The Eligibility Definition Used in SSA’s Disability Programs Needs to be Changed

Presented to the

Social Security Advisory Board Discussion Forum on the Definition of Disability
Dirksen Senate Office Building Washington, DC

Presented by

David C. Stapleton
Cornell University Institute for Policy Research April 14, 2004

• “The Nation must face up to the contradictions created by the existing [Social Security] definition of disability.” (Social Security Advisory Board, 2003, p. 1) • A bleak picture
– Deteriorating economic security of people with disabilities – Programs that are fiscally insecure – An inefficient, inequitable determination process that rations scarce program resources by arbitrarily imposing high costs on applicants

• The reason: the current eligibility definition uses the medical model • The solution: recognize that the environment matters – consistent with the new paradigm of disability and the ADA • But that will also require a fundamental change in our approach to providing economic security to people with disabilities

• Many statistics cited are based on trends from the Current Population Survey (CPS), from:
– Stapleton and Burkhauser (eds.) The Decline in the Employment Rate of People with Disabilities: A Policy Puzzle. W.E. Upjohn Institute for Employment Research, 2003. –

The CPS method for identification of people with disabilities – a work limitation question – has been heavily criticized, for good reason • Trends in statistics for people with disabilities from the CPS are very similar to those from other surveys that use preferred measures of disability
– The prevalence of disability differs – Changes in employment are comparable

Trends in the CPS statistics are mirrored in SSA’s administrative data

The Decline in Economic Security
• Household incomes of working-age people with disabilities fell further behind those of other households in the 1990s • People with disabilities became less reliant on their own earnings, and more reliant on SSDI and SSI • The employment rate of people with disabilities has declined continuously since 1989 • These trends are mirrored in disability program statistics

The Decline in the Employment Rate of People with Work Limitations
Employment Rate by Disability Status and Sex
100 90 80 70 % Employed 60 50 40 30 20 10 0
19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01

Men without Work Limitations Women without Work Limitations Men with Work Limitations Women with Work Limitations


The Rise in SSDI Participation
% Change in SSDI Beneficiaries per 1,000 Insured, 1990-2002

70% 60% 50% 40% 30% 20% 10% 0%
All 20-24 25-39 30-34 35-39 40-44 45-49 50-54 55-59 60-64 ages

Source: Social Security Advisory Board, 2003

The Decline in Economic Security (cont.)

• People with disabilities have become much more dependent on public health insurance

• The decline in economic security is greatest for those in the youngest age groups

Employment Rates of Young Adults with Disabilities Declined by More than Those for Older Adults

Source: Houtenville and Daly, 2003

Fiscal Insecurity of the Disability Programs

Inflation-adjusted Program Expenditures have Grown Rapidly Since 1989

Source: Social Security Advisory Board, 2003

Disability Program Expenditures have also Grown Rapidly as a Share of Federal Outlays

Sources: Social Security Advisory Board, 2003, and President’s Council of Economic Advisors (2003)

Fiscal Insecurity of the Disability Programs (cont.)

• SSA’s actuaries have been warning of impending exhaustion of the SSDI and OASI Trust Funds for years

• History suggests that current growth in disability spending will eventually lead to cuts in eligibility and/or benefit levels

Poor Service to Applicants
• Problems with the disability determination process have defied SSA’s reform efforts for over a decade

Poor Service: Allowances on Appeal
• Almost a third of awards are made after an initial denial • Many applicants who are initially denied benefits fail to appeal, even though high allowance rates for appeals suggest that many would be successful if they did • Although many allowances on appeal might be the result of changes in medical conditions, SSA statistics show that many are allowed on the evidence that was available to the initial examiner

Poor Service: Processing Times
• Many applicants have to wait months for their initial determination. • Many who appeal initial denials wait over a year for a final decision

Poor Service (cont.)
• Whether or not an initial application is allowed is substantially affected by where it is filed and who happens to review it • The determination process likely discourages many applicants from applying, some of whom are likely to be qualified • The determination process likely denies benefits to many people with disabilities who have a significant need for support.

The Eligibility Definition
Inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months.

Eligibility Definition (cont.)
• Disability = inability to work • Inability to work is medically determinable • Yes or no

The Consequences: The Decline in Economic Security
• Mounting evidence implicates SSA’s disability programs as the cause of the employment rate decline
– Liberalization of eligibility beginning with the 1984 Amendments – Increase in the SSDI replacement rate for low-wage workers, because of the way past wages are indexed to determine benefits – The 1990 recession triggered a flood of applications from “contingent applicants”

The Mounting Evidence
• Growth in the SSDI roles closely tracks employment declines • The fastest growing impairment categories for beneficiaries are those most affected by liberalization • The allowance rate increased as applications increased • Declines in employment and increases in participation are greatest for those with low skills • Employment and program participation have become more sensitive to the business cycle • The employment decline for those with “long-term” disabilities began in the mid-1980s

The Employment Decline for Those with Longterm Disabilities
Annual Weeks Worked Average Weekly Hours 55 50 45 (Percentage). 40 35 30 25 20 15 10 Annual Hours Worked Annual Hours greater > 52 Annual Hours greater > 1400 50 45 40 35 30 25 20 15 10 5





















Source: Burkhauser and Houtenville, 2004




The Role of the Eligibility Definition
• The eligibility definition forces people with significant medically-determinable conditions to make a choice
– Seek benefits and give up economic independence – Support themselves through work, despite significant challenges

• The definition creates a work disincentive • When we liberalize the definition so that we can care for more people who apparently need support, or when we offer better benefits, it should be no surprise that many reduce their earnings or stop working altogether

The Consequences: Fiscal Insecurity
Advocate Pressure Liberalize Eligibility

Need Grows

Expenditures Grow

Tighten Eligibility

Fiscal Pressure

The Consequences: Poor Service to Applicants
• SSA cannot substantially improve the determination process because the Agency is being required to perform an impossible task: medically define a line between those who can work and those who cannot • Adding consideration of environmental factors in eligibility determination cannot fix the problem • There is no line between those who can work and those who cannot

A New Approach to Economic Security is Required
• The “caretaker” approach:
– Is inconsistent with the new disability paradigm and the aspirations of the disability rights movement – Requires determination of who can and cannot work

• The “self-support” approach:
– Is consistent with the new disability paradigm and the aspirations of the disability rights movement – Helps people with disabilities support themselves – Would be more appealing to taxpayers – Eligibility requires determination of who has challenging medical conditions

Features of a Self Support System
• Work expectations for many, but not all • Access to comprehensive, integrated services that support employment • Tax credits or wage subsidies for those least able to compete in the labor market • Income support for those with the most severe conditions, not conditioned on earnings • “Extra” early retirement benefits after some age, not conditioned on earnings • Public health insurance benefits “for life,” but with premiums partly paid by beneficiaries or employers under certain circumstances

Challenges to Building a Self Support System
• How can we muster the resources from existing, independent programs and stakeholders? • How can a government bureaucracy successfully administer supports that are tailored to the widely diverse needs of beneficiaries? • How can we avoid hurting those we are trying to help as we change the system?

Learning from Other “Self Support” Policy Efforts
• Pay attention to both strengths and limitations • Other countries • Welfare reform
– 1993 Earned Income Tax Credit expansion – 1996 adopted “work-first” income support approach – Positive results:
 Growth in employment  Decline in caseloads  Remarkably little regression during the recession  Maintenance of political support, despite cost

– Negative results:
 Some families harmed  Parents with disabilities were further segregated

• “The Nation must face up to the contradictions created by the existing [Social Security] definition of disability.” SSAB, 2003 • The current eligibility definition for SSA’s disability programs embodies the medical model and is responsible for:
– The deteriorating economic security of people with disabilities – The fiscal insecurity of the programs themselves – An inefficient, inequitable determination process

• We have to recognize that the environment matters if we are ever to fulfill the promise of the ADA • We need to replace the “caretaker approach” to providing economic security with a “self-support” approach • Accomplishment of that task poses many significant challenges

% Change in SSDI Beneficiaries per 1,000 Insured

80% 70% 60% 50% 40% 30% 20% 10% 0% -10%
All 20-24 25-39 30-34 35-39 40-44 45-49 50-54 55-59 60-64 ages

% Change 1980-2002

% Change 1990-2002

Source: Social Security Advisory Board, 2003