8 Ideas for Saving Social Security Disability Insurance
Policy + Politics

8 Ideas for Saving Social Security Disability Insurance


There’s no way of knowing how soon Congress can resolve the brewing crisis over the severely depleted Social Security Disability Insurance (SSDI) fund.

With the question of a successor to House Speaker John Boehner (R-OH) still very much in doubt, disability insurance may take a back seat to other more pressing matters, including negotiating a new budget and debt ceiling – even as millions of  Americas face a 19 percent cut in their benefits next year if nothing is done.

Related: Battle Lines Form in the Fight Over Social Security Payment Reductions

Regardless of how lawmakers ultimately resolve the disability insurance funding problem, Republicans are determined to extract major reforms from the Obama administration and congressional Democrats to curtail the growth and excesses of the entitlement benefit. And for good reason.

Some nine million Americans currently receive disability insurance benefits, or twice the number in 1995 and six times the number in 1970. The disability program has evolved gradually over the past half century, along with the overall Social Security system. The program initially was limited to older Americans aged 50 to 64, but then was opened up to younger, severely disabled workers in 1960. At first it was targeted largely to men, but the number of female beneficiaries gradually grew significantly.

 “With statistics like that, it’s hardly surprising to see some in Congress worry that more will enroll in the program and costs would continue to rise, especially since the government funding for disability insurance is expected to run out  by the end of next year,” Henry J. Aaron, a senior fellow at the Brookings Institution and an expert on Social Security, wrote late last week.

NPR’s All Things Considered broadcast a series two years ago on the remarkable increase in SSDI. They explained that in 1984 “Congress changed the definition of disability. Lawmakers broadened it, and made it vaguer.” Chana Joffe-Walt, an NPR reporter, said, “Before 1984, the government's definition of disability included people with heart disease, cancer; basically, lots of severe illnesses that often killed you pretty quickly and were pretty easy to test for. After 1984, the new, changed definition included things like depression and back pain - things that can be severe, but things that are often very hard to test for.”

She went on to say that the people who stepped in to clarify the confusion for the Social Security administration were lawyers—“Disabled and can’t work? Call 1-800 lawyers.”

Funding for the SSDI program has nearly run out before, and the typical solution has been to shift money from the larger old age and survivors’ benefit fund (OASI) to cover shortfalls in the disability insurance fund. Currently, employers and their workers each contribute 6.2 percent of their wages to the Social Security system. Some 0.9 percent is allocated to SSDI and 5.3 percent to OASI.

Related: A New ‘Save SSDI Plan Could Derail Social Security

The Obama administration is arguing for a another simple shifting of funds to cover the projected shortfalls, while the Republicans are promoting an approach that combines money-savings reforms along with a substantial “loan” from the larger OASI that eventually would have to be repaid.

Aaron, a champion of the Social Security program, cites a report by a panel of the Social Security Advisory Board, that concludes that the rolls of disability insurance beneficiaries have actually stopped rising and will likely begin to decline.

“Nonetheless, the Disability Insurance program is not without serious flaws,” Aaron wrote.

Moreover,  there are plenty of things that could be done to both provide incentives to employers to try to keep physically impaired or disabled workers on the job as long as possible and to help remove often intolerable obstacles to people applying for benefits and appealing adverse rulings.

“Employers often save money if workers leave and apply for benefits,” according to Aaron. “Creating a financial incentive to encourage employers to help workers stay active is something that liberals and conservatives can and should embrace. Unfortunately, figuring out exactly how to do that remains elusive.”

Related: Medicare and Social Security Worse than They Look: Trustees

And then there are the nearly one million people whose applications for benefits were denied and  are stuck in an appeals process that can often take up to two years to resolve – and who risk immediate rejection if they are caught earning more than $1,090 in any month.

“This virtual bar on work brings a heightened risk of utter destitution,” Aaron wrote. “Work skills erode and the chance of ever reentering the workforce all but vanishes.”

The Bipartisan Policy Center established a diverse working group to study the problem and make recommendations. Here are their ten top principles for addressing the disability insurance problem long-term:

  1. Avert SSDI program insolvency at all costs and seek to strike long-term actuarial balance.
  2. Make no changes to primary insurance amounts for current beneficiaries and no changes to eligibility standards at the current time.
  3. Give beneficiaries the option of choosing whether to participate in pilots and work-incentive programs.
  4. Create employment opportunities for those individuals who want to work, and remove and avoid barriers to work.
  5. Come up with a benefit offset that encourages work and improves the economic security of beneficiaries.
  6. Greatly simplify the administration of SSDI and the Supplemental Security Income (SSI) program to bring them more in synch with work incentives.
  7. Crack down on fraud in the program, with the understanding that may not yield significant cost savings. .
  8. Improve the recording and processing of earnings to reduce the number and amount of overpayments.