Add One More Issue to the List
Dr. David Mielke, Retired Dean of the College of Business at Eastern Michigan University
The Republican controlled Congress has a long list of issues to deal with. The major issues include the funding for the Highway Trust Fund which will run out of money in May, the budget bill for the Department of Homeland Security due by the end of March, next year’s budget, trade authorization, energy regulations, possible tax reform, infrastructure funding, maybe even immigration and reform of Obama Care. But there is one more issue that they will have to deal with sometime in 2016, if not before–Social Security Disability Insurance funding. Social Security Disability Insurance, or SSDI is funded by a portion of payroll taxes and pays an average monthly cash benefit of about $1,150 a month to disabled workers below social security retirement age. The trust fund is scheduled to run out of money in 2016. Should Congress provide supplementary funding to replenish the trust fund? Should they raise SSDI payroll payments? Instead should the terms for being classified as disabled be changed to reduce enrollments? Should better oversight of the system occur to be sure those currently enrolled are in fact disabled? What is the “Right Thing to do?” Let’s look at some issues:
1. While the pool of workers eligible for disability benefits increased by 11.3% between 1999 and 2004, to 151 million from 136 million, the number of workers getting the benefits increased 83.5% to 9 million from 4.9 million. Between January 2009 and December 2014, more than 1.5 million workers joined the disability rolls. That just happened to coincide with the recession and substantial loss of jobs. Only one-third of this growth can be explained by the underlying health, size and demographic composition of the working age population.
2. SSDI paid over $140 billion to disabled workers and their dependents in 2013, up 32% since 2008, according to the latest trust fund data. By the end of 2013 spending outpaced payroll receipts by $32 billion and the balance of the program’s trust fund was a little more than $90 billion. As a result, trust fund reserves are expected to run out in 2016.
3. When the disability program faced a crisis in 1994, Congress reallocated payroll tax revenues, taking money from the social security fund and added it to the Disability Fund. Congress could do that again, but that impacts the time period in which Social Security itself will run out of money. Congress has done this reallocation 11 times since 1968, the most recent in 2000. Some likened this to a person transferring debt from one maxed out credit card to another with higher balances but also a higher spending limit.
4. If Congress does nothing, in order to balance disability receipts from payroll to the SSDI payments, payments would have to be reduced by 19%.
5. The subjective criteria for disability haven’t been revised for 35 years despite advances in medicine and rehabilitation and they are enforced at the discretion of administrative judges. Disability can now be claimed for back pain and anxiety. There is a network of lawyers who routinely deal with denied SSDIclaims. Between 2005 and 2013, the judges on average allowed 66% of the appellants to receive benefits. But more than one in 5 judges allowed more than 85% of the claims they considered and a handful allowed even a higher percentage. Congress could require the Social Security Administration to assess the quality of the judges who review the cases. Fraud is rampant.
6. Today a beneficiary is generally not terminated from the program unless he is selected for a Continuing Disability Review and the government finds he has experienced substantial medical improvement. Currently, there is a backlog of one million reviews. Congress could provide funding to reduce this backlog.
7. Congress could pass reforms tightening the eligibility for SSDI, for example requiring people to have worked 4 of the last 6 years instead of 5 in the last 10. Or they could tighten eligibility by raising the age when it becomes easier to qualify for benefits.
SSDI represents one more problem that has been building for years—years that we have seen no action from the Congress or the President. Should Congress ignore this issue one more time, requiring payments to be reduced 19%? Should they increase eligibility requirements and increase oversight to be sure that existing beneficiaries are in fact still disabled? Should Congress increase the payroll SSDI taxes? Should Congress raid the Social Security fund to make up the deficit? What is the “Right Thing to do?” As with many of the issues ignored by the Democratic controlled Senate and for a number of years the Democratic controlled House as well, this issue can no longer be ignored. The system needs to be reformed, starting with eligibility requirements and funding to increase the number and quality of disability reviews and opinions by administrative law judges and reduce fraud. If the changes are insufficient to cover the shortfall, the social security fund will have to plug the hole—but only for a couple year time period while substantive changes are implemented.