Social Security Disability Insurance Program Research Articles

SPOUSAL LABOR SUPPLY, CAREGIVING, AND THE VALUE OF DISABILITY INSURANCE

AbstractThis article evaluates the insurance value of the Social Security Disability Insurance (SSDI) program among married households when wives face a trade‐off between market hours and spousal care following their husbands' disability. Event study analyses show that wives' labor supply responses to their husbands' disability are small, and instead, a considerable amount of time is spent in spousal care. Using a dynamic structural model, I find that incorporating time loss due to spousal care increases the insurance value of SSDI relative to its costs. Finally, budget‐neutral policy reforms that subsidize the cost of care can improve social welfare.

Occupations, retirement, and the value of disability insurance

Occupations vary greatly in physical intensity, and there are, correspondingly, many differences in later-life work disability risk, retirement patterns, and applications for Social Security Disability Insurance (SSDI)—a national program that insures shocks to work productivity due to disability, with about nine million current beneficiaries in the U.S. In light of its widespread coverage and large differences in utilization across occupations, this paper aims to measure the value of the SSDI program across a broad population and the extent to which it influences the major choice of occupation. Using data from the Health and Retirement Study and O*NET, I estimate a life-cycle equilibrium model of occupational choice, work, savings, and disability at older ages, and find that incorporating occupations and preference heterogeneity is an integral part of understanding work and SSDI application behavior. While SSDI coverage is nearly universal and the premiums from workers are uniform, estimates suggest that the value of the program varies greatly, from being worth 2.1 to 14.5 percent of earned income—depending on preferences and choice of occupation—though for all groups it is welfare improving. I also find that SSDI plays an important role in the choice of occupation for older workers, providing an insurance value that results in over ten percent more people choosing physically intense, blue-collar occupations at older ages. This overall effect, however, masks the underlying selection of less risk-averse individuals into blue-collar jobs, which, if not accounted for, would lead to overstating the effects of the SSDI program on behavior. A counterfactual experiment aimed at eliminating the distortion created by uniform SSDI tax rates shows that—even without any additional employer accommodation of disabled workers—occupation-specific tax rates lead to fewer aggregate work-disabled years.

Opioid Use Among Social Security Disability Insurance Applicants, 2013–2018

Opioid use is common among Social Security Disability Insurance (SSDI) beneficiaries who account for a disproportionate share of opioid-related hospitalizations and mortality. However, little is known about the prevalence of opioid use prior to SSDI enrollment. Understanding when opioid use is established and how it correlates with individual characteristics and community prescribing practices would inform policy approaches to reducing opioid-related harms among SSDI beneficiaries. We estimated the prevalence of opioid use among SSDI applicants by applying a natural language processing algorithm to SSDI application data. We find the prevalence of opioid use among SSDI applicants declined from 33% in 2013 to 24% in 2018. In contrast, the share of applicants with musculoskeletal impairments, which are commonly associated with pain, was unchanged. The share of applications reporting opioid use declined across both sexes, all age groups and education levels, and all regions. There was substantial variation, however, in the magnitude of decline by geography, with the smallest declines in parts of the Midwest and Southeastern United States. SSDI application rates and applications reporting opioid use were more likely to come from communities with higher opioid prescribing rates. Our estimates suggest most SSDI beneficiaries began opioid use prior to entering the SSDI program.

United Kingdom’s Income Support Program for People With Disabilities: Redesign, Reform, and Policy Lessons for the United States

We reviewed the operational aspects of Employment and Support Allowance (ESA)—the income support program for people with disabilities in the United Kingdom—and its potential policy lessons for the United States’ Social Security Disability Insurance (SSDI) program. ESA has a five-step eligibility determination process, and eligible beneficiaries receive either an unconditional cash benefit or payments conditional on participating in return-to-work activities. The United Kingdom has reformed ESA to better meet policy objectives. Both ESA and SSDI collect medical documentation, but ESA also requires face-to-face eligibility assessments for almost all claimants. ESA eligibility is based on functional limitations exclusively, whereas SSDI assesses the ability to perform substantial work. With its focus on helping some beneficiaries return to work, ESA differs from SSDI, which requires no return-to-work efforts to receive benefits. ESA might offer policy lessons for SSDI with regard to pilot testing, program reform, and accurate decision making.

The effect of economic conditions on the disability insurance program: Evidence from the great recession

We examine the effect of job displacement during the Great Recession on the Social Security Disability Insurance (SSDI) program. Exploiting variation in the severity and timing of the recession across states, we estimate the effect of unemployment on SSDI applications and awards. We find the Great Recession induced nearly one million SSDI applications that otherwise would not have been filed, of which 41.8% were awarded benefits, resulting in over 400,000 new beneficiaries who made up 8.9% of all SSDI entrants between 2008 and 2012. More than one-half of the recession-induced awards were made on appeal. The induced applicants had less severe impairments than the average applicant. Only 9% had the most severe, automatically-qualifying impairments, 33% had functional impairments and no transferable skills, and the rest were denied for having insufficiently severe impairments and/or transferable skills. Our estimates imply the Great Recession increased claims processing costs by $2.960 billion during 2008–2012, and SSDI benefit obligations by $55.730 billion in present value, or $97.365 billion including both SSDI and Medicare benefits.

How Important Is Health Inequality for Lifetime Earnings Inequality?

Using a dynamic panel approach, we provide empirical evidence that negative health shocks reduce earnings. The effect is primarily driven by the participation margin and is concentrated in less educated individuals and those with poor health. We build a dynamic, general equilibrium, life cycle model that is consistent with these findings. In the model, individuals whose health is risky and heterogeneous choose to either work, or not work and apply for social security disability insurance (SSDI). Health affects individuals’ productivity, SSDI access, disutility from work, mortality, and medical expenses. Calibrating the model to the United States, we find that health inequality is an important source of lifetime earnings inequality: nearly 29 percent of the variation in lifetime earnings at age 65 is due to the fact that Americans face risky and heterogeneous life cycle health profiles. A decomposition exercise reveals that the primary reason why individuals in the United States in poor health have low lifetime earnings is because they have a high probability of obtaining SSDI benefits. In other words, the SSDI program is an important contributor to lifetime earnings inequality. Despite this, we show that it is ex ante welfare improving and, if anything, should be expanded.

To Work for Yourself, for Others, or Not at All? How Disability Benefits Affect the Employment Decisions of Older Veterans

AbstractThe U.S. Department of Veterans Affairs’ Disability Compensation (DC) program provides disability benefits to nearly one in four U.S. military veterans and has annual expenditures of $77 billion. We examine how the receipt of DC benefits affects the employment decisions of Vietnam‐era veterans, making use of variation in eligibility resulting from a 2001 policy change that increased access to the program for veterans who served with “boots on the ground” in the Vietnam theater but not for other veterans of that service era. We find that the policy‐induced increase in program enrollment decreased labor force participation and induced a substantial switch from wage employment to self‐employment. The latter finding suggests that an exogenous increase in income allowed some older veterans to realize an ambition to start their own business or to retire gradually through self‐employment. We estimate that one in three veterans who entered the DC program due to this policy change left the labor force, estimates in the same range as those from recent studies of the Social Security Disability Insurance (SSDI) program, and that 30 percent of marginal recipients transitioned into self‐employment.

A Pipeline of Unscrupulous Practices: Qualitative Study of Attitudes Toward the Social Security Disability Program

In the United States more than 8 million adults currently are covered by the Social Security Disability Insurance (SSDI) program, with enrollment projected to increase in the coming decades. This qualitative study explores views on work disability in the United States, and specifically on the SSDI program, among the general public. Six focus groups with a convenience sample of nonbeneficiary adults ( N = 41) were conducted in Los Angeles. We found that in spite of low levels of familiarity with the program, suspicion and prejudice against people claiming disability benefits and against the program itself were widespread among our participants. Specifically, participants argued that (a) there is a high prevalence of “scammer” disability applicants, and (b) the program fails to adequately safeguard against nondisabled claimants. Moreover, they viewed disability benefits as a symbolic admission of weakness, contrary to the U.S. ethos of hard work and against “government handouts,” and expressed a preference for claiming disability benefits as a last resort if they were ever to develop a disabling condition. Exploring public perceptions of disability and disability benefit programs helps us shed light on current cultural narratives around these topical issues. Future research could examine the impact of stigma of beneficiary status on beneficiaries’ wellbeing.

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.

Spousal Labor Supply, Caregiving, and the Value of Disability Insurance

For married couples, spousal labor supply can act as a household insurance mechanism against one spouse’s earnings shock. This paper evaluates the insurance value of the Social Security Disability Insurance (SSDI) program among married households when wives face a time allocation problem between market hours and spousal care following their husbands’ disability. Using an event study approach, I find that while there is a sizable increase in wives’ working hours after their husbands’ job displacement, wives’ labor supply responses to their husbands’ disability are small, and instead, a considerable amount of time is spent in spousal care. I develop and estimate a dynamic structural model of married households and find that incorporating time loss due to spousal care increases the insurance value of SSDI relative to its costs. Furthermore, policy reforms such as supplementary caregiving benefits can improve social welfare.

Identifying Work Capacity and Promoting Work: A Strategy for Modernizing the SSDI Program.

The Social Security Disability Insurance (SSDI) program, which provides income support to individuals who become unable to work because of a disability, has not been substantially reformed since the 1980s, despite sweeping changes in health, medical technology, and the functional requirements of jobs. I review how the SSDI program works, its history in terms of caseloads and reforms, and findings from the research evidence that offer lessons for the future. I then propose two interlocking reforms that would modernize the core functions of the program. The first is to improve SSDI's process for determining whether an applicant has remaining capacity to work by replacing the outdated medical-vocational "grid" with a new system of individual work capacity measurement. Second, I propose the introduction of partial disability benefits, which would make use of the new system for measuring work capacity, and allow beneficiaries to combine benefit receipt with work. Partial benefits could be paired with a generalized benefit offset to further encourage work by beneficiaries, and the Social Security Administration's complex array of work-related rules could be eliminated.

Innovations in Occupational Health Care Delivery Can Prevent Entry into Permanent Disability: 8-Year Follow-up of the Washington State Centers for Occupational Health and Education.

Background:Long-term work disability is known to have an adverse effect on the nation’s labor force participation rate. To reduce long-term work disability, the Washington State Department of Labor and Industries established a quality improvement initiative that created 2 pilot Centers of Occupational Health and Education (COHE).Objectives:To document the level of work disability in a sample of injured workers with musculoskeletal injuries and to examine (8-y) work disability outcomes associated with the COHE health care model.Research Design:Prospective nonrandomized intervention study with nonequivalent comparison group using difference-in-difference regression models.Subjects:Intervention group represents 18,790 workers with musculoskeletal injuries treated by COHE providers. Comparison group represents 20,992 workers with similar injuries treated within the COHE catchment area by non-COHE providers.Measures:Long-term disability outcomes include: (1) on disability 5 years after injury; (2) received a state pension for total permanent disability; (3) received total disability income support through the Social Security Disability Insurance program; or (4) a combined measure including any one of the 3 prior measures.Results:COHE patients had a 30% reduction in the risk of experiencing long-term work disability (odds ratio=0.70, P=0.02). The disability rate (disability days per 1000 persons) over the 8-year follow-up for the intervention and comparison groups, respectively, was 49,476 disability days and 75,832 disability days.Conclusions:Preventing long-term work disability is possible by reorganizing the delivery of occupational health care to support effective secondary prevention in the first 3 months following injury. Such interventions may have promising beneficial effects on reversing the nation’s progressively worsening labor force participation rate.

Understanding the Aggregate Effects of Disability Insurance

We study the aggregate consequences of the Social Security Disability Insurance (DI) program, focusing on the role of complementarity between heterogeneous human capital. First, we develop and estimate a wage process in which individuals' human capital comprises (pure) labor and experience, and their efficiencies are affected by disability. We find that older workers are more experience-abundant, and that disability causes a smaller loss in the efficiency of experience than it does in the efficiency of labor. Further, the estimated aggregate production technology shows that labor and experience are complementary inputs. Combining these empirical results with a structural general equilibrium model, we analyze the labor market implications of removing the DI program. Removal of the DI program induces an increase in the relative supply of experience, thus affecting the marginal productivities of inputs and wages of all workers in the economy. Despite the increased labor market entry of disabled workers, the aggregate productivity may increase in the counterfactual economy, thanks to the complementarity between labor and experience.

Reforming the Social Security Disability Insurance Program to Encourage Work and Labor Force Participation: Lessons from the United Kingdom

The Social Security Disability Insurance program (SSDI) was designed to assist individuals deemed unable to work as a result of a permanent disability. SSDI has been and remains an essential component of the nation’s safety net. However, the program faces significant financial challenges and must be reformed before the SSDI trust fund is depleted in 2032. Many SSDI recipients are capable of working at least part time, but the program as currently structured discourages work. Rather than presenting SSDI applicants with the binary choice between work and disability benefits, the government should explore the possibility of temporary and partial disability awards to support increased opportunities to work. In addition, there are valuable lessons to be learned from disability reform in the United Kingdom, including perhaps the most valuable lesson, which is to recognize the distinction between disability and incapacity.

Saving Social Security Disability Insurance: Designing and Testing Reforms Through Demonstration Projects

The Bipartisan Budget Act of 2015 partially addressed the poor state of the Social Security Disability Insurance (SSDI) Trust Fund, over the short run and the medium run. At the time of the act, the fund was roughly one year from depletion. Over the short run, Congress reallocated some portion of the payroll tax funds from the Old-Age and Survivors Insurance (OASI) Trust Fund to the Disability Insurance (DI) Trust Fund to allow the continued payment of full benefits under the current system through fiscal year 2022. According to the most recent report (2017) of the Social Security Board of Trustees, the DI Trust Fund will be depleted in 2028. Looking toward the longer run, Congress took the opportunity to provide a mandate and resources for program redesign. Sections 821–23 of the Bipartisan Budget Act granted expanded authority for the Social Security Administration to engage in demonstration projects aimed at improving the opportunity for disability beneficiaries to remain attached to the labor force or return to work. In this working paper we build on our earlier writing, which proposes reforms to the SSDI program, and consider demonstration project designs that promote the testing of salient aspects of our proposals. We emphasize both a modular design for demonstration projects and the sequence of projects as important for designing effective demonstrations that speak to both administrative and congressional needs for information in the 2018–2028 time frame. We also consider other critical tenets that project designers should consider before fielding projects in the very near future.

Modernizing the Ssdi Eligibility Criteria: A Reform Proposal that Eliminates the Outdated Medical-Vocational Grid

The Social Security Disability Insurance (SSDI) program, designed to assist individuals unable to work because of permanent disability, has grown substantially over the past 10 years. We document this growth, adjusting for the changing demographics of the US population, and find that the program is covering a higher percentage of the workforce over time despite the fact that actual disability rates are falling. We explain that the medical-vocational grid guidelines that are used to determine whether someone is disabled are an important part of the explanation for increased disability awards. The grid applies much looser standards for applicants as young as 45 and 50. We propose that age be eliminated as a deciding criterion, as well as language ability and education level. We also note that the guideline's list of impairments is outdated and needs to reflect a modern workforce that has access to remedying medical technologies.

Work incentives in the Social Security Disability benefit formula

AbstractWe examine the connection between taxes paid and benefits accrued under the Social Security Disability Insurance (SSDI) program on both the intensive and extensive margins. We perform these calculations for stylized workers given the existing benefit structure and disability hazard rates. On the intensive margin, we examine the effect of an additional dollar of earnings on the marginal payroll taxes contributed and future benefits earned. We find that the present discounted value of disability benefits received from an additional dollar of earnings, net of the SSDI payroll tax, generally declines with age, becoming negative around age 40 and reaching almost zero at age 63. On the extensive margin, we determine the effect of working an additional year on the additional payroll taxes and future benefits as a percentage of income. The return to working an additional year at an income level just large enough to earn Social Security credits for the year is large and positive through age 60. However, the return to working an additional full year is substantially smaller and becomes negative at approximately age 57. Thus, older workers face strong incentives to earn enough to obtain creditable coverage through age 60, but they face disincentives for additional earnings. In addition, workers aged 61 and older face work disincentives at any level of earnings. We repeat this analysis for stylized workers at different levels of earnings and find that, while the program transfers resources from high earners to low earners, the workers experience similar patterns in the returns to working.

Social Security Disability Insurance Enrollment and Health Care Employment.

To examine the relationship between Social Security Disability Insurance (SSDI) enrollment and health care employment. State-year level data from government and other publicly available sources for all states (2000-2014). Population-weighted linear regression analyses model associations between each health care employment measure and each SSDI enrollment measure (i.e., SSDI overall, physical, or mental health enrollment rates), controlling for factors associated with health care employment, state fixed effects, and secular time trends. Data are gathered from publicly available sources. A one standard deviation increase in SSDI enrollment per 100,000 population is associated with a statistically significant 2.6 and 4.5 percent increase in the mean employment rate per 100,000 population for health care practitioner and technical occupations and health care support occupations, respectively. The size of this relationship varies by the type of disabling condition for SSDI enrollment (physical versus mental health). Social Security Disability Insurance enrollment is significantly associated with health care employment at the state level. Quantifying the magnitude of this relationship is important given high SSDI enrollment rates as well as evolving policy and demographic shifts related to the SSDI program.

Son of Sam, Service-Connected Entitlements, and Disabled Veteran Prisoners

American veterans have been over-represented in the United States carceral system since at least the Vietnam War era. Prior to 1980, veterans who were wounded in the line of duty were entitled to hard-earned, service-connected disability benefits regardless of post-service involvement in the civilian criminal justice system. In 1979, the American media began running sensationalized stories detailing alleged abuse of the Social Security Disability Insurance (SSDI) program by notorious prisoners, including New York “Son of Sam” mass murderer, David Berkowitz. In response to the outcry over these well-publicized accounts of prisoner SSDI abuse, Congress enacted a law, 38 U.S.C. § 5313, that stripped certain veteran prisoners of their service-connected disability benefits. This Article argues that the federal law that strips disabled, justice-involved veterans of their service-connected benefits as the result of non-service-connected misconduct should be repealed. Section 5313 is unjust, unwarranted, and unproductive, for at least five reasons. First, Congress enacted the statute to realize federal cost savings at the expense of a politically and socially vulnerable population: disabled, justice-involved veterans. Second, the statute is grounded in faulty logic and a fundamental misunderstanding of the nature and purpose of the Department of Veterans Affairs (VA) disability compensation program. Third, Congress stripped disabled, justice-involved veterans of their service-connected disability benefits largely as a result of its erroneous conflation of VA disability compensation and SSDI benefits. Fourth, Section 5313 fails to take into account the evidence-based nexus between military service trauma and post-service mental health issues and related criminal behavior. Finally, revoking service-connected disability benefits impedes justice-involved veteran rehabilitation, reentry, and readjustment.

Disability Insurance and the Great Recession

This paper reports research on the Social Security Disability Insurance (SSDI) program, which is designed to provide income to support workers who become unable to work because of a severe, long-lasting disability. The research used administrative data to estimate the effect of labor market conditions, as measured by the unemployment rate, on the number of SSDI applications, the number and composition of initial allowances and denials, and the timing of applications relative to disability onset. The authors analyzed the period of the Great Recession, and compare this period with business cycle effects over the past two decades, from 1992 through 2012. The analysis isolates the quantity and composition of applicants who are induced to apply for SSDI benefits when labor market opportunities decline, and therefore provides important new evidence about the group for whom SSDI application is a substitute for labor force participation, and their impact on the SSDI program.