The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Disability Insurance – Reform is Needed

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


A recent General Accountability Office (GAO) report, “Disability Insurance – Work Activity Indicates Certain Social Security Disability Payments Were Potentially Improper” reminds us that Social Security Disability Insurance (SSDI) is the nation’s largest cash assistance program.  In light of that, it is no surprise then that the congressional watchdog agency estimates that the Social Security Administration (SSA)  made $1.29 billion in potential cash benefit over-payments to 36,000 individuals in 2010.  This number represents 0.4 percent of all primary disability beneficiaries in fiscal year 2010.  GAO also notes that the exact number of all individuals that received improper disability payments cannot be determined without detailed case investigations by the SSA.

Using different methodology, the SSA found additional causes of overpayments that were not considered in the GAO work and believes over-payments amounted to $1.62 billion in fiscal year 2011.  This represents 1.27 percent of all disability payments for that year.

Some people have said that Social Security Disability Insurance (SSDI) has become the new Welfare and others say its structure encourages the disabled to not work and accept a government check instead.

In The Atlantic, an article by Jordan Weissmann writes that, “[the] number of former workers enrolled in the Social Security disability program has more than doubled in the last two decades, and the reasons why have little to do with the health of our workforce.”  He goes on to say it is almost as if Congress decided to create a program for 50-something blue-collar workers that have lost their job and are facing a long-term unemployment crisis.  But instead of helping them get back on their feet and find employment, the government check they receive is enough to give up work for good.

Richard Burkhauser, an adjunct scholar at the American Enterprise Institute wrote in Roll Call that because Congress has not reformed SSDI, people who are disabled are incentivized to stay on the disability program instead of choosing to take advantage of the provisions provided in the Americans with Disabilities Act of 1990 and find work.  This was a law that according to Burkhauser, was “based on what was then a radical idea: that the physical and social environment people with disabilities face is as much responsible for their inability to fully integrate into society as their health-based impairments” and that “despite the improvements mandated by the ADA, the employment rate of working-age Americans with disabilities (aged 16-64) hit an all-time low of 14.5 percent in March 2012 (latest number available) — by comparison, it was 28.6 percent in March 1990 and 18.7 percent in March 2007, just before the Great Recession.”

The GAO tells us that in order to receive disability payments, an individual must meet statutory requirements and complete a 5-month waiting period before receiving benefits.  During that period of time, the individual cannot receive any earnings above $1,000 a month.

However, once the person is approved for disability, they can receive benefits and work for a limited time.  But beneficiaries that consistently have earnings above $1,000 or substantial gainful activity, generally are not supposed to be entitled to benefits.

The GAO does not know the true extent of over-payments but based on past studies, the agency believes most are due to beneficiaries that work while receiving disability payments.  In 2010, GAO estimated that SSA made potentially improper payments to 21,000 individuals who were disability beneficiaries and who also made substantial earnings during the 5-month waiting period.  They also say that their estimate has a margin of error of plus or minus $348 million, meaning the amount paid could be as low as $571 million or as high as $1.27 billion.

The GAO said that it was not possible to determine from the data analysis alone to what extent SSA made improper payments without a detailed investigation of all the facts and circumstances surrounding EACH beneficiary.  It would be necessary to contact the beneficiary and their employer on a variety of issues such as impairment-related work expenses, attendant care services, and so on to see if they were entitled to receive disability checks.

The GAO also gives some various examples of improper proper payments in their report such as an individual did not reporting all earnings, the SSA did not follow its program rules, there was no increased scrutiny for a known violator of the program and earning alerts did not result in a review for five years.

The GAO recommends "that the SSA take every opportunity to ensure that only eligible beneficiaries receive payments under this program and that additional actions are taken to improve the financial status of the program.  Without reliable and timely earnings information on the work activity of individuals applying for DI benefits, SSA risks making over-payments to individuals whose work activity indicates they are not disabled and therefore ineligible for disability benefits. While we cannot generalize the examples we found, SSA’s inability to identify work activity during the waiting period may result in over-payments to beneficiaries who are ineligible for benefits."

GAO recommends that SSA improve its ability to detect and prevent potential fraud in SSDI by assessing the costs and feasibility of establishing a mechanism to detect potentially disqualifying  earnings during ALL months of the waiting period to the extent it is feasible.

According to a report in CSNews, "[d]uring President Barack Obama’s first term, the number of Americans collecting federal disability insurance increased by 1,385,418 to a record 8,827,795."  But increases also occurred during George W. Bush's administration and CSNews states, "there is now one person collecting disability in this county for every 13 people working full-time.  Forty-two years ago, in December 1968, there were 51 people working full-time in this country for each person collecting disability."

Another disturbing report by Chana Joffe-Walt entitled, "Unfit for Work, the Startling Rise of Disability in America," says the rise in disability has come "even as medical advances have allowed many more people to remain on the job, and new laws have banned workplace discrimination against the disabled. Every month, 14 million people now get a disability check from the government."  The author notes that the biggest rise causing people to go on disability is seen "where there is most latitude for judgment -- back pain, mental illness."

Part of the problem causing an increase in disability is an aging population and a lousy job market that is made worse for people with a limited education. Joffe-Walt says, "disability has also become a de facto welfare program for people without a lot of education or job skills.  But it wasn't supposed to serve this purpose; it's not a retraining program designed to get people back onto their feet.  Once people go onto disability, they almost never go back to work.  Fewer than 1 percent of those who were on the federal program for disabled workers at the beginning of 2011 have returned to the workforce since then, one economist told me."

Joffe-Walt further says, "[p]eople who leave the workforce and go on disability qualify for Medicare, the government health care program that also covers the elderly.  They also get disability payments from the government of about $13,000 a year.  This isn't great.  But if your alternative is a minimum wage job that will pay you at most $15,000 a year, and probably does not include health insurance, disability may be a better option."

In 1996, welfare reform was passed.  President Clinton said he wanted to "end welfare as we know it" and encouraged people to get off the welfare roles, into job training, and work for a living.  But Joffe-Walt points that, "as the number of families on welfare declined, the number of people on disability rose."

Certainly some sort of reform is needed to make sure that only truly disabled people are receiving payments from the taxpayer.  Real Clear Politics reported on a program undertaken in Britain.  They said the government, "asked everyone receiving an 'incapacity benefit' — a disability program slowly being phased out under new reforms — to submit to a medical test to confirm they were too disabled to work.  A third of recipients (878,000 people) didn't even bother and dropped out of the program rather than be examined.  Of those tested, more than half (55%) were found fit for work and a quarter were found fit for some work."

The Real Clear Politics column provides a succinct overview of the problem and suggests that perhaps the United States should undertake what Britain did and that is to ask every recipient of a disability check "to get a thorough examination" and  perhaps "the results here in the United States would be interesting too.

That might be a good place to start because our nation is spending too much on programs such as SSDI and it must be reformed.  It paid out $132.3 billion in 2011 and the trust fund will go bankrupt in 2016.  We need to protect tax dollars and save SSDI for the people it was intended to serve -- the truly disabled.

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