Social Security Disability Insurance (SSDI) is a federal entitlement created in 1956 as an insurance plan for long-tenured workers with the misfortune of becoming disabled before retirement. Today, the program has ballooned into a $135 billion behemoth threatening to collapse under its own weight. Left unchecked, decades of loose standards and poor enforcement may cause a collapse of the system that would culminate in thousands — if not millions — of deserving recipients being deprived their rightful benefits.
Federal disability insurance began from humble beginnings, but unfortunately, over time, has grown dramatically, and today the fastest-rising cost for Social Security is not retiring baby boomers, but skyrocketing disability insurance benefits. In 1970, the disability insurance program was financed with a payroll-tax rate of only 0.8 percent of wages. Today, the cost of SSDI has tripled relative to the 1970 level with disability benefits now making up 18 percent of all Social Security costs. This is a marked difference from 10 percent in 1990. The number of people on SSDI in 2012 exceeded the entire population of New York City at more than 8.7 million participants.
The biggest contributing factor has been the ease with which benefits can be obtained. While it is tempting to blame the aching knees and backs of an aging population, the truth is that American workers are healthier and fitter today than they were when SSDI was in better fiscal shape. Instead, the answer is the program has grown soft around the middle for three reasons: low standards, enticing benefits and far too little control over its own screening process.
It is unfortunate that the disability insurance program has morphed from a program for permanently disabled workers with a substantial work history who were over the age of 50 to a rapidly growing program covering an increasing number of marginally disabled workers.
The screening process of approving SSDI applicants, once run by the Social Security Administration, has been foisted upon a system of appeals run by an overworked and underregulated network of administrative law judges. In this system, a growing amount of applicants and their well-practiced lawyers have come to treat initial approval-or-denial of benefits as merely the first stop on the way to an appeal, where the odds of success are higher. Worse, these lawyers face badly orchestrated incentives that can cost taxpayers dearly.
Part of the solution for rising disability costs is to refocus benefits on the most disabled individuals, coupled with incentives for employers to keep disabled people working. In 2010, one out of every 50 working Americans applied for federal disability benefits. Furthermore, with a challenging employment market, this program has also functioned as a fallback for workers without employable skills. Only half of those who enter the disability rolls will ever return to the workforce.
The expansion of this program is troubling even in a booming economy. In a country with a nearly $17 trillion national debt the fiscal unsoundness of this program is even more alarming. The program is growing faster than the payroll-tax revenues that fund it, and the Congressional Budget Office predicts that the SSDI trust fund will be entirely depleted by 2016. At that point, barring legislation to further fund SSDI, the program will be forced to begin paying smaller benefits, or will raid another program such as Social Security’s Old Age and Survivors Insurance trust to cover the balance.
Grappling with the problems posed by a rapidly expanding SSDI system would be simpler if it were the case that the working-age population had simply gotten older and less able to earn a living. Instead, the principal drivers of SSDI growth are a loosening of eligibility requirements, increasingly attractive benefits and an application process that has become incapable of distinguishing between truly disabled workers and those who should be rejected. Together, these three factors have combined to create a modern SSDI program very different than the one envisioned by its architects. Going forward, it is essential that Congress take significant steps to rein in SSDI’s growth. Those changes will inevitably be decried as insensitive and unjust, but they are essential. To do nothing — to continue to prioritize the able-bodied over the truly infirm — is far worse.
MacMillin Slobodien is executive director of Our Generation, a nonprofit advocacy group, which is launching the Reform SSDI Now project.