Disability Insurance Benefits Research Articles

Labour Market Screening and the Design of Social Insurance: An Equilibrium Analysis of the Labour Market for the Disabled

Abstract This article studies how firms’ screening incentives in the labour market affect the optimal design of social insurance programs and quantitatively assesses the U.S. disability policies accounting for firms’ screening of the disabled. We develop an equilibrium search model where workers with different productivities have heterogeneous preferences over non-wage benefits and firms cannot offer an employment contract that explicitly depends on worker types. In this environment, firms may use contracts to screen out a certain type of workers, distorting employment rates and contracts in equilibrium. Therefore, the optimal structure of social insurance policies depends on firms’ screening incentives. We extend and structurally estimate this framework to quantitatively understand the inefficiencies arising from firms’ incentives to screen out disabled workers and examine the optimal joint design of disability insurance (DI) and various forms of firm subsidies. We find that hiring subsidies mitigate screening distortions; at the same time, they interact with DI by reducing the labour supply disincentives it generates. The optimal policy structure leads to a considerable welfare gain by simultaneously making firm subsidies and DI benefits more generous.

The added worker effect: evidence from a disability insurance reform

AbstractThe Netherlands reformed its disability insurance (DI) scheme in 2006. Reintegration incentives for employers became stronger, access to DI benefits became more difficult, and benefits became less generous. Using administrative data on all individuals who fell sick shortly before and after the reform, we study the impact of the reform on labor participation of individuals who fell sick and their spouses. Difference-in-differences estimates show, among other things, that the reform led to an increase of labor participation of the individuals who fell sick only if these individuals had a permanent job, whereas spouses responded to the DI reform in other cases, where the individuals reporting sick had a temporary job or were unemployed. More generally, the spouses respond when the sick individual’s labor market position is weak and the individual him- or herself has trouble finding or retaining employment. The effects are persistent during the 10 years after the reform. The effect on the spouse can be seen as an “added worker effect,” where additional earnings of the spouse compensate for the sick individual’s income loss so that both partners share the burden of a more stringent DI scheme. Comparing individuals reporting sick with and without partner provides further support for the notion that the responses of couples to the reform are joint decisions of the two partners.

Is Total Disability Insurance Benefit of Life Insurance Be Income?

Is Total Disability Insurance Benefit of Life Insurance Be Income?

The heterogeneous impact of stricter criteria for disability insurance.

The Netherlands reformed its disability insurance (DI) scheme in 2006. Eligibility for DI became stricter, reintegration incentives became stronger, and DI benefits often became less generous. Based on administrative data on all individuals who reported sick shortly before and after the reform, difference-in-differences regressions show that the reform reduced DI receipt by 5.2 percentage points and increased labor participation and unemployment insurance (UI) receipt by 1.2 and 1.1 percentage points, respectively. It increased average monthly earnings and UI claims to overcompensate lost DI benefits. However, older individuals, women, individuals with temporary contracts, the unemployed, and low-wage earners did not compensate or compensated to a much smaller extent for the lost DI benefits. The effects are persistent during the 10 years after the reform.

Impacts of the 2010 VA PTSD Rule Change on Participation in SSA Disability Programs

U.S. veterans who could qualify for disability benefits from both the Department of Veterans Affairs (VA) and the Social Security Administration (SSA) might view them as complementary or as substitutes for each other. For example, people who earn above a certain income lose their Social Security Disability Insurance (SSDI) benefits, whereas VA Disability Compensation (DC) benefits do not change based on income. Veterans with disabilities who wish to work may therefore prefer to receive DC over SSDI, in effect treating the two programs as substitutes. We examined how an eligibility rule change in DC affected participation in DC, SSDI, and Supplemental Security Income to understand whether veterans with disabilities increase or reduce their take-up of SSA disability benefits when access to DC increases. Using Current Population Survey data from 2009 to 2016, we studied a 2010 DC rule change that made it easier for veterans with posttraumatic stress disorder to demonstrate eligibility. After the rule change, veterans with self-reported cognitive difficulties reported increased receipt of DC, reduced receipt of SSDI, and reduced rates of work-limiting disability, seeming to treat the two benefit programs as substitutes.

Optimal long-term contracts with disability insurance under limited commitment

We study an optimal long-term labor contract that provides disability insurance benefits under two frictions: the agent cannot commit to a long-term contract and the disability shock is private information. We predict that a job with a high risk of disability should provide a higher level of salary but with a lower growth rate over time. We find that the optimal contract can be implemented under a three-account trading system in which mandatory savings can be imposed to discourage a worker from falsely claiming disability. We also investigate how the nature of disability shock has an impact on the optimal contract: a larger borrowing limit should be given to a worker with a high severity of the disability shock or a low arrival intensity. Finally, our quantitative analysis shows that the cost caused by current long-term disability insurance practice can be substantial.

A burden too big to bear? The effect of experience‐rated disability insurance premiums on firm bankruptcies and employment*

AbstractWe study whether experience rating for disability insurance (DI) affects the labor costs of firms and the probability of bankruptcy. The experience rating requires firms to contribute to the DI benefit costs of their workers. We use matched worker–firm data of the Netherlands, where the DI premium of firms is a function of historic disability risks. To measure the effect of experience‐rated premiums, we exploit exogenous changes in the schedule that determines the firms’ DI premiums. We find that higher premiums increase not only labor costs but also the probability of firm bankruptcy. These effects are concentrated on small firms.

Disability benefit application in Switzerland: An analysis of linked administrative and survey data

Abstract Background One priority of the European Disability Strategy 2010-2020 was to increase the labor market participation of individuals with disabilities. Switzerland shares this priority: The guiding principle of disability insurance is ‘rehabilitation before pension'. Access to rehabilitation measures to restore, maintain or improve the earning capacity of individuals with disabilities via disability insurance benefit (DB) application is essential. The aim of this study was thus to identify factors associated with DB application in Switzerland. Methods A novel dataset was created linking survey information from the 2010 Social Protection and Labour Market with administrative data on DB application (2009-2018). Multiple logistic regression was used to examine the association between health-related, demographic and socioeconomic factors and DB application in adults aged 18-55 (N = 18,448). Results Higher odds of DB application were found for those suffering from long-term health-related activity limitations (OR 2.88; 95% CI 1.29-6.44); born outside of Switzerland (OR 1.75; 95% CI 1.32-2.32); living without a working partner (OR 1.54; 95% CI 1.17-2.02); living without a child aged 0-14 years (OR 1.70; 95% CI 1.29-2.26); aged 18-39 (OR 1.41; 95% CI 1.09-1.83); with an occupation in ‘Manufacturing' (OR 2.75; 95% CI 1.68-4.50), ‘Construction and mining' (OR 2.03; 95% CI 1.13-3.66), ‘Trade and transport' (OR 2.12; 95% CI 1.30-3.45), ‘Business and administration' (OR 1.68; 95% CI 1.03-2.72), and ‘Health, teaching, culture and science' (OR 1.55; 95% CI 1.05-2.29); and renters (OR 1.44; 95% CI 1.07-1.94). No statistically significant association was found between sex or registered unemployment within five years preceding the survey and DB application. Conclusions This study confirmed limited European evidence suggesting that DB application is more than a health-related phenomenon. However, it presented a less consistent picture on the role of marginalisation in DB application. Key messages One of the main contributions of this study stems from the promising and innovative method of linking detailed survey information to highly reliable administrative records. As such, the study not only offered novel results but also demonstrated the potential of the dataset for public health research.

Disability insurance benefit application in Switzerland: an analysis of linked administrative and survey data

BackgroundThe guiding principle of disability insurance in Switzerland is ‘rehabilitation before pension’. Access to rehabilitation measures to restore, maintain or improve the earning capacity of individuals with disabilities is essential. Gainful employment enables them to be an active part of society, improves their quality of life, and may mitigate the adverse health effects of disability pension receipt. The aim of this study was therefore to identify factors for disability insurance benefit application in Switzerland.MethodsA novel dataset was created linking the 2010 Social Protection and Labour Market cross-section with administrative register data on disability insurance benefit application (2009–2018). Multiple logistic regression was employed to examine the associations between long-term health-related activity limitation, region of residence, demographic and socioeconomic characteristics and disability insurance benefit application in adults aged 18–55 (N = 18,448). Sensitivity analysis based on age was performed in individuals aged 18 to retirement age and aged 25 to 55.ResultsThe regression results showed higher odds of disability insurance benefit application for individuals suffering from long-term health-related activity limitations (OR 2.88; 95% CI 1.29–6.44; p-value 0.010); born outside of Switzerland (OR 1.75; 95% CI 1.32–2.32; p-value 0.000); living without a working partner (OR 1.54; 95% CI 1.17–2.02; p-value 0.002); living without a child aged 0–14 years (OR 1.70; 95% CI 1.29–2.26; p-value 0.000); aged 18–39 (OR 1.41; 95% CI 1.09–1.83; p-value 0.009); with a learnt occupation in ‘Manufacturing’ (OR 2.75; 95% CI 1.68–4.50; p-value 0.000), ‘Construction and mining’ (OR 2.03; 95% CI 1.13–3.66; p-value 0.018), ‘Trade and transport’ (OR 2.12; 95% CI 1.30–3.45; p-value 0.003), ‘Business and administration’ (OR 1.68; 95% CI 1.03–2.72; p-value 0.036), and ‘Health, teaching, culture and science’ (OR 1.55; 95% CI 1.05–2.29; p-value 0.026); and renters (OR 1.44; 95% CI 1.00–1.94; p-value 0.016). The results were robust to alternative samples defined by age – albeit with some differences in regional and learnt occupational patterns.ConclusionsThe results suggested that disability insurance benefit application is more than a health-related phenomenon in Switzerland. However, the results provided a less consistent picture on the role of marginalization in application than in other European countries.

Health service use of Australian unemployment and disability benefit recipients: a national, cross-sectional study

BackgroundHealthcare is funded and delivered separately from income support programs such as unemployment and disability benefits. Greater understanding of the health service use (HSU) of benefit recipients would support more effective design and delivery of health and income support programs. This study aimed to characterise the HSU of disability and unemployment benefit recipients relative to people earning wages, while controlling for personal, household and health-related factors associated with HSU in benefit recipients.MethodsA cross-sectional national survey of 9110 working age Australian adults in three groups: (1) 566 receiving the disability support pension (DSP); (2) 410 receiving unemployment benefits; and (3) 8134 earning wages. Outcomes included prevalence and frequency of health professional consultations, hospital attendance and admission in the past 12 months, as well as medication and supplement use in the past 2 weeks. Analyses compared DSP and unemployment benefit recipients to wage earners using prevalence ratios and incident rate ratios, adjusted for predisposing, enabling and need factors that may affect HSU.ResultsIn adjusted regression models, both DSP and unemployment benefit recipients were significantly more likely than wage earners to have consulted psychologists and social workers. DSP recipients also reported a significantly higher prevalence of consultations with General Practitioners (GPs), specialist physicians and podiatrists.. Both groups reported significantly more frequent consultations with GPs and DSP recipients with specialists. No differences were observed between groups for hospital attendance or admission, or supplement use in fully adjusted models, though the DSP group reported more prevalent medication use than wage earners. Inclusion of confounders including self-assessed health, disability severity, health insurance status, and financial resources attenuated the relationship between benefit receipt and HSU, however significant associations were still observed.ConclusionsPeople receiving unemployment and disability insurance benefits use significantly more health services than wage earners. A range of personal and clinical characteristics explained much, but not all, of the association between greater HSU and benefit receipt. Greater coordination between health and income support systems may improve health, reduce HSU and improve work ability in unemployed and working age people.

How Much Do Outside Options Matter? The Effect of Subsidized Health Insurance on Social Security Disability Insurance Benefit Receipt

New government health insurance programs may affect participation in existing safety-net benefits that provide health insurance as a secondary aim. We examine whether the outside options for health insurance made available by the Affordable Care Act affected Social Security Disability Insurance (DI) application decisions. Using the universe of U.S. individual income tax records spanning 2007-2016, we first estimate the effect of Medicaid expansions using a state difference-in-differences identification strategy, but find small and statistically insignificant estimates. However, when we estimate the effect of being eligible for high vs. low Marketplace subsidies based on geography, we find some evidence consistent with subsidies increasing DI claiming among those with prior access to Employer Sponsored Insurance, and decreasing DI claiming otherwise. Overall, we find suggestive evidence that outside options for health insurance do matter, though magnitudes are small and results are statistically precise only for Marketplace coverage.

Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs

While kinks are prevalent in tax and transfer systems, the fiscal revenue and behavioral responses are not fully understood. In disability insurance (DI) programs, for instance, kinks help balance the moral hazard effects from the induced entry with the provision of work incentives for recipients who regain their ability to work. Using quasi-random variation in kink points in the benefit schedule for Norwegian DI recipients, I identify intensive and extensive margin earnings responses to the implicit tax on earnings as DI benefits are phased out above the kink. To identify the intensive margin responses, I implement a non-parametric bunching design that does not require functional form assumptions or deciding an excluded region around the kink. Responses correspond to an earnings elasticity with respect to the implicit net-of-tax rate of about 0.18. Using a regression discontinuity design, I further show that the kink in the benefit schedule induces significant responses at the extensive margin. I use the estimated earnings responses to evaluate how the benefit offset affects program costs, and find that relaxing the benefit offset reduces public expenditures only if program entry is very inelastic. My findings speak to recent policy-proposals aiming to improve work incentives of DI recipients.

Why Employment During and After COVID-19 Is a Critical Women's Health Issue.

Why Employment During and After COVID-19 Is a Critical Women's Health Issue.

Burden of Illness Among Medicare and Non-Medicare Populations with Acquired Thrombotic Thrombocytopenic Purpura, 2010-2018

Background and Objective Acquired thrombotic thrombocytopenic purpura (aTTP) is a rare hematologic disorder that causes microvascular thromboses and can lead to serious and life-threatening medical complications. The aim of this study was to describe aTTP-related resource utilization, cost, complications, and overall survival (OS) among US Medicare and non-Medicare populations following aTTP episodes. Methods This retrospective study utilized administrative claims data for Medicare Fee-for-Service (FFS) beneficiaries (100% sample) and a sample of commercial, managed Medicaid [MM], Medicare Advantage [MA] plan members from the Inovalon MORE2 Registry. Patients aged 18+ with aTTP were identified using a validated algorithm (Wahl et al, 2010): ≥1 hospitalization for thrombotic microangiopathy + therapeutic plasma exchange (TPE) between 2010 and 2018. Patients with hemolytic-uremic syndrome or other conditions mimicking aTTP during same hospitalization were excluded. Outcomes included characterization of index hospitalization (including length of stay), diagnosis-related group (DRG) payment amount (2019 US$ [Medicare payments also included outlier payments]), and risk of mortality. OS was compared for Medicare FFS patients with aTTP to a 1:1 matched cohort of Medicare FFS beneficiaries without aTTP (matched on age, gender, region, index year, socioeconomic status, disability insurance benefits, and Charlson comorbidity index score). Median survival time and 1-year/2-year survival rates were estimated using Kaplan Meier methodology and hazard ratio was obtained using Cox proportional hazard model. In a subgroup analysis of aTTP patients across payer channels with at least 6 months of baseline and 1 month of follow-up data, percentage of patients with readmission for TPE (exacerbation if <30 days post-discharge; relapse if >30 days post-discharge) and rate of post-discharge clinical complications per 100 person-years was calculated. Results During the 9-year period, 2,279 patients met the study criteria for aTTP; 65.2% (N=1,486) were enrolled in Medicare FFS: 13.6% (N=312) in commercial, 15.7% (N=358) in MM, and 5.4% (N=123) in MA. Mean (SD) age (in years) varied by payers as expected: Medicare FFS: 65.9 (13.9); MA: 63.8 (13.6); commercial: 45.0 (14.3); MM: 37.5 (14.0). Mean (SD) hospitalization for index event ranged from 12.4 (9.4) to 15.8 (11.8) days; majority of patients required intensive care (Medicare FFS: 61.4% [mean (SD) ICU days: 8.3 (8.2)]; MA: 61.8%; commercial: 62.2%; MM: 60.1%). Among Medicare FFS patients, 15.7% died during initial hospitalization and 21.0% died within first 30 days of the event (mean (SD) time to death: 11.7 (7.2) days). Among matched cohorts of Medicare patients with and without aTTP (N=833 in each cohort), OS was lower for patients with aTTP (Figure 1). Specifically, 1-year survival rates among aTTP patients was 71.8% (95% CI: 68.6%-74.8%) vs. 95.6% (94.0%-96.8%) for those without aTTP. Two-year survival rates among aTTP patients was 66.6% (63.2%-69.8%) vs. 91.1% (88.8%-92.9%) for those without aTTP. Risk of mortality was 2.9 times higher for patients with aTTP vs. without aTTP (95% CI: 2.4-3.4). Mean (SD) DRG payment for index hospitalization varied by payers: Medicare FFS: $29,024 ($32,565); MA: $12,860 ($6,981); commercial: $9,996 ($5,995); MM: $10,470 ($7,370). During follow-up, 18.4%-22.4% of patients experienced aTTP-related exacerbation [Medicare FFS: 18.4%; MA: 21.9%; commercial: 22.4% and MM: 22.2%]. Annual incidence rate of relapse per 100 person-years was 5.6 [Medicare FFS: 3.6; MA: 8.7; commercial: 10.4 and MM: 14.7] and annual incidence rate of complications per 100 person-years was 16.7 [Medicare FFS: 15.5; MA: 20.5; commercial: 21.7 and MM: 19.1]. Conclusions This is the first real-world study evaluating burden of illness among aTTP patients in the US across payer types. Despite being treated with TPE, patients with aTTP have high acute mortality and are nearly three times as likely to die compared with the general Medicare population without aTTP. During the initial hospitalization, many required intensive care. Following discharge, approximately 1 in 5 was readmitted within 30 days and had higher incidence for clinical complications associated with aTTP. The study findings highlight the need for more effective therapies to reduce disease burden for this population. Disclosures Pollissard: Sanofi: Current Employment, Current equity holder in publicly-traded company. Shah:Avalere Health: Current Employment. Punekar:Sanofi: Other: Employee of Sanofi at the time of study and may hold stock/stock options in Sanofi. Petrilla:Avalere Health: Current Employment. Pham:Sanofi: Consultancy; Alexion: Other: Speaker.

How the COVID-19 pandemic could reduce near-retirees' Social Security benefits

AbstractA quirk in the Social Security benefit formula interacting with the sharp economic downturn due to the COVID-19 pandemic could cause certain groups of near-retirees to suffer significant and permanent reductions to their Social Security retirement benefits. A sudden decline in the Social Security Administration (SSA)'s measure of economywide average wages in the year a worker turns 60 causes the Social Security benefit formula to devalue all the worker's earnings prior to age 60, resulting in a lower measure of career-average earnings and a lower benefit in retirement. A middle-income worker aged 60 in 2020 could receive an annual Social Security benefit reduction of around 9%, with losses through retirement approaching $46,000. Individuals becoming eligible for Social Security Disability Insurance benefits would be subject to similar reductions in percentage terms. Several methods are discussed to reduce or eliminate the likelihood of similar benefit ‘notches’ occurring in the future.

Comparison of Population-Representative and Volunteer Experiments: Lessons From the Social Security Administration’s Benefit Offset National Demonstration (BOND)

The Benefit Offset National Demonstration (BOND) tested a $1 reduction in benefits per $2 earnings increase above the level at which Social Security Disability Insurance benefits drop from full to zero under current law. BOND included a rare and large “population-representative” experiment: It applied the rule to a nationwide, random sample of beneficiaries. BOND also included a parallel “volunteer” experiment: The same offset rules applied to a nationwide random sample of volunteers. BOND’s dual experiments offer a unique opportunity to consider the merits and limitations of these two types of experiments. The findings provide a way to illustrate the limitations of volunteer experiments relative to population experiments when, as in BOND, the goal is to produce impact estimates that are valid for the entire population, not just would be volunteers. We also highlight and compare ethical issues, outreach challenges, and cost considerations for the two types of designs.

Early Determinants of Work Disability in an International Perspective

This study explores the interrelated roles of health and welfare state policies in the decision to take up disability insurance (DI) benefits due to work disability (WD), defined as the (partial) inability to engage in gainful employment as a result of physical or mental illness. We exploit the large international variation of health, self-reported WD, and the uptake of DI benefits in the United States and Europe using a harmonized data set with life history information assembled from SHARE, ELSA, and HRS. We find that the mismatch between WD and DI benefit receipt varies greatly across countries. Objective health explains a substantial share of the within-country variation in DI, but this is not the case for the variation across countries. Rather, most of the variation between countries and the mismatches are explained by differences in DI policies.

The Role of Nonattorney Representation in the SSDI Determination Process: A Case Study of One Prominent Intermediary

Intermediary organizations that provide nonattorney representation services to people applying for Social Security Administration (SSA) disability benefits are a prominent but understudied part of the disability landscape. A better understanding of these intermediaries and their clients can help to inform policies that influence the extent to which intermediaries support or impede SSA’s disability determination processes. This article describes how one prominent nonattorney intermediary screens potential clients and supports actual clients throughout the application process for Social Security Disability Insurance (SSDI) benefits. We describe the intermediary’s operations and the characteristics of its clients and compare the characteristics and outcomes of the intermediary’s awardees with all SSDI awardees. Our findings point to one important avenue through which people enter SSDI and suggest some policy options that could improve the entry process and identify employment supports that might serve as alternatives to SSDI.

Earnings responses to disability insurance stringency

Accurate assessment of earnings capacity is critical to the efficient operation of disability insurance (DI) programs. We use administrative data on the universe of Dutch DI recipients to estimate employment and earnings responses to reassessment of their earnings capacity under more stringent rules. We estimate that reassessment of recipients aged 30–44 removed 17 percent from the program and reduced benefit income by 20 percent, on average. In response, employment increased by 6.7 percentage points and earnings rose by 18 percent. Recipients were able to increase earnings by € 636 for every € 1000 reduction in DI benefit. This earnings response was strongest from those with more subjectively defined disabilities and a shorter claim duration, as well as younger and female recipients.

Association between longest‐held occupation and Social Security Disability Insurance benefits receipt

The cost of the Social Security Disability Insurance (DI) program has increased over time though recent reports showed that disability incidence and prevalence rates have started declining. We explored whether occupation was one of the risk factors for the rising number of disabled workers who received DI benefits during 1992-2016. We used a cohort of 16 196 Health and Retirement Survey respondents between the age of 51 and 64 years who were followed from their date of entry until they received DI benefits, died, reached full retirement age, or reached the end of the follow-up period (2016). We used the extended stratified Cox proportional hazard model. Because one-third of the respondents in our cohort did not report their longest-held occupation, we used a multiple-imputation method. The hazard of receiving DI benefits was 51%, 78%, 81%, and 85% higher among workers with longest-held occupations in sales, mechanics and repair, protective services, and personal services, respectively than among workers with longest-held occupations in the reference managerial occupation. The hazard of receiving DI benefits was more than double among workers with longest-held occupations in the construction trade and extractors, transportation operation, machine operators, handlers, and food preparation than among workers with the longest-held occupation in the reference managerial occupation. Improving the overall working conditions in these occupations would help reduce worker suffering and the number of applicants for DI benefits, thereby reducing the burden of workplace injury and illness on the DI program.