The Disability Disaster
Disability payments have reached an annual cost that is nearly three and a half times the budget of the Department of Homeland Security.
The source: “The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding” by David H. Autor and Mark G. Duggan, in The Journal of Economic Perspectives, Summer 2006.
A $134 billion-a-year entitlement that most people have never heard of is gobbling up an ever-larger share of the Social Security budget, raising troubling questions about whether it is being abused. Social Security Disability Insurance supported 2.6 million people in 1984; now it has 6.5 million beneficiaries—and the numbers are rapidly rising. The annual price tag is nearly three and a half times the budget of the Department of Homeland Security, write economists David H. Autor and Mark G. Duggan, of the Massachusetts Institute of Technology and the University of Maryland, respectively.
The increasing number of people judged to be totally and permanently disabled—even as Americans get healthier and live longer—suggests that the program is out of control, according to Autor and Duggan. The initial purpose of disability insurance has been dwarfed by a new role. Originally an insurance scheme for workers prematurely felled by heart attacks and cancer, the program has been transformed into a system of benefits for the unemployable. Payments are now most commonly made to people with back pain and mental disorders, potentially disabling problems in the workplace to be sure, but conditions with relatively subjective diagnoses, the authors say.
As the labor market has become more competitive, more and more low-wage workers have applied for disability benefits. When the unemployment rate increases, so do applications for disability benefits; when it decreases, applications do likewise. High school dropouts are the most likely to seek payments. In 2004, men between the ages of 40 and 65 who had not finished high school were twice as likely to receive disability benefits as men who had a diploma. Because wages at the bottom of the employment ladder have stagnated or fallen, disability benefits and the health insurance that comes with them have become more and more attractive. An average disabled worker gets a monthly check of about $1,100. Medicare benefits worth $640 are automatically included.
The system breaks down in the appeals process, according to the authors. Nearly two-thirds of initial applications are denied because the applicant is found not to be totally disabled. More than 83 percent of the denials are appealed, most with the assistance of lawyers who specialize in disability litigation. Appeals are made, first, to an alternate team of evaluators, then, successively, to an administrative law judge, the Social Security Appeals Council, the U.S. District Court, and finally the U.S. Court of Appeals. The Social Security Administration, which cannot be represented by a lawyer in the appeals hearings (the judge is supposed to represent both the applicant and the public interest simultaneously), loses nearly three-quarters of the appeals. In 1997, the last year for which figures are available, the government paid nearly half a billion dollars to attorneys representing disability applicants.
What has changed since the disability program began is not the incidence of poor health and injuries, but the nature of the labor market, the authors believe. Jobs for low-skilled workers are disappearing, and workers who would have been able to find something two decades ago are now unemployable.
Disability insurance reform has been tried and failed. When the system ran out of money in 1977, eligibility criteria were tightened and 380,000 beneficiaries were tossed off the rolls. The backlash was overwhelming, prompting Congress to establish the current system of far easier access for significantly more numerous impairments.