Social Security

Why It's Hard to Trust the Social Security Disability Insurance Trust Fund

When the economy is struggling, more people falsely apply for disability benefits.

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Social Security
Dreamstime

Have you ever wondered why your television screen is often filled with advertisements from law firms touting their ability to land money for the disabled? It's because helping people obtain federal Social Security disability benefits has become a lucrative industry in the past decade. But it would be a mistake to only blame the legal profession. After all, lawyers are merely  taking advantage of a program that frequently encourages people with dubious disability claims to seek benefits, especially when the economy is down.

According to the Social Security trustees report released at the end of July, the disability insurance trust fund will run out of money by the end of 2016. Without reforms, millions of Americans will receive an automatic 19 percent reduction in their Social Security Disability Insurance benefits.

That the program is short on cash is not surprising, considering the tremendous increase in benefits and recipients. According to the Social Security Administration, 2.6 million Americans were collecting SSDI in 1970. In 2014, that number reached 10.9 million. Today the program pays about $142 billion. Adjusted for inflation, that's double what the program cost in 1998.

The statistics show large increases in applications for disability benefits when the economy is struggling and unemployment is rising but fewer applications when the situation is reversed. Given that people obviously don't become more or less disabled depending on how the economy is performing, it means that people are using the program as a form of unemployment insurance.

How did we get here? When SSDI was implemented in the late 1950s, it was intended to provide benefits to those who were too disabled to work but weren't yet eligible for Social Security benefits. However, eligibility standard changes implemented in 1984 shifted screening rules from a list of specific impairments to a process that put more weight on an applicant's reported pain or discomfort, even in the absence of a clear medical diagnosis. This results in more workers being awarded benefits based on ailments that aren't easily diagnosed and depend on patient self-reporting, such as back pain.

Adding to the problem is that if people are initially denied benefits, they can appeal to an administrative law judge, or ALJ. In theory, these judges impartially balance the claims of applicants against the interests of us taxpayers. Unfortunately, many judges don't. In May, my colleague Mark Warshawsky and George Mason University economics student Ross Marchand noted, "In 2008 judges on average approved about 70 percent of claims before them, according to the Social Security Administration."

They added, "Nine percent of judges approved more than 90 percent of benefit requests that landed on their desks." As their data show, those judges who are generous with benefits are also consistently generous over time. This shouldn't be the case, of course, because judges are randomly assigned cases. This is problematic for taxpayers. In their upcoming Mercatus Center study, Warshawsky and Marchand estimate that over the past decade, decisions from these overly generous judges will cost taxpayers $72 billion.

As the authors note, ALJs have greater incentives to award benefits than to deny them, because approving people involves less paperwork than denying them. Considering the payoffs for applicants (the average SSDI benefit amount is $1,165 per month but can reach $2,663), as well as the lack of incentives to stop appealing when denied and the incentives for lawyers to push their clients through the appeal process, judges—especially the generous ones—are faced with huge caseloads.

The system is in dire need of reform. On the ALJ front, Warshawsky and Marchand recommend reducing the judges' workload to 500 cases per year and ending lifetime tenure by reducing it to 15 years because the generous judges are the long-serving ones.

But lawmakers could also scale back eligibility rules so that benefits only go to those who can prove their inability to work. That might just make the TV ads stop and make the SSDI program solvent again.

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  1. “OW! My back! … What? What did you say?!?! OMG, I’M DEAF, TOO! SEND ME A CHECK!”

  2. de Rugy wants little old ladies with bad backs eating cat food.

  3. My standard for ‘disabled’ is ‘inacapable of performing any productive task whatsoever’. I used to have a co-worker who had to leave a previous job on account of physical injury. Under the current rules he could have claimed diability. Instead, he got a desk job working on computers. I hold everyone else to a similar standard. If you can do something, even if it’s not something you like nor related to your old work, you’re not eligable for hand-outs.

    1. Goodwill (one of my last employers) actually hired people and paid piece work wages to those who were unable to work any “regular job” due to disability, handicaps, etc. However the “productivity” of such people was such that they would not be “profitable” employees even at minimum wage. They were however delighted to earn what they could (their work ethic was great) even if they weren’t productive enough for any ordinary employer to hire.

  4. Dubious disability claims? But my hand is disabled because I masturbate so much.

  5. Skyrocketing disability fraud is one of the major reasons the unemployment rate is not significantly higher. Green shoots!

  6. I was struggling a bit about 2 years ago and briefly considered filing for disability. Then I realized I’m not a complete piece of shit and didn’t.

    1. So anyone who does file must be a piece of shit, and surely they are at least a big of piece of shit as you and only filed because they were ‘struggling’? not disabled.

      1. Anyone who files who is at all capable of working is a complete piece of shit yes.

  7. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.online-jobs9.com

  8. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.online-jobs9.com

  9. “The system is in dire need of reform. ”

    No. It’s a scam, pure and simple. Just like welfare, medicare, medicaid, public education and all the rest of it .

    As a scam, it is working perfectly 🙂 .

    However, for most here and elsewhere:

    “In your dreams Social Security is not a scam”
    In your dreams welfare is not a scam”
    “In your dreams the constitution is not a scam,
    “In your dreams the Supreme Court is not a scam,
    “In your dreams the Federal Reserve is not a scam,
    ……

    And so on and so forth, ad infinitum 🙂 .

    Original music and lyrics: “Dreams[ Hormegeddon Blues]”:
    http://www.youtube.com/watch?v=w0o-C1_LZzk

    So, dream on, or not? Your choice.

    Regards, onebornfree.
    onebornfreeatyahoodotcom

  10. Start making cash right now… Get more time with your family by doing jobs that only require for you to have a computer and an internet access and you can have that at your home. Start bringing up to $8596 a month. I’ve started this job and I’ve never been happier and now I am sharing it with you, so you can try it too. You can check it out here…
    http://www.jobnet10.com

  11. Obama told us that having millions of able bodied Americans on disability and food stamps shows how compassionate we are as a country.

  12. Once heard a “civic volunteer” say that they knew homelessness was increasing because they gave away more free turkeys this Thanksgiving than last.

  13. I things are a little more nuanced than they appear at first glance. The author said:

    “Given that people obviously don’t become more or less disabled depending on how the economy is performing, it means that people are using the program as a form of unemployment insurance.”

    People do become more or less disabled depending on the economy.

    So many people are out of work that employers are steadily increasing the bar for employment as a way to manage the sheer number of applciants. For sample, Bashas, a grocery chain in the southwest now includes sincere facial affect as a job requirement. If your facial expression is not highly animated and consistent with a positive mental attitude you do not get hired.

    The days of being hired on the basis of skills, ability and experience are over.

    Now consider disability. A friend had a near fatal GI issue a few years ago and now needs to be near a bathroom and on rare occasions must abruptly leave her work station. Employers will not hire her because of this condition and she was awarded a disability claim. She denies her disability, (and I agree) but employers and SSDI think differently. In any case, no matter how disability is defined employers no longer hire people with even minimal health related needs leaving little them choice but a disability claim. I’m sure there are deadbeats pursuing disability claims, but we should not forget or ignore fundamental changes in the economy due to the end of the industrial age. Comments?

    1. My wife has such excessive sweating that she dripped sweat while working in a candy factory. She quit when it interfered with her ability to safely do the job. It , also, was causing dangerous dehydration to occur. So, it was a health problem, as well. She has had a learning disability, since young, so factory work was her only choice. I broke my back and damaged my spinal cord. Having made good money, I get a good check for my disability. But, who couldn’t use more?!

  14. Filing a claim is confusing and takes hours and days of research and documentation.
    Response to your claim takes months for the initial response, then more months to get in to see the Dr they refer you to.Overall it took almost 18 mos to get to see an ALJ..everything was deny. When I finally got a hearing it was a video hearing that lasted less than 15 minutes, with the judge asking me one question before his determination.The determination took another three months for a denial of benefits.
    In the meantime, I lost everything,house, car, credit, wife. I tried to work and could not. I lived on SNAP and Medicaid and the generosity of others.Just 5 years earlier I had a 6 figure income with 5 figure annual bonuses. I had burned thru savings and sold everything I owned, I applied for SSI benefits and reapplied for disability
    I am 59 years old and have worked since I was 13.The last 15 yrs I maxed out SS contributions. No one asked me if I wanted to join Social Security. It was taken from my check EVERY check. It was how the game was played, and I played by the rules. Somehow now ‘entitlements’ have become a bad word, and people that ARE entitled have become pariahs. I am entitled to have the contract that I worked under all these years to be honored! It sucked that in order for me to get what was promised, I had to lose everything I had earned.
    Remove the CAP on SS.Change the system but honor the commitments made to the people they were made to.

    1. The point is though, you are an extreme outlier. Most of the people using these benefits aren’t the ones contributing to them, which puts strain on everyone else, and leads to people who probably deserve benefits getting denied like you did because the program is near broke. You mentioned how you had no choice in contributing all of those years, and that’s why this program is crap. I think you would agree that it would have been much more efficient to let you keep all the money you hard earned for yourself, so that you couldn’t be denied part of the pool you actually contributed too. The optimal solution would be letting people keep the money they rightfully earned instead of taking it to give to some clown who claims he can’t work because his back hurts sometimes.

    2. Just 5 years earlier I had a 6 figure income with 5 figure annual bonuses.

      Fuck you!

      You say you “maxed out” your SS contributions for 15 years- which means you earned at least 1.5 million dollars during that time- yet you needed SNAP just to eat after that.

      Your disability is not physical…

      1. Not that I have to explain anything to you, but you are the exact person that needs to take a breath and look around. You say 1.5 like it means something but you have no idea what my life was, where I lived, how many dependents I had, how much was lost in the great recession, my catastrophic medical costs…plus the fact that no one thinks it will happen to them.

        I hope none of what happened to me, happens to you. I hope you have all your life squared away so that if anything happens to disrupt it, you have made all the right moves and are able to support yourself for the rest of your life without anyone telling you to fuck off.

        But if anything happens beyond what you can handle, look me up and you can stay on my couch until you get right.

  15. Why would any sane, intelligent person trust anything in government?

    Oh wait.

    No sane, intelligent person does.

  16. Part of the problem is due to the effective elimination of welfare. And once on SS disability, there is every incentive to remain there. Plus our true level of unemployment is at least double what the federal government will admit to. Additionally, more and more people have become “functionally obsolete” in a society that demands more and more education to hold even the simpler jobs.

    Also our increasing cost of living (much of which has been caused by government regulation) also makes it more difficult for people today. The cost of housing for example is driven upwards by building codes and restrictions upon the minimum size house that can be legally built today. At one time you could buy a used small trailer and put it on a lot in a trailer park for very little money. Today this is impossible. Our cost of living has considerably exceeded the increase in average wages. All of this together leaves no doubt that these problems are of our own political decisions.

    1. So not that I am trying to minimize the issue….it needs to be addressed. However the vitriol and passion are inflamed by the media, not facts. I will contain this to Disability only as this is what the article’s topic is.
      http://www.ssa.gov/oact/STATS/dibStat.html

      in 2014 there are 9 million claims in payment at a 32% approval rate on average….and let’s not forget to look at the termination rate of 9%, which leaves 8 million collecting. 8/319=.025 is the percent of the population collecting disability
      The reality therefore is if you apply for disability you have a one in three chance at being approved. (If in the beginning of my work career they had told me I had to buy this insurance, but only had a 1 in 3 chance of collecting it if I needed it, would I have signed up for that?) But if you are approved, you have a 100% chance of being derided for being a deadbeat.

      You see the Elite keep us at each other to keep us off them..I won’t fight you. You are me and I am you.

  17. “In 2008 judges on average approved about 70 percent of claims before them, according to the Social Security Administration.”

    Actually it was 38,57 percent. Approvals this decade have dropped steadily from nearly 47% in 2000 to 38 percent in 2014.

    So just a simple fact check tells me that this author has an agenda besides the facts. I wonder what they are?

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