Social Security as Part of an Integrated National Disability Policy Is the Social Security Definition Out of Sync?

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Social Security as Part of an Integrated National
Disability PolicyIs the Social Security
Definition Out of Sync?

• Social Security Advisory Board
• Washington, DC
• April 14, 2004
• By
• Virginia Reno
• Vice President for Income Security Policy
• National Academy of Social Insurance
• www.nasi.org

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Topics

• I. Is the Social Security definition of
  disability out of sync?
• II. Are benefits a strong deterrent to work?
• III. Did DI cause a decline in employment in the
  1990s?
• IV. Why did DI rolls grow in the 1990s? Other
  hypotheses.
• V. Recovery and return to work Is it better than
  we think?
• VI. Resources for implementation are essential.

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Program Eligibility Definition Should Match the
Programs Purpose

• The Social Security Act definition matches the
  purpose.
• Purpose of DI Wage-replacement income for
  workers who have lost their capacity to earn
  a living due to a severe, long-lasting work
  disability.
• Definition Inability to work due to a
  medically-determinable physical or mental
  impairment that is expected to last at least a
  year or result in death.

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Other Program Definitions Match Other Purposes

• Vocational Rehabilitation An individual who (1)
  has a physical or mental disability that
  constitutes or results in a substantial
  impediment to employment, and (2) can benefit
  from VR services.
• Personal assistance or long-term care services
  Need for assistance with activities of daily
  living, or instrumental activities of daily
  living.
• ADA Disability means . . . (1) a physical or
  mental impairment that substantially limits one
  or more major life activities, (2) a record of
  such an impairment, or (3) being regarded as
  having an impairment.

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Wage-Replacement Systems Use Unable to Work

• LTDI unable to perform usual occupation, (may
  shift to ANY occupation after two years).
• STDI, or sick leave unable to perform own job.
• CSRS unable to perform current position or
  another available position in the same agency at
  comparable pay for which the individual is
  qualified.
• The Social Security definition is very strict.
• A less strict definition would pay benefits to
  more people.

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Are DI benefits a strong deterrent to work?

• Wage-replacement must balance adequacy and
  incentives.
• Why benefits are not a strong deterrent to work
• Benefits and replacement rates are modest.
• Spending relative to other countries is low.
• People turn to benefits as a last resort.

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Figure 1. Social Security Disability Benefits
and Past Earnings, 2004
Source Office of the Actuary, OASDI Trustees
Report 2004.
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Figure 2. U.S. Disability Benefit Spending is Low
by International Standards

Source OECD, 2003.
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Did DI Cause a Decline in Employment in the
1990s?

• The expanded eligibility hypothesis
• DI eligibility criteria were not expanded in the
  1990s.
• 1984 changes sought to restore a responsible
  balance.
• 1980-1982 is an aberrant baseline.

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The Replacement Rate Hypothesis (Autor and
Duggan)

• Older men at the bottom of the wage distribution
  in the 1990s had declining wages over the
  lifetime.
• A problem in the U.S. wage structure. Not a flaw
  in the DI benefit formula.
• Did benefits draw these disabled men out of the
  workforce?
• More likely they had no real capacity to work.
• Given a severe impairment, advanced age,
  limited skills.
• Low and falling wages suggest weak employer
  demand and poor prospects for accommodation.

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Why Did the DI Rolls Grow in the 1990s?

• Are other disability programs sending people to
  DI? A look at Workers Compensation.
• Is the work place more unforgiving?
• Do men in more arduous jobs have fewer good early
  retirement options?

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Trends of the 1990s in Workers Compensation

• Various trends in States policies
• Limiting compensation if there is a pre-existing
  condition.
• Stricter evidence in case of a pain or mental
  stress.
• Exclude or limit claims for mental stress or
  cumulative trauma (musculoskeletal).

Burton and Spieler, 2001
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Figure 3. Social Security Disability Insurance
and Workers Compensation Benefits as a Percent
of Payroll, 1970-2000.
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The Focus Group Surprise

• Interviewed entrants to the DI rolls in the early
  1990s.
• Almost all with musculoskeletal impairments had
  been denied by workers comp.

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Other Hypotheses Why the Rolls Grew

• Employer Perspective A less forgiving
  workplace.
• Do men in arduous jobs have fewer early
  retirement options than in the 70s and 80s?

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Is DI recovery and return to work higher than we
think?
Status in 1994, six year after benefit award
Source SSA Tabulations, BSO, p.110.
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Adequate Administrative Resources Are Essential
for

• Sound initial disability decisions.
• Continuing disability reviews.
• Promptly adjusting payments when beneficiaries
  work.
• Helping people use work incentives.