Social Security: 1-STAPLETON

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The Eligibility Definition Used in SSA’s

Disability Programs Needs to be Changed

Presented to the

Social Security Advisory Board

Discussion Forum on the Definition of Disability

Dirksen Senate Office BuildingWashington, DC

Presented by

David C. StapletonCornell University

Institute for Policy Research

April 14, 2004



Overview

• “The Nation must face up to the contradictions created by theexisting [Social Security] definition of disability.” (SocialSecurity Advisory Board, 2003, p. 1)

• A bleak picture – Deteriorating economic security of people with disabilities

– Programs that are fiscally insecure – An inefficient, inequitable determination process that rations scarce

program resources by arbitrarily imposing high costs on applicants

• The reason: the current eligibility definition uses the medicalmodel

• The solution: recognize that the environment matters – consistent with the new paradigm of disability and the ADA• But that will also require a fundamental change in our approach

to providing economic security to people with disabilities



Data

• Many statistics cited are based on trends from the Current Population Survey(CPS), from:

– Stapleton and Burkhauser (eds.) The Decline in the Employment Rate of Peoplewith Disabilities: A Policy Puzzle. W.E. Upjohn Institute for EmploymentResearch, 2003.

– www.disabilitystatistics.org

• The CPS method for identification of people with disabilities – a work limitation question – has been heavily criticized, for good reason

• Trends in statistics for people with disabilities from the CPS are very similar to those from other surveys that use preferred measures of disability

– The prevalence of disability differs

– Changes in employment are comparable

• Trends in the CPS statistics are mirrored in SSA’s administrative data



The Decline in Economic Security

• Household incomes of working-age people with

disabilities fell further behind those of other

households in the 1990s

• People with disabilities became less reliant on their own earnings, and more reliant on SSDI and SSI

• The employment rate of people with disabilities has

declined continuously since 1989

• These trends are mirrored in disability program

statistics



The Decline in the Employment Rate

of People with Work Limitations

Employment Rate by Disability Status and Sex

0

10

20

30

40

50

60

70

80

90

100

1 9 8 1

1 9 8 3

1 9 8 5

1 9 8 7

1 9 8 9

1 9 9 1

1 9 9 3

1 9 9 5

1 9 9 7

1 9 9 9

2 0 0 1

% E m p l o y e d

Men without Work Limitations

Women without Work Limitations

Men with Work Limitations

Women with Work Limitations

Source: www.disabilitystatistics.org



The Rise in SSDI Participation

Source: Social Security Advisory Board, 2003

% Change in SSDI Beneficiaries

per 1,000 Insured, 1990-2002

0%

10%

20%

30%

40%

50%

60%

70%

All

ages

20-24 25-39 30-34 35-39 40-44 45-49 50-54 55-59 60-64



The Decline in Economic Security (cont.)

• People with disabilities have become much more dependent on

public health insurance

• The decline in economic security is greatest for those in the

youngest age groups



Employment Rates of Young Adults with Disabilities

Declined by More than Those for Older Adults

Source: Houtenville and Daly, 2003



Fiscal Insecurity of the Disability Programs



Inflation-adjusted Program Expenditures have Grown

Rapidly Since 1989

Source: Social Security Advisory Board, 2003



Disability Program Expenditures have also Grown

Rapidly as a Share of Federal Outlays

Sources: Social Security Advisory Board, 2003, and

President’s Council of Economic Advisors (2003)



Fiscal Insecurity of the Disability Programs (cont.)

• SSA’s actuaries have been warning of impending exhaustion of

the SSDI and OASI Trust Funds for years

• History suggests that current growth in disability spending will

eventually lead to cuts in eligibility and/or benefit levels



Poor Service to Applicants

• Problems with the disability determination process

have defied SSA’s reform efforts for over a decade



Poor Service: Allowances on Appeal

• Almost a third of awards are made after an initialdenial

• Many applicants who are initially denied benefits fail

to appeal, even though high allowance rates for appeals suggest that many would be successful if they

did

• Although many allowances on appeal might be the

result of changes in medical conditions, SSA statisticsshow that many are allowed on the evidence that was

available to the initial examiner



Poor Service: Processing Times

• Many applicants have to wait months for their initial

determination.

• Many who appeal initial denials wait over a year for a

final decision



Poor Service (cont.)

• Whether or not an initial application is allowed issubstantially affected by where it is filed and who

happens to review it

• The determination process likely discourages manyapplicants from applying, some of whom are likely to

be qualified

• The determination process likely denies benefits to

many people with disabilities who have a significantneed for support.



The Eligibility Definition

Inability to engage in any substantial gainful activity

by reason of any medically determinable physical or

mental impairment which can be expected to result indeath or to last for a continuous period of not less than

12 months.



Eligibility Definition (cont.)

• Disability = inability to work

• Inability to work is medically determinable

• Yes or no



The Consequences:

The Decline in Economic Security

• Mounting evidence implicates SSA’s disability programs as the cause of the employment rate decline

– Liberalization of eligibility beginning with the 1984

Amendments

– Increase in the SSDI replacement rate for low-wage

workers, because of the way past wages are indexed to

determine benefits

– The 1990 recession triggered a flood of applications from

“contingent applicants”



The Mounting Evidence

• Growth in the SSDI roles closely tracks employment declines

• The fastest growing impairment categories for beneficiaries are

those most affected by liberalization

• The allowance rate increased as applications increased

• Declines in employment and increases in participation are

greatest for those with low skills

• Employment and program participation have become more

sensitive to the business cycle

• The employment decline for those with “long-term” disabilities

began in the mid-1980s



The Employment Decline for Those with Long-

term Disabilities

10

15

20

25

30

35

40

45

50

55

1 9 8

0

1 9 8

1

1 9 8 2

1 9 8

3

1 9 8

4

1 9 8

5

1 9 8

6

1 9 8 7

1 9 8

8

1 9 8

9

1 9 9

0

1 9 9

1

1 9 9

2

1 9 9

3

1 9 9

4

1 9 9

5

1 9 9

6

1 9 9

7

1 9 9

8

1 9 9

9

2 0 0

0

2 0 0

1

2 0 0

2

( P e r c e n t a

g e ) .

5

10

15

20

25

30

35

40

45

50

Annual Weeks Worked Annual Hours Worked Annual Hours greater > 140

Average Weekly Hours Annual Hours greater > 52

Source: Burkhauser and Houtenville, 2004



The Role of the Eligibility Definition

• The eligibility definition forces people with significantmedically-determinable conditions to make a choice

– Seek benefits and give up economic independence

– Support themselves through work, despite significant

challenges

• The definition creates a work disincentive

• When we liberalize the definition so that we can care

for more people who apparently need support, or whenwe offer better benefits, it should be no surprise that

many reduce their earnings or stop working altogether



The Consequences:

Poor Service to Applicants

• SSA cannot substantially improve the determination process because the Agency is being required to

perform an impossible task: medically define a line

between those who can work and those who cannot

• Adding consideration of environmental factors in

eligibility determination cannot fix the problem

• There is no line between those who can work and

those who cannot



A New Approach to Economic

Security is Required

• The “caretaker” approach: – Is inconsistent with the new disability paradigm and the

aspirations of the disability rights movement

– Requires determination of who can and cannot work

• The “self-support” approach: – Is consistent with the new disability paradigm and the

aspirations of the disability rights movement

– Helps people with disabilities support themselves

– Would be more appealing to taxpayers – Eligibility requires determination of who has challenging

medical conditions



Features of a Self Support System

• Work expectations for many, but not all• Access to comprehensive, integrated services that support

employment

• Tax credits or wage subsidies for those least able to compete in

the labor market• Income support for those with the most severe conditions, not

conditioned on earnings

• “Extra” early retirement benefits after some age, notconditioned on earnings

• Public health insurance benefits “for life,” but with premiums partly paid by beneficiaries or employers under certaincircumstances



Challenges to Building a Self Support System

• How can we muster the resources from existing,independent programs and stakeholders?

• How can a government bureaucracy successfully

administer supports that are tailored to the widelydiverse needs of beneficiaries?

• How can we avoid hurting those we are trying to help

as we change the system?



Learning from Other

“Self Support” Policy Efforts

• Pay attention to both strengths and limitations• Other countries

• Welfare reform – 1993 Earned Income Tax Credit expansion

– 1996 adopted “work-first” income support approach – Positive results:

Growth in employment

Decline in caseloads

Remarkably little regression during the recession

Maintenance of political support, despite cost

– Negative results: Some families harmed

Parents with disabilities were further segregated



Conclusion

• “The Nation must face up to the contradictions created by theexisting [Social Security] definition of disability.” SSAB, 2003

• The current eligibility definition for SSA’s disability programsembodies the medical model and is responsible for: – The deteriorating economic security of people with disabilities

– The fiscal insecurity of the programs themselves

– An inefficient, inequitable determination process

• We have to recognize that the environment matters if we areever to fulfill the promise of the ADA

• We need to replace the “caretaker approach” to providingeconomic security with a “self-support” approach

• Accomplishment of that task poses many significant challenges



% Change in SSDI Beneficiaries per 1,000 Insured

-10%

0%10%20%30%40%50%

60%70%80%

All

ages

20-24 25-39 30-34 35-39 40-44 45-49 50-54 55-59 60-64

% Change 1980-2002 % Change 1990-2002

Source: Social Security Advisory Board 2003

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