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Social Security Disability Insurance (SSDI) is an essential lifeline for millions of Americans. Without it, many families would be in deep financial distress. In August 2011, 8.5 million people received disabled-worker benefits, as did 1.8 million of their children. The average disabled-worker benefit is modest—$1,070 a month in December 2010, or about $12,820 a year—which is just above the poverty guideline for individuals living alone ($10,890). Those with one or more dependent children had average family benefits of $1,640, or $19,690 a year, close to the poverty guideline for a family of three ($18,530). Disabled-worker beneficiaries account for many of the 5.3 million working-age Americans who are lifted out of poverty by Social Security (Van de Water & Sherman, 2010). For many, Social Security is almost all the income they have. Nearly half (46 percent) of the disabled-worker beneficiaries rely on benefits for 90 percent or more of their total personal income (DeCesaro & Hemmeter, 2008). SSDI is insurance that workers pay for through premiums deducted from their pay. Workers pay 6.2 percent of their annual earnings, up to $106,800, for old age, disability, and survivor protection, and employers pay a matching amount. Of the 6.2 percent, 0.9 percent is the premium for disability insurance. In return, workers gain the right to monthly benefits if a disabling condition ends their capacity to earn a living. This insurance function of SSDI is critically important. The need for it is not made obsolete by the Americans with Disabilities Act (ADA) or by advances in medicine and assistive technology. Such developments expand opportunities for some people with disabilities. But others with disabilities face increasing impediments to work as the demands of work change. Most people with disabilities do not receive SSDI. Some work despite their conditions; others do not meet the strict test of disability for SSDI. Broadly speaking, the goals of national disability policy are to fully integrate people with disabilities into all aspects of American society—including equal opportunity, independent living, and economic self-sufficiency. These goals are pursued through varied systems that provide access to health care, appropriate education, rehabilitation, legal protections against discrimination, and wage replacement income when work incapacity strikes. When properly measured, participation in the SSDI program has increased modestly. Looking only at raw numbers, recipients roughly doubled between 1995 and 2011 (Figure 1), but that is a misleading measure of prevalence. The number of beneficiaries increased, in large part, because the work force grew, more women had worked long enough to be insured for benefits, and the large cohort of Baby Boomers entered their disability-prone years (Ruffing, 2010; Ruffing, 2011). We elaborate on this in the following sections. Disabled Worker Beneficiaries, 1995 to 2010. Source: Adapted from Board of Trustees, 2011. Individuals with significant work disabilities are eligible for SSDI benefits only if they have worked during at least one-fourth of their adult lifetimes and during five of the 10 years before disability onset. Until the great influx of women into the workforce during the 1970s and 80s, relatively few women met those tests. As recently as 1990, male disabled workers outnumbered women by nearly two to one. Now that more women have worked long enough to be insured for disability benefits, more women receive them. The risk of work disabilities that meet the SSDI test rises sharply with age. People are roughly twice as likely to be disabled at age 50 as at age 40, and twice again as likely to be disabled at age 60 as at age 50. As Baby Boomers (people born in 1946 through 1964) enter their 50s and 60s, more people are disabled and thus receive benefits. When SSDI beneficiaries reach the full retirement age, they shift from disability to retirement benefits. The increase in the retirement age has delayed that shift. In December 2010, over 300,000 people between ages 65 and 66 were collecting disability benefits; under the rules in place a decade ago, they would instead be classified as retired (Social Security Administration [SSA], 2010). The Social Security actuaries use an “age- and sex-adjusted disability prevalence rate” that controls for the increase in the insured population and the aging of the working-age population. Between 1995 and 2011, it rose from 3.5 to 4.4 percent—an increase, to be sure, but not as dramatic as some alarmists portray. One line of thinking posits only two possible reasons for the increase in receipt of SSDI. Either the health of American workers is getting worse, thereby causing more work disability, or the design of the disability insurance program is flawed. In the absence of clear evidence of declining health, critics turn to Social Security policy to look for causes. But developments in the broader work environment may instead increase the prevalence of work incapacity. Analysts have long recognized that economic recessions increase the likelihood that workers with physical or mental impairments will turn to disability benefits when they lose their jobs and exhaust other resources. While not all meet the strict test of disability in the Social Security Act, some do. The increase in disability claims during recessions is evident in the history of the Social Security program (Mashaw & Reno, 1996, p. 110), in private disability insurance, and in foreign disability systems (Burkhauser & Daly, 2011). When jobs are plentiful and employers are competing for qualified workers, they are much more inclined to accommodate those with disabilities. When jobs are scarce and firms are laying off workers, those with disabilities who lose their jobs (particularly at older ages) have few prospects for finding work. This is evident in the current downturn. With the overall unemployment rate for working-age adults at 9.2 percent in August 2011, persons with disabilities experienced an unemployment rate nearly twice as high (17.0 percent) (Bureau of Labor Statistics [BLS], 2011). Over the past decade, more working-age Americans lacked health coverage from either private insurance or government programs. The uninsured increased from 16 percent to 22 percent of 18- to 64-year-olds between 2000 and 2010 (Table 1). Health coverage declined for all age groups, but was most pronounced among Americans aged 25 to 54. Without health coverage, workers are at risk of missing care that could prevent or delay the onset of conditions that lead to work incapacity. Private long-term disability insurance (LTDI) that is financed, at least in part, by employers covers about 33 percent of private sector employees. Coverage is far more common among management and professional employees (58 percent) than among blue collar or service occupations (12 percent) (BLS, 2010). LTDI is generally designed to replace 60 percent of the worker's prior wage and is usually coordinated with Social Security so that the private benefit is reduced dollar for dollar by the amount of SSDI. Providers of LTDI often require recipients to claim SSDI and help them appeal denied claims. In some states, workers’ compensation payments are reduced if the recipient receives SSDI. In these cases, too, the workers’ compensation provider may encourage or require the injured worker to seek SSDI (Sengupta, Burton, & Reno, 2011). “Cost efficiency and productivity improvements are now imperative for most large American companies … More intense competition has brought a less forgiving world … Many risks are now borne by workers in ways that they were not in the old economy where firms were more paternalistic … Intensified competition is a double-edged sword … As skills become more valuable, the costs of discriminating against skilled disabled workers might become higher … As less skilled workers become relatively less valuable, the incentives for accommodating their disabilities diminish” (Ooms, 1997, p. 176–179). Today, many individuals who end up on SSDI are doubly disadvantaged by health problems and limited skills. About one-third of those receiving SSDI lack a high school diploma or GED certificate (Livermore, Stapleton, & Roche, 2009) compared to about 13 percent of the entire working-age population (U.S. Census Bureau, 2011b). Mental impairments are a growing cause of work disability and are the primary diagnosis for one-third of the disabled-worker beneficiaries today (SSA, 2011a). Leslie Scallet, executive director of the Mental Health Policy Resource Center and an advocate for people with mental illness, described how the changing demands of work affect people with mental disabilities. Downsizing and streamlining place greater value on employees’ speed, productivity, and flexibility. Workers with mental disabilities have a harder time adapting to this kind of environment. In an increasingly competitive, less forgiving workplace, employers are less likely to accommodate people who have difficulty meeting the new demands of work. In addition, welfare reform policies of the 1990s brought added competition for low-skill jobs. While some people with mental disabilities have found a niche in a semi-sheltered environment of public or nonprofit agencies, such opportunities are being reduced by funding cutbacks (Scallet, 1997). Lee's (2008) review of experience under the ADA finds that workers with mental disorders face particular barriers to on-the-job accommodations. NASI's Disability Policy Panel addressed this question in its landmark 1996 study, Balancing Security and Opportunity: The Challenge of Disability Income Policy. It noted that any wage replacement program can be seen as a disincentive to work to some degree; the challenge is to find the right balance between security for those who cannot work and opportunity for those who can. When work capacity ends, wage replacement is essential to pay every day bills—such as rent, utilities, and groceries—which are basic to independence and self-sufficiency. The panel concluded that benefits are not a strong deterrent to work for several reasons. First, because benefits and replacement rates are relatively modest, they are not a desirable alternative to paid work. For an average earner making about $40,000, SSDI would replace just under half (45 percent) of prior earnings. Second, the test of disability is very strict—inability to engage in any substantial gainful activity by reason of a physical or mental impairment that is expected to last 12 months or result in prior death. Those who meet this strict test face a five-month wait before benefits begin. Moreover, in interviews beneficiaries reported that they turned to SSDI only as a last resort. They remained at work after the onset of health problems and sought accommodations before resorting to SSDI (Mashaw & Reno, 1996, pp. 177–193). Finally, both in 1996 and today, recovery and return to work among SSDI recipients is better than commonly thought. NASI's Disability Policy Panel found similar results (Mashaw & Reno, 1996). These are much more promising findings about recovery and return to work, as well as sobering results about the high rate of death among new SSDI beneficiaries. Many more SSDI beneficiaries work to some degree, even if they do not earn enough to have benefits terminated (Liu & Stapleton, 2010). Young SSDI recipients were most likely to have worked at all and to have left benefits because of work. Of those under 40 when they began benefits in 1996, fully 46 percent had worked in at least one year of the following 10 years. They include 20 percent who completed a trial work period, 16 percent who had benefits suspended after finding work, and 10 percent whose benefits were ultimately terminated due to work. These findings suggest that SSDI beneficiaries want to work if they can. In a 2006 survey, four in 10 beneficiaries reported having work as a goal despite their disabilities (Livermore, Stapleton, & Roche, 2009). At the time, 14 percent were actually working or looking for work, while almost all (96 percent) of the others said that their physical or mental condition prevented work. Better outcomes mean better quality of life for SSDI beneficiaries and for those at risk of becoming work-disabled, as well as better opportunities for work, when work is an option. Administrative improvements in SSDI and universal access to health care could strengthen security, reduce risk, and increase opportunities for individuals with disabilities. Adequate, affordable health care is important for everyone. It is particularly vital for people with disabilities. The increase in the uninsured—from 16 to 22 percent over the last decade—marks a striking decline in economic security for working-age Americans. Medicaid expansions, new insurance coverage rules, and new tax credits to help pay for insurance premiums established by the Affordable Care Act of 2009 are designed to fill gaps in coverage. The new coverage could also improve SSDI decisionmaking by increasing the quality of medical evidence available to adjudicators. Universal health care coverage would be a breakthrough in national policy with regard to disability income policy and work. Appropriate care could prevent some medical conditions becoming work disabilities. Good medical records would improve the evidence available to decide SSDI claims. And individuals with disabilities would not risk losing health care coverage if they worked or changed employers. The Social Security Administration (SSA) needs adequate resources to decide disability claims promptly. Decisions on new claims take 111 days, on average (SSA, 2011c). Claims that are allowed promptly typically have good medical evidence readily available. Individuals with limited or no medical records—including those without health coverage—are at a disadvantage in documenting their disabling conditions. Waits are particularly long for individuals who appeal denied claims to an administrative law judge. These took an average of 353 days in June 2011. Long delays in deciding disability applications undermine the security that SSDI is meant to provide. SSA's plans to eliminate the backlog of cases on appeal by fiscal year 2013 and to expedite decisions on new claims hinges on full funding of the agency's 2012 budget (Joint Hearing on the Role of Social Security Administrative Law Judges, 2011) and is endangered by recent budget cuts. If beneficiaries are to work, they need assurance that their benefits will be adjusted promptly so that they will not be charged with large benefit overpayments later. Overpayments to SSDI beneficiaries totaled $1.4 billion in 2010 (Government Accountability Office, 2011). Fear of overpayments and the requirement to pay them back makes work risky. Adjusting benefits in the light of work is a time-consuming task and SSA needs adequate funding to do it promptly and accurately. SSDI has various rules designed to encourage beneficiaries to test their work capacity. These rules, however, are complex and various changes are often proposed to ease the transition to work. One popular proposal would eliminate the so-called “cash cliff” by creating a gradual reduction in benefits as the beneficiary's earnings increase. The SSA conducted a pilot study to examine the effects of a partial benefit offset—reducing benefits by $1 for each $2 in earning above a certain level (Weathers & Hemmeter, 2011). Early findings indicate that the policy resulted in some increase in earnings for those subject to the new policy, but did not result in lower overall net benefit payments. A benefit offset national demonstration is underway to test the policy on a broader scale. The policy's success will depend, in large part, on SSA's capacity to adjust benefits promptly as earnings change as noted above. The SSDI program provides vital income support for workers who have lost their capacity to earn a living. It sustains millions of families and keeps many of them out of poverty. Workers pay for the insurance while they are working, and the benefits are critical to economic security when work incapacity strikes. Its policies require a careful balance of security for people who are unable to work and opportunity for those who aspire to work. Lawmakers need to allocate adequate resources for attentive and prompt administration of the program. The fundamental structure of SSDI remains sound and is critically important in today's highly competitive labor market. VIRGINIA P. RENO is Vice President for Income Security Policy, National Academy of Social Insurance, 1776 Massachusetts Avenue, NW, Suite 400, Washington, DC 20036. LISA D. EKMAN is a consultant on disability to the National Academy of Social Insurance; President of Ekman Advocates for Progress, LLC; and Senior Policy Advisor for Health & Disability Advocates, 623 Kennedy Street, NW, Washington, DC 20011.
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