Social Security Disability Insurance Costs are Exploding

EXPERT COMMENTARY

Social Security Disability Insurance Costs are Exploding

By Veronique de Rugy |
Aug 07, 2013

Spending on monthly Social Security disability insurance payments is exploding as the number of recipients has skyrocketed in the last 30 years, even though medical advances during the same period allow many more people to remain on the job longer than ever before.

Discrimination against the disabled in the workplace has also been banned by new laws in recent years, but the dramatic rise in SSDI claims has pushed the program's insolvency date to the point it is now projected in three years. And yet, disability insurance programs are often left out of the social safety net discussion.

Cash payments for disabled former workers currently exceed the amount the federal government spends on food stamps and all other welfare programs, combined. Spending on the SSDI program has more than doubled in the past decade, and disability payments now account for almost 20 percent of Social Security's budget.

Over the past 40 years, the number of Americans claiming disability benefits has increased by more than six times. During that period, the average disability benefit payment rose from about $560 per month to about $1,050 per month in 2010 dollars. According to a new study by Cato Institute's Tad DeHaven, the program will spend $144 billion in 2013. In real (inflation-adjusted) dollars, SSDI expenditures will have roughly doubled since 2000.

There are other troubling components to this trend: As the number of disability claimants increases, the number of workers supporting them decreases. In 2012, there were 6.6 people on disability for every 100 people actively working. That's double the ratio from 20 years ago, and almost three times what it was in 1972. The amount of time individuals receive disability benefits is also increasing.

A 2012 study by the Richmond Federal Reserve notes that "since the economic recovery started, more than 8 million have applied for disability benefits. If recent history is any guide, more than a third of those who apply will get on the program within months."

How did we get here? When SSDI was implemented in the late 1950s, it was intended to provide much-needed benefits to those who were too disabled to work, but weren't yet eligible for Social Security benefits. As MIT economist David Autor and University of Maryland economist Mark Duggan characterized it, the purpose of SSDI was to provide early retirement benefits for those were "totally and permanently disabled." But eligibility standards have long since changed.

Among other factors, Autor and Duggan trace the rise in benefits to loosening of eligibility rules in 1984, which "substantially liberalized the disability screening program." These changes shifted screening rules from a list of specific impairments to a process that put more weight on an applicant's reported pain or discomfort, even in the absence of a clear medical diagnosis.

The result was more workers awarded benefits based on ailments that were not easily diagnosed and relied more heavily on patient self-reporting, such as back pain.

Sen. Tom Coburn, R-Okla., has a 2012 report called "Social Security Disability Programs: Improving the Quality of Benefit Award Decisions." It explains that the program has such a poor process for deciding who is disabled that as many as 25 percent of all benefits are given to those who aren't really disabled or don't satisfy SSDI criteria.

It is worth noting that the main reason individuals' SSDI benefits are terminated is because they become eligible for full Social Security benefits; only 4 percent of benefit terminations are due to improvement in medical conditions, and only 6 percent are because the recipient goes back to work.

As DeHaven notes in his report, "With massive and ongoing federal deficits, policymakers need to pursue spending cuts in every area of the budget. The Social Security disability insurance program's soaring expenditures desperately need to be tackled."

Besides, the program is on the verge of insolvency. He rightfully suggests that lawmakers should reform the programs by "cutting SSDI's average benefit levels and instituting stricter eligibility standards to discourage claims from people who could be working." These commonsense reforms are critical to ensure SSDI is around for those Americans who are truly disabled.

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