Tuesday, March 22, 2011

Does Government Have The Ability To Manage Disability?

An article in today's Wall Street Journal provides a glimpse at the some of the difficult policy issues that face us in dealing with our massive federal deficit.  The focus of the article is on the impending insolvency of the Social Security Disability Insurance program that was first enacted in 1956.  This program is funded with a portion of a worker's (and the employer's) FICA taxes. The current rate is 6.2% on both the employee and employer with .9% (1.8% in total) funding the Disability Insurance program fund.

In 2010, the disability insurance trust fund received $109.3 billion but disability payments totaled $121.5 billion.  Considering the "pay as you go" nature of social security this is a serious issue and payments are being made from the "fund reserves".  However, even these reserves will run dry up in four to seven years if nothing is done.

How did we get here?  The number of beneficiaries has risen from 6.6 million in 2000 to 10.2 million in 2010.

How do you qualify for social security disability payments?  It is supposed to be very difficult.  Much harder than a typical private long term disability insurance program.

To be eligible for disability benefits, the Social Security law says that the applicant must be “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or is expected to last for a continuous period of at least 12 months.” Furthermore, the impairment or combination of impairments must be of such severity that the applicant is not only unable to do his or her previous work but cannot, considering his or her age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy (Social Security Act, section 223(d)).
Where do you find the most disabled workers?  9 of the top 10 U.S. zip codes for disabled workers receiving benefits can be found in Puerto Rico.  In several of those zip codes about 15% of all residents are receiving SSDI payments.  It is little coincidence that the unemployment rate in Puerto Rico was 15.7% in December, 2010.  It should be of little surprise that as people find it harder to find a job they are more willing to file for disability benefits.  However, where is the oversight and control?

Make no mistake that we need disability programs to provide for those that truly cannot work.  However, if we allow these programs to be abused then we risk hurting those that really need the support.  Are we to believe that an additional 3.4 million Americans became disabled such that they could not "engage in any other kind of substantial gainful work" over the last ten years?

A big part of the problem is the manner in which Social Security disability is administered according to the WSJ article.

Unlike Medicare or the Social Security retirement fund, which provide benefits mostly based on age, SSDI decisions are based in large part on medical opinions, which can vary from doctor to doctor, state to state.

Because someone else pays the bills, local officials have little incentive to keep the numbers low. The feds have tried to enforce consistency, but the process relies heavily on the judgment of doctors and administrative law judges who hear appeals.

Benefits can be modest: In 2009, they averaged $1,064 a month. But the program opens up access for recipients to other government programs, multiplying the ultimate cost to taxpayers.

Anyone who spends two years on SSDI qualifies for the Medicare health program, which usually is available only for those 65 years old and older. SSDI recipients tend to remain tethered to the program for years, and the government's lifetime financial commitment averages $300,000 per person, estimates David Autor, an SSDI expert who teaches at the Massachusetts Institute of Technology. "The system has profound problems," Mr. Autor said.
If you think there is any control over the program consider a couple of these findings from a 2010 Government Accountability Office investigation of federal employees and commercial drivers who were receiving disability payments by the Social Security Administration.  This from JUSTFACTS.  Check the section under Disability Payments for the full story and citations to the GAO Report.

  • Roughly 7,000 federal employees received disability payments while also receiving wages from federal jobs. (They are working for the federal government and are also getting full disability? Nice gig!)
  • 62,000 individuals received or renewed commercial driver's licenses after the SSA determined they were eligible for full disability benefits. (If you cannot be gainfully employed why would you need a commercial driver's license which is only necessary if you are driving someone for hire?)
  • Out of all these suspicious cases, the GAO looked into only 20 in detail.  All 20 were found to be improperly receiving disability payments.  (Is that a surprise?  Why didn't they look at all 69,000? There is probably more money here than in many IRS audits.)
  • One of the 20 was actually working for the Social Security Administration as a legal secretary!
  • Another of the 20 had received $108,000 in improper disability payments and was working as a TSA screener.  That individual was also living in a house listed for sale for $1.8 million. ( I am not making this up.)
  • What is the penalty when someone gets caught?  SSA has the authority to charge interest and penalties on top of the need for repayment of the ill-gotten gains.  This was not done in any of the 20 cases investigated.  In one case they worked out a repayment plan (interest-free of course) of $20 monthly installments.  This will only take 130 years to repay.
Our country has serious financial challenges.  There are many people in need. For our system to survive we have to make sure there is the utmost integrity in everything that government does.  Like so many of our social programs, the Social Security Disability Insurance Program is well-intentioned and well-meaning. However, it is not well managed.  It has to change.  Our whole approach to government programs has to change.  If it does not, many will lose all hope.  And that is something we really cannot afford to lose.

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