If It Isn't Broken... Leave It Alone: A Policy Analysis of SSDI
By Joe Eurell
Executive summary:
Social
security is often referred to by the pundit class as a potentially fatal
subject of attack for those running for elected office. However, for many
already occupying elected office, this program is a heated point of argument.
The recent budget negotiations prior to representative Paul Ryan becoming
Speaker of the House were partly about the future of one of Social Security’s sub programs, Social Security Disability
Insurance, which also includes Supplemental Security Income. While this paper
will focus on SSDI’s function, its administrative strengths and weaknesses, it
will also talk about Social Security more broadly as a program. This type of
analysis is important to this time in history, when those who opposed the
program’s existence attempt to dismantle it through systematic restructuring,
justified by claims of user fraud within its sub program SSDI. For those who
oppose the program of Social Security, its disability insurance component is a
central target. This paper will take those criticisms at face value as SSDI’s
history, administrative structure, beneficiaries, benefits and policy
alternatives are examined, in order to bring a sober look at this embattled
government program. By doing so, perhaps an answer can be reached as to whether
or not the major restructuring sought by some is necessary.
Program History
It is impossible to talk about SSDI without talking about
Social Security. The initial program was signed into law in August of 1935.
Social Security is structured to be funded by payroll taxes that are collected
throughout the time span of an employee’s career and then redistributed back to
them upon their retirement. However, the policy was held up by procedural opposition
in the Senate, “Operation of the new program was hampered for several months when
the budget bill for the Act was killed by a Senate
filibuster at the end of August 1935. The new Social Security Board had to
borrow money from other federal agencies to operate until January 1936 when the
Congress reconvened and passed an appropriation to fund the programs and
operations under the Social Security Act…The Social Security Board begin as an
independent agency of the federal government. In
1939 it became part of the cabinet-level Federal Security Agency, and in 1946
the SSB was abolished and replaced by the current Social Security
Administration.”1 The program started making payments in
1937 in lump sum forms until 1940 when the law provided that the Social Security
Board start distributing monthly payments. 1939 saw amendments to the Social
Security Act that would become the forerunner policy to Social Security
Disability Insurance and Supplemental Security Income. Those amendments sought
to expand program coverage to the families and or spouses of the retiring
worker. This was a dynamic shift that facilitated the policy structure that
would become SSDI and SSI, since it was the first time coverage was granted to
those not paying in with their payroll taxes. Though the move to cover non
payee disabled people did not come for nearly twenty years, it happened none
the less, “The Social Security Amendments of 1954 initiated a disability
insurance program which provided the public with additional coverage against
economic insecurity. At first, there was a disability "freeze” of a
worker's Social Security record during the years when they were unable to work.
While this measure offered no cash benefits, it did prevent such periods of
disability from reducing or wiping out retirement and survivor benefits. On
August 1, 1956, the Social Security Act was amended to provide benefits to
disabled workers aged 50-64 and disabled adult children. In September 1960
President Eisenhower signed a law amending the disability rules to permit
payment of benefits to disabled workers of any age and to their dependents.”1 The time lapse
between the implementation of the program and sub program was not due to
political opposition, rather more pressing means of more pressing matters were
at hand, such as WWII and Korea. The task of administrating SSDI would require
a massive expansion in the Social Security Administrations, in order to expand
its processing and procedural capabilities which will be expanded upon later in
the paper.
As previously stated after implementation
the program rapidly expanded in terms of its beneficiaries. This aspect of
SSDI, rising rates of coverage application, would become a central rhetorical
theme of those seeking to restructure SSDI and Social Security more broadly. Professor Edward D. Berkowitz explains the lead up to the
adoption of Social Security Disability Insurance, “Social Security Disability
Insurance did not receive serious attention from Congress until the Committee
on Ways and Means held hearings on this topic, and other topics related to
Social Security, in 1949. By this time the depression was over, and wartime
conditions had helped to bring rehabilitation medicine to maturity. As a
consequence, the opponents of Social Security Disability Insurance argued that
people with disabilities should receive rehabilitation, rather than a pension
that allowed them to retire from the labor force for life. Social Security
officials conceded the importance of rehabilitation and even gave serious
consideration to recommending that applicants to the disability rolls should
receive rehabilitation services and interim payments before they entered the
rolls on a permanent basis. They managed to persuade the Committee, however,
that, important as rehabilitation was, it did not supersede the need for cash
benefits. As a consequence, the Committee included a disability insurance
program in the bill that the House of Representatives passed in 1949.”2 As time passed coverage would expand
with the aging population, as well as knowledge about the application process
and qualifications. To this end, Social Security’s architects foresaw the
possibility of fraud as a discouraging possibility for creating a sub program
for disabled workers or people. Berkowitz illustrates this by explaining, “Planners
in the Social Security Administration began their consideration of this measure
in 1936. They devised a program that they felt could withstand the pressures of
the depression. In particular, they wrote a tough definition of disability into
their proposals so as to distinguish sharply between unemployment and
disability. Instead of adopting a definition similar to the ones in the
existing workers' compensation and veterans pension laws, they chose to define
disability as ‘an impairment of mind or body which continuously renders it
impossible for the disabled person to follow any substantial gainful occupation,’
and was likely to ‘last for the rest of a person's life.’"2
Benefits,
Beneficiaries, and Eligibility
Currently, the benefits of qualifying for
Social Security Disability Insurance include two benefit programs, SSDI, which
is for working people who are temporarily or permanently disabled but have
worked a certain amount of time. Benefits can range from between $1,200 and
$1,400 depending on the beneficiary’s FICA score. The other benefit program is
Supplemental Security Income, for those who are born disabled, blind, or who are elderly, this program
operates as a cooperative effort between the Social Security Administration and
the state governments. Benefits can range from between $700 and $1,400. The
process of approval for eligibility is determined by work and medical history.
If a beneficiary on either program is going to be drawing benefits for an extended
period of time would require reauthorization process called a Continuing
Disability Review. If a beneficiary remains on SSDI for more than eighteen
months they become eligible for Medicare coverage as well.3
Effective
Alternative?
Needless to say, administering a program
of this magnitude and its benefit distribution has a lot of moving parts.
Opponents of this program cite this as a cause for a program being fraught with
fraudulent beneficiaries, claiming that the entire program needs to be
overhauled and replaced with a more individually controlled savings plan. In
2006, the Journal of Policy Analysis and
Management printed a point-counterpoint couple of articles following
President Bush’s unsuccessful attempt to institute this policy in 2005. Both
articles start with addressing whether or not Social Security is sustainable in
the long term. The article in favor of the change, maintains that the
pay-as-you-go system would not be solvent, when its cost are combined the
budgetary needs of all the other federal government departments claiming that,
“Once the trust funds run dry, in 2042, Social security will only have enough
income to pay approximately 70 percent of the benefits that have been promised.”4 Brown claims that Personal Retirement
Accounts would solve this by being a hybrid of a personal account and the
traditional Social Security program. Meaning that the missing 30% would be made
up by the individual contributions. Oddly enough, Brown also dismisses the idea
that PRA’s would perform better if they were invested in the stock market. This
is a wise observation in 2006 considering the financial meltdown in 2008. On
the other hand, those opposed to the overhaul dismiss the idea that the program
is not solvent in the long term, “The Social Security financing shortfall manageable
without major structural changes. While the system does not face a long term
deficit, it is now generating very large surpluses- about $150 billion this
year including trust fund interest. It’s been running surpluses for the past
two decades and will likely stay in surplus for many years into the future.
Social Security revenues can pay about 70% to 80% of today’s benefit
commitments even a half-century from now (Board of Trustees of the Old-Age and
Survivors Insurance and Disability Insurance trust funds, 2005: CBO 2005)…..
The Social Security deficit over the next 75 years translates to about half of
a percent of GDP.”5 Apfel points out how this approach
worked for Chile in a time of economic downturn, where the head of that system
was publically encouraging those who had invested in PRAs to keep working until
Chile’s economy improved. Furthermore, Apfel observed this approach would only
be solvent if when the economy plunges, that it bounce back quickly in order to
keep the savings of the PRAs from being lost. Ultimately, the slow recovery
following the 2008 meltdown appears to validate Apfel’s argument that such a
change would have made the system needlessly vulnerable in times of economic
downturn. Finally, Social Security remains solvent to this day, and while SSDI
beneficiaries will not see a cost of living increase this year, all benefits
are guaranteed until 2034 6
A Broken System?
Central to the criticism of Social
Security Disability Insurance is the idea that its beneficiary roles are
overrun with fraudulent cases that cost the program exorbitant amounts of
money. Other criticisms are more esoteric, such as the idea that definition of
disability has become too broad and facilitates fraudulent claims from those
with only minor ailments. A similar grievance of this group is that too many
people are applying to the program, and that those conducting the CDRs are
reluctant to deny a claimant. This portion of the paper will examine all of these
as evidence of whether or not reform is needed, and what kind is needed.
To
hear it from some, one might be let to believe that Social Security Disability
insurance is now anemic because of the rate of waste, fraud, and abuse. Reading
articles from those reporting on this often claim that it is a financial black
hole. These writings are often long in rhetoric and short on data. In the year
2000, the Cato Institute’s James Taylor published a policy analysis citing
billions of dollars in fraudulent payments. Yet under the section of his paper
labeled “Evidence of Rampant Abuse” is pretty sparse on data, this being the
entirety of the section, “Despite the clear
language and the compelling purpose behind the strict SSDI eligibility
standards, SSA has been allowing persons with minor or nonexistent disabilities
to collect SSDI benefits. Whether motivated by misguided altruism, political
expediency, or bureaucratic indifference, SSA flagrantly disregards both the
language and the spirit of the SSDI program. SSA has effectively evaded any
meaningful third-party supervision and has become the fox guarding the hen
house of Social Security funds. As a result, Social Security resources,
intended to provide for the most severely disabled Americans who genuinely cannot
work, are limited and dwindling. Moreover, the payment of billions of Social
Security dollars annually to persons with only minor impairments wastes money
meant for retirement and pushes the system more quickly toward bankruptcy.”7 Taylor also informs his reader in
melodramatic terms that Social Security Disability Insurance accounts for a
whole 14 percent in payments! Others are even more accusatory based rather than
data based, such as Forbes’s Richard Finger in 2013, “The Senate conducted their own
investigation which concluded that fully one quarter of all disability
insurance claims decisions were flawed, improperly addressing ‘insufficient,
contradictory, and incomplete evidence, thus increasing the chances of
rewarding nondisabled persons.’ The study also determined the Social Security
Administration (SSA) failed to establish that claimants were properly screened
to certify that they satisfied metrics in the Social Security Administration’s
(SSA) medical “Listing of Impairments” to meet eligibility requirements that
would qualify them for the DI program. The Inspector General’s office
identified billions in fraud. The Senate study implies many billions more in
abuses.”8 Note
the use of the word “implies”! Finger also points the idea that some
claims that are based off injuries that are self inflicted for financial gain!
However, in both of these articles lack actual data on the rate of actual fraud.
In actuality, the Office of the Inspector General co-filed a report with the
Social Security Administration to the Sub committee on Social Security in 2014
that found that of a nationwide sample of 1,523 cases, only one third of one
percent proved to be fraudulent. The report also notes that most of the
improper payments were the result of, “…have other causes not related
to fraud, such as errors in calculating payments, beneficiaries failing to
report in a timely manner an event that affects eligibility, and beneficiaries
misunderstanding program rules.”9
As
far as the increase in beneficiaries, which has been three fold between 1980
and 2011, this is explaining by drivers other than fraud. According to a study
done by the San Francisco Federal Reserve Bank the drivers are , 9.1% increase
in retirement age, 17.9% the aging of the population, 29.2% though increase of
women in the workforce, and 43.8% residual use. 10
These figures are often
used to make claims about the programs unsustainably, but they appear to be
only apocalyptic musings. Like
most apocalyptic prophets, there is always plenty of rhetoric of the coming
disaster, yet very little result. Most of the flaws in Social Security
Disability Insurance can be explained by the fact that it is a human system,
and thus prone to administrative error. In this humble writer’s opinion, claims
of fraud or unsustainability are merely a pretext for an opposition to the
existence of the program on a ideological principle of austerity. Some of their criticisms are consistent
with their ideology. They object to the government controlling distribution of
retirement savings, as well as that system being used by those who don’t pay
into it by not working. However, their ideological discomfort does not justify
a change that would destabilize the lives of so many with a system that has
proven less than effective in Chile, being that it did not actually provide
retirement security, but instead delayed retirement of workers.
Conclusion
From
a public administration standpoint, Social Security may require some
administrative reforms or even a serious reanalysis of the definition of
disability. However, one shouldn’t be so quick to dismiss something such as a
mental disorder or chronic pain as a
“real disability”. That should be left to the criteria prescribed by the
Americans with Disabilities Act. Also,
an increase in applicants does not automatically equal an increase in
fraudulent claims, nor does it mean bureaucratic apathy or negligence within the Social Security
Administration. Despite that fact that Social Security detractors have been
successful permeating misinformation, the data is there to show that the
administrative mechanisms within SSDI have been effective at not only detecting
fraud, but also at recovering improper payments which is why the conservative
alternative has long been advocated for, but never adopted. So, structurally
changing Social Security into a system of personal savings is unnesessecary,
and would leave little room to cover those who rely on its Disability Insurance
component. Also, the criticisms are largely anecdotal and sometimes downright
misleading in what they purport. It is not a serious premise to blame
structural deficiencies on 14% of a programs recipients. However, in the spirit
of compromise, perhaps SSDI could be separated from Social Security and
maintain its own independent funding as simply Supplemental Security Income.
Ultimately, that might be unnecessary, for as the old saying goes if it isn’t
broke don’t fix it!
Endnotes
1 Social
Security Administration. (n.d.). Pre-Social Security Period. In Historical
Background And Development Of Social Security. Retrieved November 7, 2015,
from https://www.ssa.gov/history/briefhistory3.html
2 Berkowitz, Edward D.
"Disability Policy & History." Legislative History of
Disability Policy. Subcommittee on Social Security of the Committee on Ways
and Means, 13 July 2000. Web. 4 Nov. 2015.
<https://www.ssa.gov/history/edberkdib.html>.
3 Laurence, B. (n.d.).
Social Security Disability Benefits. In NOLO.com. Retrieved November 9,
2015, from
http://www.nolo.com/legal-encyclopedia/social-security-disability-benefits-29686.html
4 Brown, J. R. Would
Private Accounts Improve Social Security? Affirmative: Private Accounts Would
Improve Social Security. Journal of Policy Analysis and Management, 25(3),
680-683. Retrieved from JSTOR.
5 Apfel, K. S. Would
Private Accounts Improve Social Security? Negative: Private Accounts Would Not
Improve Social Security. Journal of Policy Analysis and Management, 25(3),
684-688. Retrieved from JSTOR.
6 Altman, N. (2015,
November 1). How the GOP almost forced a Social Security disaster. Salon.com.
Retrieved from http://www.salon.com/2015/11/01/how_the_gop_almost_forced_a_social_security_disaster_everything_you_need_to_know_about_their_disgraceful_hostage_taking/
7 Taylor, J. M. (2000,
August 13). Facilitating Fraud: How SSDI Gives Benefits to the Able Bodied. In The
Cato Institute. Retrieved from
http://www.cato.org/publications/policy-analysis/facilitating-fraud-how-ssdi-gives-benefits-able-bodied
8 Finger, Richard.
"Fraud And Disability Equal A Multibillion Dollar Black Hole For
Taxpayers." Forbes.com 13 Jan. 2013. Web. 7 Nov. 2015.
<http://www.forbes.com/sites/richardfinger/2013/01/14/fraud-and-disability-equal-a-multibillion-dollar-balck-hole-for-taxpayers/>.
9 "Follow-up
Report on Anti-Fraud Efforts." The Sub Committee on Social Security , 14
Feb. 2014. Web. 4 Nov. 2015.
<https://www.ssa.gov/legislation/SSA_Report_to_Chairman_Johnson_2_14_2014.pdf>.
10 Daly, Mary C., Brian
Lucking, and Jonathan A. Schwabish. "The Future of Social Security
Disability Insurance." The San Francisco Federal Reserve Bank, 24 June
2013. Web. 15 Nov. 2015.
<http://www.frbsf.org/economic-research/publications/economic-letter/2013/june/future-social-security-disability-insurance-ssdi/>.
