SSDI (disability insurance) was originally created as a “modest” safety net aimed at helping severely disabled workers who were close to retirement age. But Congress being Congress, in order to secure reelection and reward lobbyist and donors, greatly expanded eligibility to include claims for depression, back pain and chronic fatigue syndrome, to name a few. The result is that people capable of working are instead opting for the disability rolls when confronted with unemployment. Once they get on the disability rolls, experience shows that they are likely to remain there, which is bad news for the taxpayers, Seniors, and the economy.
Today, instead of providing a wage-replacement backstop for the disabled workers who are permanently incapable of working, disability insurance has become more like a permanent unemployment insurance or a general welfare program where fewer than 1% on disability ever return to work.
The Cato study cites economists David Autor and Mark Duggan, who wrote that “the rapid growth of Disability Insurance does not appear to be explained by a true rise in the incidence of disabling illness, but rather by policies that increased the subjectivity and permeability of the disability screening process.”
The cost of S.S. Disability Insurance has risen so sharply in recent years that its nonexistent “trust fund” is now projected to be depleted in just three years according to a study by the Cato Institute, “The Rising Cost of Social Security Disability Insurance” published August of this year.
Nearly 11 million Americans were on disability in 2012 costing taxpayers $132 billion. This is more than the combined annual budgets of the Departments of Agriculture, Homeland Security, Commerce, Labor, Justice and the Department of the Interior. In 2013, the cost to taxpayers is expected to reach $144 billion, up from an inflation adjusted $56 billion spent in 2000.
The SSDI nonexistent “trust fund” is expected to take in $111 billion this year, leaving it with a deficit of $33 billion.
The rise in disability recipients also increases Medicare spending, since disabled workers can go on Medicare after a two-year waiting period, regardless of their age. And, depending on family income, they may also be eligible for other federal programs such as food stamps. Medicare benefits cost taxpayers about 80% as much as the benefits themselves which means that Medicare will ring up another $100 billion in taxpayer costs.
With the impending depletion of Social Security in 2016, U.S. Senators Tom Coburn, M.D. (R-OK), Jeff Flake (R-AZ), Angus King (I-ME), and Joe Manchin (D-WV) introduced the “Reducing Overlapping Payments Act” to protect SSDI and Unemployment Insurance by reducing overlapping benefits. The bill would require SSA to suspend Disability benefits during any month in which a recipient also collects Unemployment Insurance, while also ensuring the SAA has the necessary information to identify overlapping DI and UI payments. According to the Government Accountability Office (GAO), in fiscal year 2010 over 117,000 individuals received more than $850 million in overlapping payments.
“In order to protect safety-net programs for those who truly need them most, Congress must act to reduce wasteful and overlapping payments,” Dr. Coburn said. “Absent new legislation, there is no way to prevent beneficiaries from essentially double-dipping and receiving disability insurance while also obtaining unemployment insurance. The non-partisan GAO has said both programs face serious financial challenges, so I am pleased there is bipartisan support to close this loophole. The President also proposed closing this loophole in his most recent budget, and I look forward to working with him to implement his proposal.”