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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Congressional Research Service (CRS)

 

Social Security Disability Insurance (SSDI) Reform: An Overview of Proposals to Reduce the Growth in SSDI Rolls

William R. Morton, Research Associate

April 29, 2013

http://www.fas.org/sgp/crs/misc/R43054.pdf

[full-text, 51 pages]

 

Summary

Social Security Disability Insurance (SSDI) program provides benefits to insured workers with

disabilities under the full retirement age and their dependents based on an individual worker’s

earnings and work history in covered employment. Recently, some Members of Congress and the

public have expressed concern over the financial sustainability of the SSDI program. Between

1980 and 2011, the number of disabled-worker beneficiaries grew 196.6%, whereas the number

of workers insured for disability increased 50.9%. This increase in the ratio of disabled-worker

beneficiaries to insured workers, or prevalence rate, has placed pressure on the Disability

Insurance (DI) trust fund, which the Social Security Board of Trustees projects will be exhausted

in 2016.

 

Some of the increase in the SSDI prevalence rate stems from changes in the demographic

characteristics of the insured-worker population. According to the Social Security Board of

Trustees, the aging of the baby boom generation and a sharp rise in the number and incidence rate

of female insured workers helped to propel the prevalence rate upward between 1980 and 2011.

However, other factors may have also contributed to the growth in SSDI rolls. For example,

instances of high unemployment and the increasing relative value of SSDI benefits to low-income

workers may have induced more individuals to apply to the program. In addition, inconsistency in

the determination and adjudication process might have increased the likelihood of denied

claimants being awarded SSDI on appeal. Moreover, changes to federal policy that relaxed

certain program eligibility criteria and increased the value of disability benefits relative to

retirement benefits may have played a role in increasing the SSDI prevalence rate.

 

To assist lawmakers in addressing the sustainability of the program, this report provides an

overview of reform proposals designed to mitigate the growth in SSDI rolls. Most of the

proposals discussed in this report focus on reducing the inflow (incidence) of new beneficiaries

into the program. These proposals include implementing stricter SSDI eligibility criteria,

improving consistency in the disability determination and adjudication process, and incentivizing

employers to provide supported-work services for employees following the onset of disability

(i.e., rehabilitation, workplace accommodation, and a partial wage replacement). On the other

hand, some of the proposals seek to increase the outflow (termination) of beneficiaries from the

program. Proposals to reduce the current beneficiary population entail providing stronger

incentives for beneficiaries with some residual functional capacity to return to the labor force, as

well as increasing the number of continuing disability reviews (CDR) performed by the Social

Security Administration (SSA).

 

Contents

Introduction ...................................................................................................................................... 1

Background on SSDI ....................................................................................................................... 2

Eligibility ................................................................................................................................... 2

Benefits ...................................................................................................................................... 2

Determination and Adjudication Process .................................................................................. 3

Trends in the SSDI Program Since 1980 ......................................................................................... 4

Enrollment ................................................................................................................................. 4

Terminations .............................................................................................................................. 5

Program Size ............................................................................................................................. 8

Factors Behind the Growth in SSDI Rolls ..................................................................................... 10

Changes in the Demographic Characteristics of Insured Workers .......................................... 10

A Sharp Rise in the Number and Incidence Rate of Female Insured Workers .................. 11

A Shift in the Age Distribution of Inured Workers ............................................................ 11

Slightly Higher Work-Limiting Disability Rates............................................................... 12

Changes in the Economic Incentives to Apply for SSDI ......................................................... 13

A Rise in the Unemployment Rate .................................................................................... 13

An Increase in the Relative Replacement Wage ................................................................ 15

The Value of Health Care Benefits .................................................................................... 16

A Lack of Consistency in the Initial Determination Process ................................................... 17

Changes in Federal Policy ....................................................................................................... 18

The Disability Benefits Reform Act of 1984 ..................................................................... 18

The Social Security Amendments of 1983 ........................................................................ 21

Overview of Reform Proposals...................................................................................................... 22

Stricter Eligibility Criteria ....................................................................................................... 22

Increase the Recency-of-Work Requirement ..................................................................... 23

Adjust the Age Categories for Vocational Factors............................................................. 24

Improved Program Administration .......................................................................................... 25

Changing the Hearing Level Process from Inquisitorial to Adversarial ............................ 25

Update SSA’s Listing of Impairments ............................................................................... 27

Update SSA’s Occupational Information System .............................................................. 29

Increase the Number of CDRs Performed By SSA ........................................................... 30

Return-to-Work Incentives ...................................................................................................... 33

Increase Awareness of Return-to-Work Services .............................................................. 34

Benefit Offset .................................................................................................................... 36

Promote Supported-Work Policies .......................................................................................... 38

Experience Rate the Employer’s Portion of the Payroll Tax ............................................. 38

Employer-Sponsored Private Disability Insurance ........................................................... 41

 

Figures

Figure 1. SSDI Applications and Awards......................................................................................... 5

Figure 2. SSDI Disabled-Worker Termination Rates ....................................................................... 6

Figure 3. SSDI Disabled-Worker Beneficiaries and Their Dependents ........................................... 8

Figure 4. SSDI Disabled-Worker Prevalence Rates ......................................................................... 9

Figure 5. SSDI Applications and Awards During Instances of High Unemployment ................... 14

Figure 6. The Percent Distribution of Newly Awarded Disabled-Worker Beneficiaries ............... 20

 

Appendixes

Appendix. Acronyms ..................................................................................................................... 45

 

Contacts

Author Contact Information........................................................................................................... 47

 

 

 

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