Committee for a Responsible Federal Budget

NPR Takes a Look at Disability Insurance

Mar 26, 2013 | Social Security

In a recent story called “Unfit for Work: The Startling Rise of Disability in America,” Chana Joffe-Walt of NPR's Planet Money takes an in-depth look at the Social Security Disability Insurance (SSDI) program, which covers a growing number of Americans and is projected to face insolvency by 2016. NPR features the report on This American Life, where Joffe-Walt presents a complex picture of disability and highlights the role that SSDI plays in the communities of its beneficiaries, as well as trends in the growth of the program. Disability insurance currently covers 14 million Americans, many of whom heavily rely on SSDI cash payments and health insurance benefits, costing the government about $230 billion annually. Joffe-Walt notes that disability is not a medical diagnosis, but rather a reflection of an individual's ability to work, which makes the determination of eligibility that much more complicated.

 

 

Joffe-Walt points to the decreased demand for unskilled labor, change in job skills over the last few decades, and lack of education as factors which have expanded demand for the Social Security Disability Insurance program. She finds many individuals receiving disability have physical conditions which would render work difficult under any circumstance, but also shows that there are some beneficiaries that say they could work if given the right opportunity.

Joffe-Walt's report helps to explain some of the challenges in trying to reform the disability system, but also highlights why reform is necessary. Chief among these reasons for reform is the program's looming insolvency. The Social Security Disability Insurance trust fund is projected to run out in 2016, at which point benefits would be cut across-the-board by 20 percent. Lawmakers could use funds from the old-age component of Social Security, but the combined OASDI fund is due to become insolvent by 2033. Waiting to reform the program will require greater changes and lawmakers would be missing an opportunity to make the program simpler and fairer.  

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Source: Social Security Trustees

Jeffrey Liebman of Harvard University and Jack Smalligan of the White House Office of Management and Budget (OMB) recently proposed reforms to the Social Security Disability Insurance program as part of the Hamilton Project's 15 Ways to Rethink the Federal Budget.  Their proposal included demonstration projects with the hope of increasing incentives to work while protecting the truly disabled, such as offering wage subsidies or temporary cash payments to those who could rejoin the workforce, or by allowing states to reallocate existing funding streams to target those who will receive disability benefits. They also propose intervention projects for employers, such as requiring private disability insurance for the first two years an individual is eligible to increase incentives for businesses to retain workers, with the private insurance offset with tax credits to companies that can reduce disability incidence of their employees by 20 percent.

Lawmakers can also look at a wide range of options proposed by the Congressional Budget Office to make the program solvent, such as eliminating eligibility at age 62, increasing the share of earnings taxed, or increasing the work requirement. CRFB Senior Policy Director Marc Goldwein has argued that both efficiency and solvency need to be part of reform, and if lawmakers are willing to put all ideas on the table, much can be done to improve the program.