How To Fix Social Security Disability Insurance
Social Security Disability Insurance has often been forgotten in the debate over the broader Social Security program. But Congress is beginning to pay attention, perhaps because the program is due to become insolvent by 2016. The program needs to be fixed. The question is, as always, how.
There are some interesting solutions—many aimed at keeping people working or helping to get them back in the workforce after a bout of disability. These reforms won’t work for everyone—many SSDI recipients are permanently disabled. But they may work for some.
SSDI is critically important to people with disabilities. It benefits nearly nine million workers and more than two million of their dependents. And for many, it is a key part of the safety net that supports them when illness or injury makes it impossible to work.
Yet, the program has big problems. In 2009, it paid disabled workers $121 billion, triple what it paid in 1989.
It takes in less money than it pays out in benefits and will be insolvent, at least technically, in just three years.
It faces severe administrative problems, including long delays in processing applications, and a deeply troubled appeals process. In the words of the Social Security Advisory Board, the benefit process “may award benefits to individuals who do not meet SSA disability criteria and deny benefits to individuals who do met the criteria.”
Perhaps most troubling, many believe its design discourages work—which is almost always bad public policy.
This morning, I had a chance to moderate an Urban Institute panel that confronted these issues. It included former Social Security Administrator Ken Apfel; my Urban Institute colleague Melissa Favreault; Gina Livermore, a Senior Researcher at Mathematica Policy Research; and Lisa Ekman, Director of Federal Policy at Health and Disability Advocates.
We discussed several possible reforms, including:
- Identifying potential disability claimants quickly and using vocational rehabilitation and job training to help keep them in the workforce.
- Better integrating SSDI with health care and supportive services. This can make it easier for people to pull together the package of benefits they need and also encourage more cooperation among government programs. Today, for example, the Labor Department has no incentive to spend more to train a disabled person if keeping that person at work saves money only for Social Security.
- Better aligning incentives for employers to retain workers with disabilities rather than letting them simply shift to SSDI. One way to do that is universal private insurance that would cover the first two years of disability. This idea, which was developed by David Autor of MIT and Mark Duggan of the University of Maryland (now at Wharton), aims to keep people employed by giving firms a financial incentives to retain their workers. Under such a mandate, total premiums would average only about $20-a-month (employers and employees would each pay part). But they project substantial cost savings to SSDI.
Would such an employer mandate fly? It would clearly be a political challenge. But it, along with more modest solutions, is worth looking at.
Before 2016, Congress will have to address SSDI’s shortfall, which would reduce benefits by 20 percent. When the SSDI fund fell short in the past, Congress reallocated payroll tax dollars from the Old Age and Survivors program to DI. But now, many Republicans are likely to oppose such a step without major program reforms.
It will be an opportunity to take a serious look at the program—not just to save money but to better address the needs of working people with disabilities.