Unlike Social Security’s Old-Age and Survivors Insurance program for retirees, which has a highly predictable financial outlook, the financial well-being of Social Security’s Disability Insurance program varies widely from year to year. Drastic yearly swings in its projected solvency occur because the system hasn’t stuck to its mission of providing benefits for people who are physically or mentally unable to work. Instead, it has allowed many individuals to misuse it as both an unemployment and early-retirement program.
According to the trustees’ 2022 report, the Disability Insurance program appears to be on solid footing for the next 75 years. That’s at least a 40-year extension in the program’s projected solvency compared to the trustees’ 2021 report. And it’s a massive swing from the trustees’ 2015 report that projected the program would be insolvent in 2016, which led to policymakers robbing $150 billion from Social Security’s retirement program to boost the disability program.
Misuse of the disability program is the main reason for drastic swings in its projected solvency over time. If the program were serving its intended purpose of providing benefits to individuals who lose the physical or mental ability to work and provide for themselves, its finances would remain relatively stable over time. In fact, we could expect disability incidence rates to steadily decline with medical improvements, technological advancements, and new ways of working, such as through app-based platforms and remote work.
But the disability program has been allowed to function as a long-term unemployment insurance program and an early-retirement option for some.
Instead of preserving benefits for individuals who, due to a physical or mental disability, are unable to perform any job in the national economy—the program’s definition of unemployment—far too many people are awarded benefits. In 2016, nearly half—48%—of all disability determinations relied on non-medical, so-called “GRID” factors such as age, education, and work experience.
For example, prior to the Trump administration eliminating the “inability to speak English” as a factor in disability determinations, judges had no choice but to award benefits to a 45-year-old who could only perform sedentary work and claimed to not speak English, even if there were many jobs he could perform.
In addition to too many people entering the program, too few ever leave it to return to work. In part, that’s because the program does nothing to improve—and in some ways it even harms—individuals’ ability to return to work.
For starters, the program’s lengthy determination process—often requiring applicants to wait over a year before receiving benefits—can cause deterioration in their work capabilities and discourage them from ever leaving the program. And once people receive benefits, the program does nothing to help them return to work, and it requires beneficiaries to wait two years before they can receive Medicare.
Private disability insurance, on the other hand, provides a determination within 60 days. Claimants receive coordinated medical care, workplace accommodations, and even wraparound services such as training and child care. And private disability insurance costs about half as much and provides about 50% higher benefits than Social Security’s Disability Insurance program.
There are also all sorts of perverse incentives that prevent the program from functioning as it was intended.
Just one example is the Social Security Administration acting as the middleman between individuals seeking disability insurance benefits and the representatives those individuals often hire to help them with their claims. Instead of a typical client-attorney relationship, the Social Security Administration sets representatives’ pay based not on how well they serve their clients, but on how long it takes their claims to move through the process. This incentivizes some representatives to prolong their clients’ cases, and since the SSA takes representatives’ payments directly out of beneficiaries’ checks, disability beneficiaries have little control over the representation they pay for.
Disability insurance has been broken for decades. Those who administer the program and those who need it will tell you that much.
Regardless of the program’s erratic financial projections, it is plagued with massive inefficiencies, wrought with misuse and abuse, and doesn’t serve individuals with disabilities well.
The upside is that there are many ways to improve it. The Heritage Foundation has proposed 16 reforms that would improve the program and cut its costs nearly in half—which would allow all workers to keep more of their paychecks, since the cost for Social Security’s disability program comes from workers’ pay. (The Daily Signal is Heritage’s news and analysis outlet).
Many of these reforms are already being considered by lawmakers, including Rep. French Hill, R-Ark., and Sen. Tom Cotton, R-Ark., with their Social Security Disability Insurance Return to Work Act, and the House Republican Study Committee’s Blueprint to Save America.
The fact that the Disability Insurance program appears to be solvent this year should not be used as justification for overcharging more than 150 million workers who are forced to pay into the program or for underserving millions of individuals with disabilities who deserve the coverage we all have paid for.
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