January 23, 2015
Options to Manage the Growth in the Disability Insurance Rolls
Social Security Disability Insurance (SSDI) provides
benefits to nonelderly workers with certain disabilities and
to their eligible dependents. As in Old-Age and Survivors
Insurance (OASI)—Social Security’s retirement program—
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
In December 2014, the average benefit for a disabled
worker was $1,165. For spouses and children of disabled
workers, the monthly benefit averaged $315 and $349,
respectively. Disabled workers and certain dependents are
also eligible for Medicare after a two-year waiting period.
SSDI is financed primarily by a 1.8% payroll tax on
employers and employees, which is part of the total 12.4%
Social Security payroll tax; the other 10.6% finances OASI.
SSDI has grown markedly: Between 1980 and 2013, the
number of beneficiaries increased from 4.7 million to 11.0
million, mostly because the number of disabled workers
grew. In 1980, 2.1% of working-age adults (aged 20-64)
were disabled workers; in 2013, 4.4% were. The cause of
some of this growth is clear—for example, the population
grew and aged, more women worked enough to be eligible
for SSDI, and the Great Recession increased applications
from unemployed workers. However, the cause of a portion
of this growth remains unclear.
Figure 1 shows disabled-worker beneficiaries as a share of
the population eligible for benefits. The dotted line reflects
only non-demographic factors, including (1) changes in
opportunities for work and compensation (e.g., slow wage
growth for low-skilled workers and high unemployment);
(2) changes to federal policy that made it easier for some
people to qualify for SSDI; and (3) the rise in Social
Security’s full retirement age, which reduced retirement
benefits and made SSDI relatively more valuable. The solid
line also reflects the aging of baby boomers into more
disability-prone years. (More women worked enough to be
eligible for SSDI. That contributed to growth in both the
number of beneficiaries and the number of people eligible
for SSDI, so its effects are not reflected in Figure 1.)
Figure 1. Percentage of Eligible Workers on SSDI
Source: 2014 Social Security Trustees Report, Figure V.C6.
The growth in SSDI has generated concern among
Members of Congress and the public for two main reasons.
Short-Term Financing Shortfall
First, it has contributed to the declining solvency of the
program’s Disability Insurance (DI) trust fund, from which
SSDI benefits are paid. Outlays have exceeded income
since 2009, causing the DI trust fund to shrink. It is
expected to be exhausted by the end of 2016, after which
taxes would be sufficient to pay about 80% of scheduled
benefits. The resulting benefit cut would adversely affect
one of the country’s most vulnerable populations.
Avoiding exhaustion would require cash infusions to the DI
trust fund. For example, Congress could allocate a larger
share of the 12.4% Social Security payroll tax to the DI
trust fund (as was done most recently in 1994) or authorize
borrowing from the OASI trust fund or Medicare’s Hospital
Insurance (HI) trust fund.
With fewer than two years until trust fund exhaustion, even
policies to reduce the number of beneficiaries (described
below) would not notably forestall exhaustion.
Long-Term Program Growth
Second, employment rates of working-age individuals with
disabilities have declined. Over the past 30 years, the
employment rate among individuals (aged 21-64) who
report a work-limiting disability has fallen from 24.4% in
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Options to Manage the Growth in the Disability Insurance Rolls
1981 to 14.4% in 2013, a decline that cannot be adequately
explained by health or economic factors.
organizations, researchers, and the Administration all
support increasing CDR funding.
Some research suggests that unemployed individuals with
disabilities are increasingly more likely to apply for SSDI
“rather than search for employment that would
accommodate their disabilities.” Once on SSDI, most
disabled workers are unlikely to return to the labor force;
for example, in 2013, 0.4% of all beneficiaries left the rolls
due to work. Some believe that declining labor force
participation promotes dependency and discourages selfsufficiency among working-age individuals with
Time Limit Benefits. Another option is to limit the benefits
of all newly approved beneficiaries to a specified period.
Time limiting benefits would partially shift the burden of
proof in determining disability from SSA to the beneficiary.
This option could be applied to all beneficiaries or
restricted to those with less severe conditions.
Previous Legislative Efforts
In recent years, reforms have focused mostly on providing
current beneficiaries with incentives to return to work. In
1999, Congress created the Ticket to Work (TTW)
program, which entitles beneficiaries to rehabilitation and
reemployment support. TTW also extended Medicare
coverage for beneficiaries who return to work and made it
easier for people to return to SSDI after stints of work.
However, few beneficiaries have participated in TTW, and
it has had little effect on reemployment rates.
Policy Options to Limit Growth
Tighten Eligibility Criteria. Tightening eligibility
requirements would reduce the number of individuals on
the program who could work, but it would also prevent
some who cannot work from receiving support. Deciding
which disabilities are truly work limiting is difficult. As
Henry Aaron, chair of the Social Security Advisory Board,
summarized, “the challenge for society is to choose a
definition that best balances its willingness to award
benefits to some people who do not ‘deserve’ them and to
deny benefits to some who do.”
One option is to limit eligibility for SSDI to those under age
62, when workers are eligible for Social Security retirement
benefits. Proponents contend that some people use SSDI
“as an early retirement program.” Opponents argue that
many older people have little capacity to work.
Another option is to increase the “recency of work”
requirement. Currently, individuals must have worked for at
least five of the past 10 years to qualify for benefits.
Increasing the requirement to four of the past six years
would reduce the number of beneficiaries by roughly 4%.
A third option is to adjust “vocational factors,” adjustments
to disability criteria that make it easier for older people to
qualify. Raising the ages at which those factors apply would
make it more difficult for older workers to qualify.
Increase Reviews of Current Beneficiaries. Periodic
continuing disability reviews (CDRs) end benefits for
recipients found to have recovered from their disabilities.
The Social Security Administration (SSA) estimates that
each dollar spent on CDRs reduces future benefits by more
than $10. However, funding limitations have resulted in a
CDR backlog of about a million cases. Advocacy
Make Appeals Adversarial. This option would grant SSA
representation at appeals hearings. When applications are
denied, claimants may appeal to administrative law judges
(ALJs). Most applicants hire a legal representative for an
appeal. Proponents argue that having SSA representation at
hearings would result in better decisions and greater judicial
consistency. Opponents contend that the informal nature of
hearings and lack of cross-examination of claimants
encourages them to share more information.
Return-to-Work Incentives. Another option is to provide
stronger incentives for beneficiaries to return to work.
Currently, SSA allows beneficiaries to participate in a trial
work period (TWP), during which they may earn any
amount for nine months with no benefit reduction. SSA also
provides employment services. Still, few beneficiaries
permanently leave the program. Some beneficiaries
deliberately “park” their earnings below the SGA threshold.
To encourage work, several disability-rights organizations
advocate replacing the strict SGA limit with a gradual
reduction in benefits as workers earn more. SSA is
currently conducting a Benefit Offset National
Demonstration (BOND) project, in which participants lose
$1 in benefits for every $2 in earnings over the SGA limit.
Early Interventions. Given the limited success of returnto-work efforts, several researchers have suggested
focusing more on preventing people from joining SSDI in
the first place. “Supported-work” policies would provide
services shortly after disability onset, when workers still
have a strong attachment to the labor force. “Experience
rating,” which would link an employer’s tax rates to past
SSDI claim rates, could be one way to encourage employers
to provide such services and limit their employees’
enrollment in SSDI. Opponents argue that the policy could
backfire by making employers hesitant to hire workers at
high risk for disability and that the policy fails to address
the incentives for workers to apply for SSDI.
Another option is to promote or require employersponsored private disability insurance (PDI), which
provides partial wage replacement and other return-to-work
services. By intervening with robust employment supports
early in the disability process, PDI may keep workers with
disabilities attached to the labor force.
For additional information, see CRS Report R43054, Social
Security Disability Insurance (SSDI) Reform: An Overview
of Proposals to Manage the Growth in the SSDI Rolls, by
William R. Morton.
William R. Morton, firstname.lastname@example.org, 7-9453
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