Social Security: Reno%20SS%20Board%204-14-03

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Social Security as Part of an IntegratedNational Disability Policy

Is the Social Security Definition Out of Sync? Social Security Advisory Board

Washington, DC

April 14, 2004

ByVirginia 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 ShouldMatch the Program’s 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 MatchOther Purposes

Vocational Rehabilitation: An individual who (1) has a physical or

mental disability that constitutes or results in a substantial impedimentto 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 UseUnable 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 inthe 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 deterrentto work?

Wage-replacement must balance adequacy andincentives.

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 andPast Earnings, 2004

$19,100$21,400

$15,600

$34,600

$54,300

$87,000

$14,500

$8,800

56 40

3525

$0

$20,000

$40,000

$60,000

$80,000

"low" "medium" "high" "maximum"

Earnings Amount

Past Wages Benefits

Source: Office of the Actuary, OASDI Trustees Report 2004.



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Figure 2. U.S. Disability Benefit Spending is Lowby International Standards

Public

Disability

Plus WC and

Sickness

United States (DI + SSI) 0.71 1.37

United Kingdom 1.27 1.52

Germany 1.01 2.9

Sweden 2.05 4.02

Netherlands 2.65 4.14

Spending as a Percent of GDP, 1999

Source: OECD, 2003.



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Did DI Cause a Decline inEmployment in the 1990s?

The expanded eligibility hypothesis:

DI eligibility criteria were not expanded

in the 1990s.

1984 changes sought to restore aresponsible 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 the1990s?

• 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-existingcondition.

– 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 byworkers’ comp.



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Other Hypotheses: Why theRolls Grew

• Employer Perspective: A less

“forgiving” workplace.

• Do men in arduous jobs have fewer

early retirement options than in the 70sand 80s?



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Is DI recovery and return towork higher than we think?

Status in 1994, six year after benefit award:

All Under 30 Age 30-39

Total Percent 100 100 100

Still receiving DI 53 72 74

Died 26 15 22Shifted to retirement 18 -- --

Recovered or returned to work:

Percent of all 4 11 7

Percent of alive, not retired 6 13 9

Age at award

Source: SSA Tabulations, BSO, p.110.



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Adequate AdministrativeResources Are Essential for:

• Sound initial disability decisions.• Continuing disability reviews.

• Promptly adjusting payments when

beneficiaries work.• Helping people use work incentives.

Documents

Social Security: Reno%20SS%20Board%204-14-03