A Cautionary Tale About the Latest Effort to Cut Disability Insurance Benefits
Policy + Politics

A Cautionary Tale About the Latest Effort to Cut Disability Insurance Benefits


For years, Congress has sought ways to squeeze savings out of the Social Security Disability Insurance program by weaning disabled Americans off their monthly government benefits and into often low-paying jobs.

The Social Security Administration over the past quarter century has conducted many work-incentive experiments to try to reduce or eliminate DI benefits at the urging of lawmakers and the executive branch, but with little to show for their efforts.

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In 1999, the SSA experimented with a “Ticket to Work” program, which provided vocational rehabilitation and work support from networks of employers, but to little effect. A mental health and job training program for DI beneficiaries with schizophrenia and other disorders was launched in 2003, but was closed down in 2011 after limited success.

Most recently, a Benefit Offset National Demonstration (BOND) program is testing the efficacy of a strategy of reducing people’s DI benefits by $1 for every $2 they earn in a job and stripping them of all benefits once they hit the Substantial Gainful Activity (SGA) level of earnings, which was $1,090 per month in 2015.  So far, the pilot project has had only a marginal effect on earnings or overall benefits being paid out.  

A new study by the liberal leaning Center on Budget and Policy Priorities that researched eight of these demonstration projects concluded that they almost all fell far short of their goals, despite widespread belief that the DI program has grown too costly and is rife with waste and corruption. The report by Kathleen Romig found that in some cases, the pilot projects had positive effects, improved health outcomes and greater rates of employment.

“However, in none of the experiments did a significant number of beneficiaries earn enough to support themselves and to leave DI,” Romig wrote. “The fact is no surprise, given DI’s strict criteria and beneficiaries’ limited work capacity.”

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While the study must be taken with a grain of salt in light of the CBPP’s previous sharp criticisms of the DI demonstration programs, it nonetheless offers a cautionary tale as the Social Security Administration begins a new round of these projects.

With as many as 11 million Americans facing a 19 percent cut in their disability insurance benefits absent intervention by Congress and the White House, both parties had little choice but to devise a solution last year to assure the continued solvency  of the $150 billion DI trust fund.  At the same time, then House Speaker John Boehner (R-OH) and other Republican leaders demanded that the administration go along with major “entitlement reform” as part of the congressional bailout.

Amid growing numbers of Americans seeking assistance -- and frequent reports of widespread fraud adding billions of dollars to the overall cost -- the Social Security trustees warned last July that the disability insurance fund would be depleted by late 2016, with beneficiaries likely to lose on average $2,545 in benefits every year. Although the program to assist the physically and mentally disabled and their families comes in for substantial criticism, the benefits it provides are relatively meager – an average of $1,165 per month, or $14,000 a year.

In striking a final deal last October to extend the DI trust fund’s solvency into 2022, lawmakers inserted language to require additional experimentation in cost savings, including a new variation on the BOND program’s income thresholds. Lawmakers said the goal was to enable the agency to test new ideas to encourage work among current beneficiaries and applicants.

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But as the Center on Budget and Policy Priorities cautioned in its new report, “New demonstrations will likely produce only limited results.”

“SSA has conducted many work-incentive experiments over the past 25 years, and none has led to a significant number of beneficiaries  earning enough to support themselves and leave DI,” the report states.

Moreover, even if the government hits on some good ideas for reducing the benefits long term, Congress shifted just enough money into the DI trust fund from the larger Social Security retirement trust fund to keep it solvent for less than seven years, leaving a restricted time frame in which to adequately test the new approach. According to the report, it takes years to design, conduct and evaluate a good experiment.

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“Given all that is involved in running a demonstration, it’s not surprising that most of SSA’s DI work demonstrations in the past 25 years have taken at least seven years from design to evaluation,” the report states. “Some experiments necessarily take longer.  For example, testing whether early intervention would cause disabled workers to delay or forgo DI benefits would take years after the intervention to know whether it worked, and at what cost.”