The Disability Insurance Monster

The fastest rising cost for Social Security isn’t retiring baby boomers, but skyrocketing Disability Insurance benefits. Disability benefits now make up 18 percent of all Social Security costs, up from only 10 percent in 1990. This year, the federal government will spend $125 billion for disability benefits. Including the Medicare benefits that are paid to D.I. recipients, total expenditures approach $200 billion.

Why have disability costs risen so fast? The main reason is looser eligibility standards passed by Congress in the 1980s that expanded the criteria for disability and put greater emphasis on evidence presented by applicants own doctors rather than the Social Security Administration's experts. Likewise, increasing numbers of D.I. applicants are represented by lawyers, with the result that S.S.A. loses two-thirds of appeals against denied benefits. The economists David Autor of M.I.T. and Mark Duggan of the University of Maryland conclude, "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."

These reviews save $10 in program costs for each dollar they cost to undertake.

Four steps would help screen out non-disabled applicants while ensuring the disabled continue to receive benefits. First, give greater credence to evidence from the Social Security Administration's own experts, rather than deferring to applicants’ own doctors. Second, allow S.S.A. to be represented by its lawyers in disability appeals. One study found that mistaken judgments could be cut in half if the S.S.A. were represented. Third, the Social Security Administration should receive funds to carry out more Continuing Disability Reviews to ensure that current beneficiaries remain qualified. These reviews save $10 in program costs for each dollar they cost to undertake.

Finally, making health coverage more affordable to low earners could reduce disability costs by making the Medicare coverage that comes alongside disability less attractive.

Andrew G. Biggs is a resident scholar at AEI and a former principal deputy commissioner of the Social Security Administration.

Photo Credit: Bigstock/AndreBlais

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