Options to Manage the Growth in the Disability Insurance Rolls

Options to Manage the Growth in the Disability Insurance Rolls

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January 23, 2015
Options to Manage the Growth in the Disability Insurance Rolls
Social Security Disability Insurance (SSDI) provides
number of beneficiaries and the number of people eligible
benefits to nonelderly workers with certain disabilities and
for SSDI, so its effects are not reflected in Figure 1.)
to their eligible dependents. As in Old-Age and Survivors
Insurance (OASI)—Social Security’s retirement program—
Figure 1. Percentage of Eligible Workers on SSDI
benefits are based on a worker’s past earnings. In December
2014, SSDI provided disability insurance to more than 151
million people and paid benefits to about 9 million disabled
workers and 2 million of their spouses and children.
To qualify, individuals must have worked and paid Social
Security taxes for a certain number of years and be unable
to engage in substantial gainful activity (SGA) due to a
severe mental or physical impairment that is expected to
last for at least one year or result in death. In 2015, the
monthly SGA earnings limit for most individuals is $1,090.
In general, disabled workers must be unable to do any kind
of substantial work, taking into account age, education, and
work experience.

In December 2014, the average benefit for a disabled
Source: 2014 Social Security Trustees Report, Figure V.C6.
worker was $1,165. For spouses and children of disabled
workers, the monthly benefit averaged $315 and $349,
Program Challenges
respectively. Disabled workers and certain dependents are
also eligible for Medicare after a two-year waiting period.
The growth in SSDI has generated concern among
Members of Congress and the public for two main reasons.
SSDI is financed primarily by a 1.8% payroll tax on
employers and employees, which is part of the total 12.4%
Short-Term Financing Shortfall
Social Security payroll tax; the other 10.6% finances OASI.
First, it has contributed to the declining solvency of the
program’s Disability Insurance (DI) trust fund, from which
Program Growth
SSDI benefits are paid. Outlays have exceeded income
since 2009, causing the DI trust fund to shrink. It is
SSDI has grown markedly: Between 1980 and 2013, the
expected to be exhausted by the end of 2016, after which
number of beneficiaries increased from 4.7 million to 11.0
taxes would be sufficient to pay about 80% of scheduled
million, mostly because the number of disabled workers
benefits. The resulting benefit cut would adversely affect
grew. In 1980, 2.1% of working-age adults (aged 20-64)
one of the country’s most vulnerable populations.
were disabled workers; in 2013, 4.4% were. The cause of
some of this growth is clear—for example, the population
Avoiding exhaustion would require cash infusions to the DI
grew and aged, more women worked enough to be eligible
trust fund. For example, Congress could allocate a larger
for SSDI, and the Great Recession increased applications
share of the 12.4% Social Security payroll tax to the DI
from unemployed workers. However, the cause of a portion
trust fund (as was done most recently in 1994) or authorize
of this growth remains unclear.
borrowing from the OASI trust fund or Medicare’s Hospital
Insurance (HI) trust fund.
Figure 1 shows disabled-worker beneficiaries as a share of
the population eligible for benefits. The dotted line reflects
With fewer than two years until trust fund exhaustion, even
only non-demographic factors, including (1) changes in
policies to reduce the number of beneficiaries (described
opportunities for work and compensation (e.g., slow wage
below) would not notably forestall exhaustion.
growth for low-skilled workers and high unemployment);
(2) changes to federal policy that made it easier for some
Long-Term Program Growth
people to qualify for SSDI; and (3) the rise in Social
Second, employment rates of working-age individuals with
Security’s full retirement age, which reduced retirement
disabilities have declined. Over the past 30 years, the
benefits and made SSDI relatively more valuable. The solid
employment rate among individuals (aged 21-64) who
line also reflects the aging of baby boomers into more
report a work-limiting disability has fallen from 24.4% in
disability-prone years. (More women worked enough to be
1981 to 14.4% in 2013, a decline that cannot be adequately
eligible for SSDI. That contributed to growth in both the
explained by health or economic factors.
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Options to Manage the Growth in the Disability Insurance Rolls
Some research suggests that unemployed individuals with
Time Limit Benefits. Another option is to limit the benefits
disabilities are increasingly more likely to apply for SSDI
of all newly approved beneficiaries to a specified period.
“rather than search for employment that would
Time limiting benefits would partially shift the burden of
accommodate their disabilities.” Once on SSDI, most
proof in determining disability from SSA to the beneficiary.
disabled workers are unlikely to return to the labor force;
This option could be applied to all beneficiaries or
for example, in 2013, 0.4% of all beneficiaries left the rolls
restricted to those with less severe conditions.
due to work. Some believe that declining labor force
participation promotes dependency and discourages self-
Make Appeals Adversarial. This option would grant SSA
sufficiency among working-age individuals with
representation at appeals hearings. When applications are
disabilities.
denied, claimants may appeal to administrative law judges
(ALJs). Most applicants hire a legal representative for an
Previous Legislative Efforts
appeal. Proponents argue that having SSA representation at
hearings would result in better decisions and greater judicial
In recent years, reforms have focused mostly on providing
consistency. Opponents contend that the informal nature of
current beneficiaries with incentives to return to work. In
hearings and lack of cross-examination of claimants
1999, Congress created the Ticket to Work (TTW)
encourages them to share more information.
program, which entitles beneficiaries to rehabilitation and
reemployment support. TTW also extended Medicare
Return-to-Work Incentives. Another option is to provide
coverage for beneficiaries who return to work and made it
stronger incentives for beneficiaries to return to work.
easier for people to return to SSDI after stints of work.
Currently, SSA allows beneficiaries to participate in a trial
However, few beneficiaries have participated in TTW, and
work period (TWP), during which they may earn any
it has had little effect on reemployment rates.
amount for nine months with no benefit reduction. SSA also
provides employment services. Still, few beneficiaries
Policy Options to Limit Growth
permanently leave the program. Some beneficiaries
deliberately “park” their earnings below the SGA threshold.
Tighten Eligibility Criteria. Tightening eligibility
To encourage work, several disability-rights organizations
requirements would reduce the number of individuals on
advocate replacing the strict SGA limit with a gradual
the program who could work, but it would also prevent
reduction in benefits as workers earn more. SSA is
some who cannot work from receiving support. Deciding
currently conducting a Benefit Offset National
which disabilities are truly work limiting is difficult. As
Demonstration (BOND) project, in which participants lose
Henry Aaron, chair of the Social Security Advisory Board,
$1 in benefits for every $2 in earnings over the SGA limit.
summarized, “the challenge for society is to choose a
definition that best balances its willingness to award
Early Interventions. Given the limited success of return-
benefits to some people who do not ‘deserve’ them and to
to-work efforts, several researchers have suggested
deny benefits to some who do.”
focusing more on preventing people from joining SSDI in
the first place. “Supported-work” policies would provide
One option is to limit eligibility for SSDI to those under age
services shortly after disability onset, when workers still
have a strong attachment to the labor force. “Experience
62, when workers are eligible for Social Security retirement
rating,” which would link an employer’s tax rates to past
benefits. Proponents contend that some people use SSDI
“as an early retirement program.” Opponents argue that
SSDI claim rates, could be one way to encourage employers
to provide such services and limit their employees’
many older people have little capacity to work.
enrollment in SSDI. Opponents argue that the policy could
Another option is to increase the “recency of work”
backfire by making employers hesitant to hire workers at
requirement. Currently, individuals must have worked for at
high risk for disability and that the policy fails to address
least five of the past 10 years to qualify for benefits.
the incentives for workers to apply for SSDI.
Increasing the requirement to four of the past six years
would reduce the number of beneficiaries by roughly 4%.
Another option is to promote or require employer-
sponsored private disability insurance (PDI), which
A third option is to adjust “vocational factors,” adjustments
provides partial wage replacement and other return-to-work
to disability criteria that make it easier for older people to
services. By intervening with robust employment supports
qualify. Raising the ages at which those factors apply would
early in the disability process, PDI may keep workers with
make it more difficult for older workers to qualify.
disabilities attached to the labor force.
Increase Reviews of Current Beneficiaries. Periodic
For additional information, see CRS Report R43054, Social
continuing disability reviews (CDRs) end benefits for
Security Disability Insurance (SSDI) Reform: An Overview
recipients found to have recovered from their disabilities.
of Proposals to Manage the Growth in the SSDI Rolls, by
The Social Security Administration (SSA) estimates that
William R. Morton.
each dollar spent on CDRs reduces future benefits by more
than $10. However, funding limitations have resulted in a
William R. Morton, Analyst in Income Security
CDR backlog of about a million cases. Advocacy
IF10053
organizations, researchers, and the Administration all
support increasing CDR funding.
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Options to Manage the Growth in the Disability Insurance Rolls

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