All You Need to Know about Disability Insurance

Earl Pomeroy and Jim McCrery are both former Congressmen who in the past headed the Social Security Subcommittee of the House Ways and Means Committee. Pomeroy is a Democrat from North Dakota and McCrery is a Republican from Louisiana. They have co-chaired something called the SSDI Solutions Initiative on behalf of the Committee for a Responsible Federal Budget, which is a nonpartisan Washington DC public policy organization that's been around since the 1980s. The group has now produced a volume of essays called SSDI Solutions: Ideas to Strengthen theSocial Security Disability Insurance Program, and chapters can be downloaded individually online.

If you want to get up to speed on the current status and issues facing Disability Insurance, along with a range of proposals for improving it, this volume should be your go-to starting point. Just to skim through the basics, which Patricia Owens lays out in detail in her essay, the share of working-age men receiving DI rose from 3.0% in the late 1970s to 4.5% in 2013; for women, the DI rate went from 1.4% in the late 1970s to 4.3% by 2013.

In the late 1970s, 3.0 percent of working-age men received SSDI, increasing to 3.8 percent before the recession and 4.5 percent by 2013, while the corresponding SSDI receipt rates for working-age women went from 1.4 percent, to 3.5 percent, and 4.3 percent, respectively. A number of economic, demographic, and policy factors went into this change. For example, back in the 1970s a lower percentage of working-age women had been  in the (paid) workforce in a way that made them eligible for DI in the first place.

The revenue for DI is part of the payroll tax that also funds Social Security and portions of Medicare. There is a separate DI trust fund, which was about to run out of money this year before a last-minute short-term fix in the Bipartisan Budget Act of 2015, which reallocated some of the rest of the payroll tax over to the DI trust fund, and should keep the fund solvent until 2022. But more substantial changes are needed. Here's a figure from the Owens paper showing the long-run projections of revenues and costs for DI. Clearly, there's a gap to be closed.

One perplexing bit of evidence is that although SSDI is a national program, and thus in theory applies to everyone in the country equally, there are some dramatic differences in how the program applies across the country. For example, the share of the population receiving DI can vary across states.  Here's an illustrative figure from the Owens paper. DI rates are the lowest in Alaska and Hawaii, and tend to be

Some of this difference seems to reflect not differences in the characteristics of those receiving disability, but rather differences in the process for granting disability benefits across state. As one example from the overview paper by Pomeroy and Jim McCrery, some of the Administrative Law Judges who hear appeals about whether someone should receive DI are very likely to grant those appeals, while others are not: "There also appears to be considerable (albeit shrinking) decisional inconsistency among judges. In 2010, for example, one ALJ in Texas approved only 9 percent of applications for benefits while another in Tennessee approved 99 percent ..."

I found myself especially interested in the international comparisons chapter by Robert Haveman: "Approaches to Assisting Working-Aged People with Disabilities: Insights from Around the World." A number of other high-income countries have experienced rising levels of disability and rising program costs, and some of those countries enacted substantive reforms in the last two decades, which may have lessons for US policymakers. For a quick sense of some of the differences, check this table from Haveman's

Of this comparison group, the share of the population receiving disability payments looks especially high in Sweden and Netherlands (notice that more than one-fifth of all Swedes in the 50-64 age bracket are receiving disability benefits), and quite low in Germany, with the US in the middle. When it comes to annual growth in the recipiency of disability in the last few decades,the US leads the way.

What are some of the changes in other countries? Haveman offers an overview of the countries in the table and other high-income countries, and suggests this summary:

"Across the countries studied, a number of options to better manage the disability pension caseload—aside from reforms to the public sickness benefit programs—have been pursued; these include:

• The introduction of more stringent vocational criteria into the eligibility determination process, e.g., in determining ability to work, moving from reference to jobs in the worker’s own occupation or jobs for which the worker has been trained to all jobs in the economy.
• The centralization of disability assessment. Instead of relying on an applicant’s own doctors, responsibility for assessing capability has been assigned to government agencies. The goal is to make medical assessments more objective and consistent over applicants.
• Increasing the emphasis on work capacity itself relative to medical conditions in the eligibility determination process. (For example, in the US system, a physical and mental Listing of Impairments has been established to identify conditions considered sufficiently severe to prevent an individual from performing any gainful activity.)
• Changing the emphasis in the disability pension program toward a “rehabilitation before benefits” model involving the requirement that benefit applicants have undertaken rehabilitation efforts, as well as requiring employers to pursue workplace accommodation.
• Substituting for the current uniform payroll tax obligations an arrangement in which employer contributions to social insurance depend upon the number of their workers that apply for disability benefits (“experience rating”).
• Limiting the duration of disability pension payments to a fixed period (say, three years), with the need to reapply and reestablish eligibility after that period in order to continue benefit receipt.
• Increasing work incentives for benefit recipients through wage or employment subsidies or disregarding earnings in calculating benefits for recipients who combine work and disability benefit receipt."

Not coincidentally, the bulk of the Pomeroy/McCrery volume involves a range of proposals by various authors that could improve the ability of the US SSDI program to meet its goal of helping the disabled and also help to save money: early intervention proposals to help people stay in the workforce rather than ending up on DI rolls;  improve program administration so that determinations of who is eligible to receive DI can be faster and more accurate; help DI work better with other programs often related disability, like worker's compensation and long-term care programs; and structural reforms, like changing the rules so that disability is not all-or-nothing, forever, but it could where appropriate become simpler for some of those who experience disability to return to the workforce, or the possibility of allowing a combination of partial disability and part-time work. Here's the full Table of Contents with links to PDFs of all the chapters. Physical copies of the book can be bought on Amazon.com.

SSDI Solutions: Ideas to Strengthen the Social Security Disability Insurance Program 
The McCrery-Pomeroy SSDI Solutions Initiative


Section I: Introduction
1. "Seizing the Opportunity: Ideas for Improving Disability Programs," by Co-Chairs Jim McCrery and Earl Pomeroy
Full Chapter

2. "An Overview of Social Security Disability Insurance (SSDI)," by by Patricia Owens
Full Chapter
Appendix


Section II: Early Intervention
3. "The Employment/Eligibility Service System: A New Gateway for Employment Supports and Social Security Disability Benefits," by David Stapleton, Yonatan Ben-Shalom, and David Mann
Full Chapter
Summary Slides
Appendix

4. "A Community-Focused Health & Work Service (HWS)," by Jennifer Christian, Thomas Wickizer, and A. Kim Burton
Full Chapter
Summary Slides
Appendix I
Appendix II
Appendix III

5. "Using Transitional Jobs to Increase Employment of SSDI Applicants and Beneficiaries," by Julie Kerksick, David Riemer, and Conor Williams
Full Chapter
Summary Slides

Discussion of Early Intervention Proposals
by Lisa D. Ekman
Full Discussion

Section III: Program Administration

6. "Data-Driven Solutions for Improving the Continuing Disability Review Process," by Alexandra Constantin, Julia Porcino, John Collins, and Chunxiao Zhou
Full Chapter
Summary Slides

7. "Social Security Disability Adjudicative Reform: Ending the Reconsideration Stage of SSDI Adjudication after Sixteen Years of Testing and Enhancing Initial Stage Record Development," by Jon C. Dubin
Full Chapter
Summary Slides

8. "Social Security: Restructuring Disability Adjudication," by David W. Engel, Dale Glendening, and Jeffrey S. Wolfe
Full Chapter
Summary Slides
Appendix

Discussion of Program Administration Proposals
by Margaret Malone
Full Discussion

Section IV: Interaction with Other Programs
9. "Expanding Disability Insurance Coverage to Help the SSDI Program," by David F. Babbel and Mark F. Meyer
Full Chapter
Summary Slides

10. "Ensuring Access to Long-Term Services and Supports for People with Disabilities and Chronic Conditions," by Mark Perriello
Full Chapter

11. "Improving the Interaction Between the SSDI and Workers' Compensation Programs," by John F. Burton Jr. and Xuguang (Steve) Guo
Full Chapter
Summary Slides

Discussion of Interaction with Other Programs Proposals
by David Wittenburg
Full Discussion

Section V: Structural Reforms
12. "Transitional Benefits for a Subset of the Social Security Disability Insurance Population," by Kim Hildred, Pamela Mazerski, Harold J. Krent, and Jennifer Christian
Full Chapter
Summary Slides

13. "Beyond All or Nothing: Reforming Social Security Disability Insurance to Encourage Work and Wealth," by Jason J. Fichtner and Jason S. Seligman
Full Chapter
Summary Slides

14. "Exploring an Alternative Social Security Definition of Disability," by Neil Jacobson, Aya Aghabi, Barbara Butz, and Anita Aaron
Full Chapter
Summary Slides

Discussion of Structural Reform Proposals
by Art Spencer
Full Discussion
Summary Slides

Section VI: International Comparisons and Long-Term Solvency
15. "Approaches to Assisting Working-Aged People with Disabilities: Insights from Around the World," by Robert Haveman
Full Chapter

16. "Options to Address SSDI's Financial Shortfall," by Marc Goldwein and Edward Lorenzen
Full Chapter

Appendix - Letter from the Chief Actuary of Social Security to Co-Chairs McCrery and Pomeroy