[House Hearing, 106 Congress]
[From the U.S. Government Printing Office]





   CHALLENGES FACING SOCIAL SECURITY DISABILITY PROGRAMS IN THE 21ST 
                                CENTURY

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 13, 2000

                               __________

                             Serial 106-94

                               __________

         Printed for the use of the Committee on Ways and Means


                   U.S. GOVERNMENT PRINTING OFFICE
68-103                     WASHINGTON : 2001



_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402


                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Social Security

                  E. CLAY SHAW, Jr., Florida, Chairman

SAM JOHNSON, Texas                   ROBERT T. MATSUI, California
MAC COLLINS, Georgia                 SANDER M. LEVIN, Michigan
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               BENJAMIN L. CARDIN, Maryland
KENNY HULSHOF, Missouri
JIM McCRERY, Louisiana


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 6, 2000, announcing the hearing.................     2

                               WITNESSES

U.S. General Accounting Office, Barbara D. Bovbjerg, Associate 
  Director, Education, Workforce, and Income Security Issues, 
  Health, Education and Human Services Division; accompanied by 
  Carol Petersen, Assistant Director, Education, Workforce, and 
  Income Security Issues, Health, Education, and Human Services 
  Division.......................................................     6
U.S. Department of Health and Human Services, Donald Lollar, 
  Ed.D., Chief, Disability and Health Branch, National Center for 
  Environmental Health, Centers for Disease Control and 
  Prevention.....................................................    37

                                 ______

Berkowitz, Edward D., George Washington University...............    32
Burkhauser, Richard V., Cornell University.......................    44
Consortium for Citizens with Disabilities, and NISH, Tony Young..    61
OMG Center for Collaborative Learning, Richard C. Baron..........    40
UnumProvident Corporation, Ralph Mohney..........................    55

                       SUBMISSIONS FOR THE RECORD

Social Security Administration, Kenneth Nibali, Assistant 
  Commissioner for Disability, statement.........................    76

                                 ______

American Occupational Therapy Association, Inc., Bethesda, MD, 
  statement......................................................    81
National Association of Disability Examiners, Lansing, MI, Terri 
  Spurgeon, statement and attachments............................    83

 
   CHALLENGES FACING SOCIAL SECURITY DISABILITY PROGRAMS IN THE 21ST 
                                CENTURY

                              ----------                              


                        THURSDAY, JULY 13, 2000

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:07 a.m., in 
room B-318, Rayburn House Office Building, Hon. E. Clay Shaw 
(Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                                CONTACT: (202) 225-9263
FOR IMMEDIATE RELEASE

July 6, 2000

No. SS-20

Shaw Announces Hearing on Challenges Facing Social Security Disability 
                      Programs in the 21st Century

    Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on 
Social Security of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing to examine the challenges 
facing the Social Security Disability Insurance (SSDI) and Supplemental 
Security Income (SSI) programs in the 21st century. The hearing will 
take place on Thursday, July 13, 2000, in room B-318 Rayburn House 
Office Building, beginning at 10:00 a.m.
      
    Oral testimony at this hearing will be from invited witnesses only. 
Witnesses will include representatives of the U.S. General Accounting 
Office, disability experts, and advocates for people with disabilities. 
However, any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The SSDI and SSI programs provide cash benefits to individuals who 
are unable to work because of severe disabilities. In 1999, nearly five 
million disabled workers and their families received more than $50 
billion from the SSDI program, and four million low-income disabled 
adults received $24 billion from SSI. Most of these beneficiaries also 
received health insurance through Medicare and Medicaid because they 
qualified for this cash assistance.
      
    The Social Security Act first addressed the issue of disability in 
1952 by excluding income earned while disabled from the computation of 
retirement benefits. The 1954 amendments provided cash benefits, but 
only for disabled individuals who were at least age 50. The lower age 
limit was removed in 1960. The definition of disability has remained 
essentially unchanged since the beginning of the SSDI program, and the 
same definition was adopted for the SSI program when it began providing 
benefits for low-income people with disabilities in 1974.
      
    In recent years, numerous technological and medical advances, 
coupled with a growing economy, have created the potential for more 
people with disabilities to achieve independence. In addition, the 
``Americans with Disabilities Act of 1990'' (P.L. 101-336), has helped 
promote the full participation of people with disabilities in society 
and has fostered the expectation that people with disabilities can work 
and have the right to work. The ``Ticket to Work and Work Incentives 
Improvement Act of 1999'' (P.L. 106-170), provided new opportunities 
for adults receiving public benefits to pursue work without fear of 
losing all benefits.
      
    The safety net provided by the Social Security disability program 
is critically important for individuals with disabilities and their 
families. Maintaining the safety net will be particularly challenging 
in coming decades, when, like Social Security, the disability program 
faces financial challenge. According to the 2000 Annual Report of the 
Board of Trustees, beginning in 2007, the Disability Insurance Trust 
Fund is projected to run cash deficits and by 2023, the trust fund 
assets will be exhausted.
      
    In announcing the hearing, Chairman Shaw stated: ``Social 
Security's disability programs have provided vital assistance for 
people with disabilities for nearly 50 years. Fortunately, today 
individuals with disabilities have opportunities and support never 
imagined in years past. As we enter the 21st century, we need to ensure 
Social Security disability programs continue to meet the changing needs 
of people with disabilities.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the characteristics of people with severe 
disabilities and will identify the supports needed to achieve 
independence. The hearing will also examine how disability systems in 
other countries as well as in the private sector have adapted to meet 
the changing needs of people with disabilities.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Thursday, 
July 27 , 2000, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Social Security office, room B-316 
Rayburn House Office Building, by close of business the day before the 
hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or 
MS Word format, typed in single space and may not exceed a total of 10 
pages including attachments. Witnesses are advised that the Committee 
will rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at `http://waysandmeans.house.gov'.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                


    Chairman Shaw. Today we will explore the challenges facing 
Social Security disability programs in the 21st century. Like 
Social Security retirement and survivor programs, the 
disability program has been remarkably successful in providing 
financial and health care support of those unable to work 
because of their disabilities. Yet, this vital program faces 
more immediate financial challenge than that faced by the 
retirement program.
    Beginning in just 7 years, disability program outlays will 
exceed income. By the year 2023 the trust fund will no longer 
be able to pay full benefits. Securing the financial future of 
this essential safety net is paramount as we begin the 21st 
century. Much has changed over the nearly 50 years of history 
of this program. This month we are celebrating our 10th 
anniversary of the Americans with Disabilities Act.
    This landmark legislation has helped to change the 
expectations for work for many people with disabilities as well 
as expand the consciousness of Americans to view people with 
disabilities in terms of their abilities, not their 
disabilities. Medical and technological advances have made it 
possible for many individuals to achieve independence even 
though it is independence that they never thought was possible.
    The Ticket to Work and Work Incentive Improvement Act of 
1999 developed in large part by this Subcommittee and signed 
into law last December removed barriers preventing individuals 
from becoming self-sufficient by providing extended health care 
coverage and providing more choice and opportunities to obtain 
needed rehabilitation and support services. These are important 
achievements but we must do more. Today we will begin our work 
by learning more about the characteristics of people with 
severe disabilities today and the support that they need to 
achieve independence.
    We also examine how disability systems in other countries 
as well as in the private sector have adapted to meet the 
changing needs of people with disabilities. I look forward to 
hearing the advice and suggestions of the experts that we have 
assembled in this room today. Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman. As many members in 
this room are aware, one of our successes in this Congress was 
enacting the Ticket to Work and Work Incentives Improvement 
bill last year. The Ticket to Work Act when fully implemented 
will help disabled Social Security beneficiaries receive the 
rehabilitation services they need to return to the labor force. 
The Ticket to Work Act also provides disabled beneficiaries who 
return to work with extended health care coverage to increase 
the likelihood that they will be able to remain in the work 
force.
    The Ticket to Work Act represents a great step forward in 
helping people with disabilities to participate in our Nation's 
economy and to share in the prosperity of recent years. 
However, we should not consider it the end of our journey. We 
still have much further to go before we can call our efforts 
complete. Consequently, I would like to thank Chairman Shaw for 
holding today's hearing for I think it is vitally important to 
examine new ideas for helping people with disabilities realize 
their goals to participate in the work force.
    During today's hearing, we will hear testimony about the 
different approaches foreign countries and private insurance 
utilize to help people with disabilities and enhance their 
ability to return to work. While I am sure we can learn a 
number of lessons from these countries and private insurers, we 
do need to keep several things in mind as we explore new ways 
to help people return to work.
    We must be aware that many differences may exist between 
populations and that the disability programs abroad and private 
insurers serve populations that may differ somewhat than ours. 
For instance, private insurance have the luxury of deciding 
their risk pools while SSA does not. We must also recognize the 
differences that exist between the United States and other 
industrialized nations in terms of the delivery of social 
services and the implications that those differences have for 
the disabled community.
    Health insurance is the prime example. In crafting the 
Ticket to Work Act last year, we went through a major struggle 
for relatively modest extensions of health care coverage for 
those disability beneficiaries returning to work. Indeed, in 
the end the Congress agreed to a Ticket to Work Act providing 
8.5 years of Medicare coverage for disabled beneficiaries 
rather than the full 10 years in the original House bill. This 
aspect of the debate would not be of great concern abroad 
because of universal health care coverages in those countries.
    In addition, we must be clear that our goal is not simply 
to move people with disabilities off the beneficiary rolls but 
to help them secure a job with salaries that can be supportive 
to them. One of our witnesses today will testify about a study 
that he recently conducted that reveals that people with severe 
mental impairments who are gainfully employed are still 
frequently poor and are likely to remain so because most of 
their jobs are low wage, entry level positions.
    Finally, we should expect Social Security to maximize the 
effectiveness of its resources for helping people to return to 
work but we should also be realistic. We cannot delude 
ourselves and think that with a few shifts in policy we can do 
the job and Social Security can do the job on its own within 
its current budget. Further progress in assisting people with 
disabilities to return to work will require a sustained 
commitment from across the Federal bureaucracy and may well 
require dedication of additional resources. So, Mr. Chairman, 
again I want to thank you for calling this hearing and 
obviously thank all the witnesses as well.
    Chairman Shaw. Thank you, Bob. Our first panel this morning 
is a friend of this Committee, Barbara Bovbjerg, who is the 
Associate Director, Education, Workforce and Income Security 
Issues, Health, Education and Human Services Division of the 
United States General Accounting Office, and she has with her 
Carol Petersen, who is the Assistant Director, Education, 
Workforce, and Income Security Issues. Welcome, both of you.
    As other panels, we have your full statement which will be 
placed in the record, and we invite you to proceed as you see 
fit. Ms. Bovbjerg.

     STATEMENT OF BARBARA D. BOVBJERG, ASSOCIATE DIRECTOR, 
   EDUCATION, WORKFORCE, AND INCOME SECURITY ISSUES, HEALTH, 
 EDUCATION, AND HUMAN SERVICES DIVISION; ACCOMPANIED BY CAROL 
PETERSEN, ASSISTANT DIRECTOR, EDUCATION, WORKFORCE, AND INCOME 
SECURITY ISSUES, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION

    Ms. Bovbjerg. Thank you, Mr. Chairman. Mr. Chairman, Mr. 
Matsui, I am pleased to be here to discuss practices that help 
people with severe disabilities return to work. The Disability 
Insurance and Supplemental Security Income Programs 
administered by the Social Security Administration provide 
benefits to millions of people with long-term disabilities. 
Although many of these programs' beneficiaries want to work and 
technological and medical advances have increased the potential 
for them to do so, less than 1% of SSA's disabled beneficiaries 
successfully return to work each year.
    Disability systems in the private sector and other 
countries have designed programs to help disabled workers who 
can work, do so. Although measures taken by these other systems 
may not translate directly to SSA's disability programs their 
practices and experiences may provide approaches for SSA to 
draw upon. My testimony is based on our ongoing review of these 
practices for this Subcommittee in which we have interviewed 
managers of three private sector disability insurers and 
disability program officials in Germany, Sweden and the 
Netherlands.
    Today I would like to focus my remarks in two areas. First, 
how disability systems in the private sector and three other 
counties facilitate and encourage return to work, and, second, 
how these practices compare with the DI program. I make this 
distinction, DI/SSI, because DI beneficiaries' work experience 
is more comparable to that of employees with private disability 
insurance, but many of the comparisons we will discuss apply to 
the SSI Program as well.
    First, the systems in the private sector and other 
countries. These systems integrate return-to-work 
considerations early after disability onset and continue them 
throughout the eligibility assessment process. With the initial 
reporting of a disability claim, these disability insurers 
immediately set up the expectation that the claimant will 
return to work, and collaborate closely with the claimant, the 
treating physician, and the employer to assess what support is 
needed.
    These systems also provide incentives for claimants to take 
part in individualized return-to-work programs and to receive 
appropriate medical treatment. They also provide incentives for 
employers to offer work to claimants. Claimants with work 
potential are required to participate in individualized 
programs that may include vocational rehabilitation. Claimants 
are also assessed medically and required to obtain appropriate 
medical treatment. Insurers offer assistance in obtaining such 
treatment where necessary.
    Employer incentives involve paying for employee 
accommodation, subsidizing wages, or reducing premiums for 
employers who re-employ disabled workers.
    Managers of these other systems also explained to us that 
they match appropriately trained staff with different types of 
claims to provide cost-effective return-to-work assistance. 
Both the insurers and other countries triage claims by the 
claimant's work potential. They have access to staff with a 
range of skills and expertise and they apply this expertise 
where it could be most effective to assess and enhance 
claimant's capacity to work.
    Let me now turn to SSA's approach. Historically, the agency 
has placed little emphasis on helping beneficiaries return to 
work. More recently, however, the agency has begun placing a 
greater priority on this area. For example, the Office of 
Employment Support Programs has been established to promote 
employment of disabled beneficiaries through a variety of means 
including sponsoring research and working to remove employment 
barriers.
    Moreover, the new Ticket to Work Act, by expanding access 
to vocational rehabilitation services, is also expected to 
enhance work opportunities for people with disabilities.
    But despite these advances, fundamental policy weaknesses 
in the DI program remain. These weaknesses include an 
eligibility determination process that concentrates on 
applicants' incapacities, an all or nothing benefit structure 
and return to work services offered only after a lengthy 
determination process.
    This is not to say that SSA could effectively engage in all 
the practices that private insurers and other countries have 
adopted. Little hard data exist on the effectiveness of return-
to-work approaches used in these other systems and even less 
information is available with regard to cost. Furthermore, it 
is unclear that successful practices in other countries would 
succeed in another socio-political environment or that private 
sector policies could prove directly adaptable to public sector 
priorities.
    Nonetheless, as we have recommended in the past, SSA needs 
to adopt a comprehensive strategy for returning beneficiaries 
to work and could usefully draw upon the approaches of other 
systems in so doing. Because such a strategy may require 
fundamental changes to the underlying philosophy and direction 
of the disability programs, policymakers would need to weigh 
carefully the implications of such changes.
    However, the prospect of helping individuals improve their 
productive potential should provide ample reason to consider 
the experiences of these other systems. Mr. Chairman, that 
concludes my statement and I welcome your questions.
    [The prepared statement follows:]

Statement of Barbara D. Bovbjerg, Associate Director, Education, 
Workforce, and Income Security Issues, Health, Education, and Human 
Services Division

    Mr. Chairman and Members of the Subcommittee:
    Thank you for inviting me here today to discuss the practices of 
the private sector and other countries in helping people with severe 
disabilities return to work. Each month the Social Security 
Administration's (SSA) Disability Insurance (DI) program pays over $4 
billion in cash benefits to people with disabilities. The DI 
beneficiary population has grown significantly over the past 15 years, 
increasing by 67 percent, while benefit payments have nearly tripled. 
This growth has contributed to the DI Trust Fund's projected insolvency 
in 2023. Yet, during this period of program growth, numerous 
technological and medical advances, combined with changes in society 
and the nature of work, have increased the potential for some people 
with disabilities to return to, or remain in, the labor force. Many 
beneficiaries with disabilities indicate that they want to work and be 
independent, and many can work if they receive the supports they need, 
yet fewer than one-half of 1 percent of DI beneficiaries leave the 
rolls each year to return to work.
    The U.S. private sector, as well as other countries, has designed 
disability systems to help disabled workers return to work. In recent 
years, a growing number of private insurance companies have been 
focusing on developing and implementing strategies for controlling 
disability costs by enabling people with disabilities to return to 
work. Disability programs financed by social insurance systems in other 
countries also focus on return to work and have implemented practices 
similar to those in the U.S. private sector.
    Today I would like to discuss how disability systems in the private 
sector and other countries encourage and facilitate return to work in 
three key areas: (1) the eligibility assessment process, (2) work 
incentives, and (3) staffing practices. I will describe these three 
elements for U.S. private sector disability insurers and for other 
countries' social insurance systems and compare the practices of both 
with those of the DI program. We are comparing these practices with 
those of the DI program because the work experience of the DI 
population is most comparable to that of employees covered under 
private disability insurance. However, many of the comparisons 
discussed would be applicable as well to SSA's other disability 
program, Supplemental Security Income (SSI).
    To develop this information, we conducted in-depth interviews and 
reviewed policy documents and program data at three private sector 
disability insurers: UNUMProvident, Hartford Life, and CIGNA.\1\ We 
also interviewed program officials and other experts on the disability 
systems of Germany, Sweden, and The Netherlands and reviewed policy 
documents and studies of these programs. This work updates and expands 
on our previous work in this area.\2\
---------------------------------------------------------------------------
    \1\ Taken together, these three insurers have experience not only 
in long-term, stand-alone disability insurance, but also in integrating 
short-and long-term disability insurance with workers' compensation 
and, in one instance, with health care. These insurers are also among 
the largest long-term disability insurers in the country, together 
covering about 52 percent of the long-term U.S. private disability 
insurance market in 1997. We focused our analysis on the population of 
applicants and beneficiaries whose disabilities are of such severity 
that they would likely qualify for SSA's disability benefits. In 
addition, we focused our review on private insurers' group disability 
insurance policies, which contain return-to-work incentives.
    \2\ See SSA Disability: Return-to-Work Strategies From Other 
Systems May Improve Federal Programs (GAO/HEHS-96-133, July 11, 1996).
---------------------------------------------------------------------------
    In summary, the disability systems of the private insurers and the 
countries we reviewed integrate return-to-work considerations early 
after disability onset and throughout the eligibility assessment 
process. This involves both determining--as well as enhancing--the 
ability of each claimant to return to work. In addition, these systems 
provide incentives for claimants to take part in vocational 
rehabilitation programs and to obtain appropriate medical treatment and 
for employers to provide work opportunities for claimants. Managers of 
these other systems also explained to us that they have developed 
techniques--such as separating (or ``triaging'') claims--to use staff 
with the appropriate expertise to provide return-to-work assistance to 
claimants in a cost-effective manner. Although these practices are 
common to the private sector insurers and the countries whose systems 
we examined, limited data exist on the cost-effectiveness of these 
approaches.
    SSA may face greater difficulty in returning some of its 
beneficiaries to work than the private sector insurers, since DI covers 
a broader population than the private insurers. Nevertheless, 
opportunities exist to help disabled workers remain at or return to the 
workplace. In recognition of these opportunities, SSA has recently 
begun placing greater priority on returning beneficiaries to work. 
Moreover, the new Ticket to Work and Work Incentives Improvement Act of 
1999 (Ticket to Work Act), by expanding access to vocational 
rehabilitation services, is expected to enhance work incentives for 
people with disabilities. However, fundamental policy weaknesses in the 
DI program remain unchanged. As we have reported in the past, these 
weaknesses include an eligibility determination process that 
concentrates on applicants' incapacities, an ``all-or-nothing'' 
benefits structure, and return-to-work services offered only after a 
lengthy determination process.
    To address these policy weaknesses, we continue to believe--as we 
recommended in 1996--that SSA should develop a comprehensive return-to-
work strategy. In developing the strategy, SSA can draw upon the 
experiences of other systems to identify elements of a new federal 
disability system that could help each individual realize his or her 
productive potential without jeopardizing the availability of benefits 
for people who cannot work. Having identified these elements, SSA would 
then be in a position to determine the legislative and regulatory 
changes needed to test and evaluate the effectiveness of these 
practices in the federal disability system.

                               Background

    DI provides monthly cash benefits to workers who are unable 
to work because of severe long-term disability. Established in 
1956, DI is an insurance program funded by payroll taxes paid 
by workers and their employers into a Social Security Trust 
Fund. Workers who have worked long enough and recently enough 
become insured for DI coverage. In addition to cash assistance, 
DI beneficiaries receive Medicare coverage after they have 
received cash benefits for 24 months. In 1999, 4.9 million 
disabled workers received DI cash benefits totaling about $46.5 
billion, with average monthly cash benefits amounting to $755 
per person.\3\
---------------------------------------------------------------------------
    \3\ In the same year, DI also paid about $4.9 billion in cash 
benefits to about 1.7 million spouses and children of disabled workers.
---------------------------------------------------------------------------
    To meet the definition of disability under DI, an 
individual must have a medically determinable physical or 
mental impairment that (1) has lasted or is expected to last at 
least 1 year or to result in death and (2) prevents the 
individual from engaging in substantial gainful activity. 
Individuals are considered to be engaged in substantial gainful 
activity if they have countable earnings at or above a certain 
dollar level.\4\ Moreover, the statutory definition specifies 
that, for a person to be determined to be disabled, the 
impairment must be of such severity that the person not only is 
unable to do his or her previous work, but, considering his or 
her age, education, and work experience, is unable to do any 
other kind of substantial work that exists in the national 
economy. SSA pays state disability determination service (DDS) 
agencies to determine whether applicants are disabled. The 
program offers people on the DI rolls incentives that are 
intended to encourage beneficiaries to return to work--and, 
potentially, to leave the rolls. For example, the DI work 
incentives provide for a trial work period in which a 
beneficiary may earn any amount for 9 months within a 60-month 
period and still receive full cash and medical benefits.
---------------------------------------------------------------------------
    \4\ Regulations currently define substantial gainful activity (SGA) 
as employment that produces countable earnings of more than $700 a 
month for nonblind disabled individuals. The SGA level for individuals 
who are blind is set by statute and indexed to the annual wage index. 
Currently, the SGA for blind individuals is $1,170 of countable 
earnings. SSA deducts from gross earnings the cost of items a person 
needs in order to work and the value of support a person needs on the 
job because of the impairment before deciding if work is considered 
SGA.
---------------------------------------------------------------------------
    Historically, SSA has given little emphasis to assisting 
beneficiaries in returning to work, and we have made a number 
of recommendations for improvement. For example, in 1996, we 
identified weaknesses in SSA's return-to-work efforts and 
recommended that SSA intervene earlier to foster a greater 
emphasis on assisting disabled applicants and beneficiaries in 
returning to the workforce.\5\ We also reported that the 
disability determination process encourages work incapacity 
because applicants have a strong incentive to emphasize their 
limitations in order to qualify for benefits. In addition, we 
observed that the often lengthy and cumbersome application 
process may itself reinforce applicants' perceptions of their 
inability to work.\6\
---------------------------------------------------------------------------
    \5\ See GAO/HEHS-96-133, July 11, 1996.
    \6\ See SSA Disability: Program Redesign Necessary to Encourage 
Return to Work (GAO/HEHS-96-62, Apr. 24, 1996).
---------------------------------------------------------------------------
    SSA has recently begun to place higher priority on 
emphasizing return to work for DI beneficiaries. For example, 
SSA recently established the Office of Employment Support 
Programs to promote the employment of disabled beneficiaries. 
In addition, the Ticket to Work Act is expected to enhance work 
opportunities for people with disabilities. For example, this 
new act expanded eligibility for Medicare for DI beneficiaries 
and created a ``Ticket to Work'' voucher program that will 
allow beneficiaries a greater choice of vocational 
rehabilitation and employment service providers. SSA has also 
funded partnership agreements in 12 states that are intended to 
help the states develop services to increase the employment of 
DI beneficiaries.

Private Disability Insurers Implement Return-to-Work Practices 
to Control Costs

    Private insurers provide disability insurance to a selected 
portion of the U.S. working population. Unlike SSA, private 
sector insurers are able to choose the industries to which they 
market their policies. The characteristics of the private 
insurers' beneficiaries can also differ from those of SSA's 
beneficiaries because private insurers can allow employers who 
purchase their disability policies to vary coverage by type of 
impairment or by class of employee. For example, employers 
generally choose to limit coverage for mental impairments to a 
maximum of 24 months.\7\ Employers may also choose to provide 
long-term disability coverage for only their white collar 
employees, rather than for all their employees.
---------------------------------------------------------------------------
    \7\ The 24-month limitation on mental impairments does not include 
time spent in a hospital or mental institution. Also, the three 
insurers vary in their descriptions of the types of mental illness that 
are covered under this special limitation. One insurer excludes bipolar 
affective disorders, psychotic disorders, and schizophrenia from this 
limitation. In contrast, the DI program does not have time-limited 
benefits for beneficiaries with mental impairments. In 1999, 26.8 
percent of DI disabled workers with an available diagnosis had mental 
disorders.
---------------------------------------------------------------------------
    The private disability insurance industry, moreover, 
provides benefits to many individuals who are not as severely 
disabled as the beneficiaries of the DI program. However, for 
the insurers reviewed, almost two-thirds of those receiving 
private long-term disability benefits also received DI 
benefits.\8\ This group of beneficiaries, in the cases of the 
two insurers that provided us with comparable data, was 
composed of a slightly higher proportion of female and older 
beneficiaries than the overall DI population. All the insurers 
had a lower proportion of beneficiaries with mental impairments 
than the DI population.
---------------------------------------------------------------------------
    \8\ For claimants who receive both private and DI benefits, the 
private insurers reduce their disability payments by the amount of the 
DI payment.
---------------------------------------------------------------------------
    Some private sector organizations have recognized the 
potential for reducing disability costs through an increased 
focus on returning people with disabilities to productive 
activity. To accomplish this comprehensive shift in 
orientation, the private disability insurers have begun 
developing and implementing strategies for helping claimants 
return to work as soon as possible, when appropriate. Although 
the private sector insurance companies expect a positive effect 
on return-to-work outcomes from these strategies, it is too 
early to fully measure the effect of these changes. In many 
cases, return-to-work processes have only recently been 
implemented. Moreover, although the private insurers are now 
including return-to-work provisions in the standard contracts 
that they are writing, a large number of employees are still 
insured under prior contracts that lack these provisions. While 
the insurers could not provide us with comprehensive cost-
effectiveness studies, their initial return-to-work rates are 
promising. The private insurers reported that, in 1999, between 
2 and 3 percent of their long-term disability beneficiaries who 
also received DI benefits returned to work or were terminated 
from the private sector disability benefit rolls because they 
were assessed as having the capacity to work.
    Other Countries Also Invest in Return-to-Work Efforts
    In contrast to the private sector, which covers a selected 
portion of the U.S. working population, the experiences of 
Germany, Sweden, and The Netherlands show that return-to-work 
strategies are applicable to a population with a wide range of 
work histories, job skills, and disabilities. However, these 
disability systems operate in a somewhat different social and 
political context than the DI program. For example, public 
health care programs in these countries ensure that the 
retention of health insurance is not an issue in a worker's 
decision on whether to apply for benefits, participate in 
rehabilitation, or attempt returning to work. In addition, 
disability systems in these countries offer short-term as well 
as long-term benefits, which provides an important basis for 
comprehensive disability case management.
    The social insurance disability programs in these countries 
have invested in return-to-work efforts and have implemented 
practices similar to those in the U.S. private sector. While 
the German social insurance system has had a long-standing 
focus on the goal of ``rehabilitation before pension,'' the 
reorientation of Sweden and The Netherlands toward a return-to-
work focus has occurred mostly within the past decade. Although 
rigorous studies demonstrating the cost-effectiveness of 
German, Swedish, or Dutch programs generally do not exist, some 
limited studies and data indicate positive results from the 
return-to-work approach in these disability insurance 
systems.\9\
---------------------------------------------------------------------------
    \9\ For example, a 1990-92 study of certain return-to-work 
practices used by Sweden's social insurance offices concluded that 
social insurance costs had been reduced by returning people to the 
workplace sooner. Practices assessed included early screening and 
contact with disabled individuals.

The Eligibility Assessment Process Integrates Return-to-Work 
---------------------------------------------------------------------------
Considerations Throughout

    All the private disability insurers and the countries we 
reviewed have developed an eligibility process that includes 
assessing and enhancing the ability of claimants to work 
throughout the process. To enable claimants to return to work 
as quickly as possible, insurers incorporate return-to-work 
considerations early in the assessment process and throughout a 
customized evaluation of each claimant's initial and continuing 
eligibility for benefits. In contrast, SSA's return-to-work 
efforts occur after its eligibility assessment process. (See 
Table 1.)

  Table 1:--Comparison of Eligibility Assessment Process Features of Private Insurers and Other Countries With
                                                  Those of SSA
----------------------------------------------------------------------------------------------------------------
     Process feature          Private insurers and other countries                        SSA
----------------------------------------------------------------------------------------------------------------
Disability definition        Definition of disability shifts over              ``All-or-nothing'' definition
                           specified time period from less to more       characterizes individuals as either
                           restrictive, recognizing the possibility    unable to work or having the capacity to
                           of improvement in the capacity to work                                      work.
                                through provision of supports and
                                    services, such as retraining.
   Early intervention      Intervention occurs soon after disability      There is a long delay in providing
                           onset to identify return-to-work needs.     services because only individuals who
                                                                       have been awarded benefits--following an
                                                                       often lengthy assessment process--are
                                                                       eligible for return-to-work services.
Ongoing assessment of      Work capacity is periodically monitored     There is no integration of return-to-work
        work potential      and reassessed, focusing on returning      considerations into either the initial or
                               those with work potential to work.      the continuing eligibility assessment
                                                                                                    process.
----------------------------------------------------------------------------------------------------------------


Private Insurers Incorporate Return-to-Work Efforts From the 
Beginning of the Assessment Process

    All the private insurers we observed incorporate return-to-
work considerations early in the assessment process to assist 
claimants in their recovery and in returning to work as soon as 
possible. With the initial reporting of a disability claim, 
these insurers, when appropriate, immediately set up the 
expectation that the claimant will return to work. The 
insurers' process for assessing and assisting a claimant's 
ability to work is illustrated in Figure 1.
[GRAPHIC] [TIFF OMITTED] T8103.001

    After receiving a claim, the private insurers' assessment 
process begins with determining whether the claimant meets the 
initial definition of disability. In general, for all the 
private sector insurers we studied, claimants are considered 
disabled when, because of injury or sickness, they are limited 
from performing the essential duties of their own occupation, 
and they earn less than 60 to 80 percent of their predisability 
earnings, depending upon the particular insurer.\10\ As part of 
determining whether the claimant meets this definition, the 
insurers compare the claimant's capabilities and limitations 
with the demands of his or her own occupation and identify and 
pursue possible opportunities for accommodation--including 
alternative jobs or job modifications--that would allow a quick 
and safe return to work. A claimant may receive benefits under 
this definition of disability for up to 2 years.\11\
---------------------------------------------------------------------------
    \10\ The private insurers generally define one's ``own occupation'' 
as the occupation a person is routinely performing at onset of 
disability. They generally assess how the claimant's own occupation is 
performed in the national economy, rather than how the work is 
performed for a specific employer or at a specific location. Two 
insurers have expanded their ``own occupation'' definition of 
disability to include a reasonable alternative position. These insurers 
require that a claimant who is judged able to do so accept a reasonable 
alternative position--a job in the same general location offered by the 
claimant's current employer--or risk losing cash benefits. The claimant 
must be qualified to perform this alternative position--which must pay 
the claimant more than 60 to 80 percent of predisability earnings, 
depending upon the insurer--given his or her education, training, or 
experience.
    \11\ Our review of group disability insurance policies focused on 
those with an ``own occupation'' definition of disability that changes 
to an ``any occupation'' definition after 2 years.
---------------------------------------------------------------------------
    As part of the process of assessing eligibility according 
to the ``own occupation'' definition, insurers directly contact 
the claimant, the treating physician, and the employer to 
collect medical and vocational information and initiate return-
to-work efforts, as needed. Insurers' contacts with the 
claimant's treating physician are aimed at ensuring that the 
claimant has an appropriate treatment plan focused, in many 
cases, on timely recovery and return to work. Similarly, early 
contact with the claimant's employer is used to encourage the 
employer to make accommodations for claimants with the capacity 
to work.
    If the insurers find the claimant initially unable to 
return to his or her own occupation, they provide cash benefits 
and continue to assess the claimant to determine if he or she 
has any work potential. For those with work potential, the 
insurers focus on return to work before the end of the 2-year 
period when, for all the private insurers we studied, the 
definition of disability becomes more restrictive: after 2 
years, the definition shifts from an inability to perform one's 
own occupation to an inability to perform any occupation for 
which the claimant is qualified by education, training, or 
experience. Claimants may be found ineligible for benefits 
under the more restrictive definition.\12\
---------------------------------------------------------------------------
    \12\ The private insurers generally use the same ``own occupation'' 
definition for short-and long-term disability benefits. However, in the 
case of long-term benefits, the definition shifts to the ``any 
occupation'' definition after 2 years. When applying the ``any 
occupation'' definition, private insurers generally try to identify 
several occupations that exist locally that could provide a sufficient 
salary for the claimant. However, the insurer is obligated only to 
identify occupations with a sufficient salary in the national economy 
and not to find specific job openings or place the claimant in a new 
position.
---------------------------------------------------------------------------
    The private insurers' shift from a less to a more 
restrictive disability definition after 2 years reflects the 
changing nature of disability and allows a transitional period 
for insurers to provide financial and other assistance, as 
needed, to help claimants with work potential return to the 
workforce. During this 2-year period, the insurer attempts to 
determine the best strategy for managing the claim. Such 
strategies can include, for example, helping plan medical care 
or providing vocational services to help claimants acquire new 
skills, adapt to assistive devices to increase functioning, or 
find new positions. For those requiring vocational intervention 
to return to work, the insurers develop an individualized 
return-to-work plan, as needed. Basing the continuing receipt 
of benefits upon a more restrictive definition after 2 years 
provides the insurer with leverage to encourage the claimant to 
participate in a rehabilitation and return-to-work program. 
Indeed, the insurers told us that they find that claimants tend 
to increase their efforts to return to work as they near the 
end of the 2-year period.
    If the insurer initially determines that the claimant has 
no work potential, it regularly monitors the claimant's 
condition for changes that could increase the potential to work 
and reassesses after 2 years the claimant's eligibility under 
the more restrictive definition of disability. In addition, the 
insurer looks for opportunities to assist these claimants when 
changes in medical technology, such as new treatments for 
cancer or AIDS, may enable them to work.
    The private insurers that we reviewed told us that they 
customize their assessment and enhancement of a claimant's 
ability to work throughout the duration of the claim. To do 
this, disability insurers use a wide variety of tools and 
methods when needed. Some of these tools, as shown in tables 2 
and 3, are used to help ensure that medical and vocational 
information is complete and as objective as possible. For 
example, insurers consult medical staff and other resources to 
evaluate whether the treating physician's diagnosis and the 
expected duration of the disability are in line with the 
claimant's reported symptoms and test results. Insurers may 
also use an independent medical examination or a test of basic 
skills, interests, and aptitudes to clarify the medical or 
vocational limitations and capabilities of a claimant. In 
addition, insurers identify transferable skills to compare the 
claimant's capabilities and limitations with the demands of the 
claimant's own occupation. This method is also used to help 
identify other suitable occupations and the specific skills 
needed for these new occupations when the claimant's 
limitations prevent him or her from returning to a prior 
occupation. Included in these tools and methods are services to 
help the claimant return to work, such as job placement, job 
modification, and retraining.

Table 2:--Tools and Methods Used to Provide Medical Assessment



----------------------------------------------------------------------------------------------------------------
                          Task                                              Tools and methods
----------------------------------------------------------------------------------------------------------------
Assess diagnosis, treatment, and duration of the         Consultation of medical staff and other resources,
 impairment and begin developing a treatment plan        including current medical guidelines describing
 focused on returning the claimant to work promptly and  symptoms, expected results from diagnostic tests,
                                         safely.          expected duration of disability, and treatment
        Assess the claimant's cognitive skills.                                Standardized mental tests
Validate the treating physician's assessment of the      Review of the claimant's file, generally by a nurse or
 impairment's effect on the claimant's ability to work    a physician who is not the claimant's treating
 and the most appropriate treatment and accommodation.                                         physician
    Verify diagnosis, level of functioning, and          Independent medical examination of the claimant by a
                   appropriateness of treatment.                                    contracted physician
Evaluate the claimant's ability to function, determine   Home visits by a field nurse or investigator or
 needed assistance, and help the claimant develop an                           accompanied doctor visits
  appropriate treatment plan with the physician.
                   Assess the claim's validity.          Home visits and interviews with neighbors or others who
                                                             have knowledge of the claimant's activities
----------------------------------------------------------------------------------------------------------------


Table 3: Tools and Methods Used to Provide Vocational 
Assessment and Assistance



----------------------------------------------------------------------------------------------------------------
                          Task                                              Tools and methods
----------------------------------------------------------------------------------------------------------------
Identify transferable skills, validate restrictions on    Test basic skills, such as reading or math.
 and capabilities for performing an occupation, and           Determine interests and aptitudes.
 identify other suitable occupations and retraining       Evaluate functional capacities associated with
                                       programs.         an occupation, such as lifting, walking, and following
                                                                                             directions.
                                                          Compare functional capacities, work history,
                                                            education, and skills with the demands of an
                                                                                             occupation.
Enhance work capabilities and help develop job-seeking    Provide resume preparation, development of job-
                                         skills.            seeking skills, and help with job placement.
                                                          Assist in obtaining physical, occupational, or
                                                         speech therapy and access to employee assistance,
                                                              support groups, or state agency vocational
                                                             rehabilitation or other community services.
                                                          Identify and fund on-the-job training or other
                                                                                    educational courses.
Assess ability to perform own or any occupation, assess   Observe and analyze the essential duties of
 potential for accommodation, and determine whether      the claimant's own occupation, another occupation for
 sufficient salary is offered locally or nationally for  the same employer, or an occupation of a prospective
                          a suitable occupation.                                               employer.
                                                          Determine the general availability and salary
                                                                         range of specified occupations.
                                                          Identify for a specified occupation the
                                                         potential employers and related job descriptions,
                                                                             salary range, and openings.
Reaccustom claimant to a full work schedule and enable    Provide work opportunities for the claimant to
 claimant to overcome impairment and return to work.             gradually resume his or her job duties.
                                                          Procure devices to assist with work or
                                                                       otherwise help to modify the job.
----------------------------------------------------------------------------------------------------------------


Other Countries Also Provide Return-to-Work Assistance Early 
After Disability Onset and Throughout the Assessment Process

    The countries we studied also begin assessing return-to-
work needs soon after the onset of a disabling condition and 
integrate return-to-work assistance that is tailored to meet 
individual needs throughout the assessment process. These 
countries also provide short-term benefits on the basis of a 
person's inability to perform his or her current job because of 
illness or injury. These short-term disability benefits--which 
may be granted for a year or more--are similar to the private 
insurers' provision of benefits during the 2-year ``own 
occupation'' period of disability in that they provide a 
transitional period for assessing an individual's work 
potential and providing treatment and rehabilitation.
    For example, German laws and policies require that all 
applicants for disability benefits be evaluated for 
rehabilitation and return to work. Based on the principle that 
intervention should occur at the earliest possible stage of 
disability to minimize the degree and effect of the impairment, 
intervention in Germany often begins when the health insurance 
agency urges a disabled worker receiving short-term benefits to 
apply for medical rehabilitation. In addition, vocational 
counselors often discuss rehabilitation and return-to-work 
plans with disabled workers while they are still in the 
hospital. The social insurance office then evaluates the 
person's capacity to work and, if necessary, refers the 
applicant to vocational rehabilitation or other types of 
return-to-work services and assistance. These return-to-work 
measures may include assistance in retaining or obtaining a job 
or in selecting an occupation. They may also involve providing 
basic training or retraining to prepare for an occupation and 
developing workplace accommodations. As long as the person 
continues to receive short-term disability benefits, the social 
insurance office will monitor the case and periodically 
reassess the person's work capacity and need for return-to-work 
assistance. The office will award long-term disability benefits 
only after it determines that a person's earning capacity 
cannot be restored through return-to-work interventions.
    Under Swedish laws and policies, both the private and 
public sectors are responsible for the early identification of 
candidates for rehabilitation and return to work. After an 
employee has been on sick leave for 4 weeks, employers are 
responsible for determining whether the employee needs some 
type of rehabilitation and are required to report this 
information to the social insurance office. Social insurance 
offices closely monitor the use of short-term benefits and 
intervene when employers disregard their early intervention 
responsibilities.\13\ The social insurance office then begins 
the process of determining whether the person will need 
vocational rehabilitation to return to work. The office 
arranges for an assessment of the disabled employee's 
rehabilitation needs and works with the employer and employee 
to develop a rehabilitation plan. Rehabilitation in Sweden is 
not meant to be a lengthy process, but rather a short, 
intensive period of medical and vocational training to help the 
individual return to work as soon as possible. As in Germany, 
the social insurance offices in Sweden periodically monitor and 
reassess the rehabilitation needs of individuals receiving 
short-term disability benefits and, after the first year of 
benefits, consider granting long-term benefits if the person's 
rehabilitation potential has not improved.
---------------------------------------------------------------------------
    \13\ Social insurance offices in Sweden have no mechanisms or 
sanctions to force employers to comply with their rehabilitation 
responsibilities. We reported in 1996 that, according to social 
insurance office surveys, employers do not arrange for rehabilitation 
examinations in about 40 to 50 percent of the cases.
---------------------------------------------------------------------------
    In The Netherlands, the employer has had increasing 
responsibility for efforts to return the employee to his or her 
current job or a comparable job within the company since the 
mid-1990s. This shift of responsibility from the public to the 
private sector is intended to encourage greater responsibility 
on the part of employers in the prevention and prompt 
amelioration of employee health impairments. Under this policy, 
within about 3 months of the onset of the disability, the 
employer must submit to the social insurance agency a 
preliminary plan to return the disabled worker to the 
workforce. A final plan must be submitted within about 9 
months. If the employer determines that the disabled worker 
cannot return to the workplace, or if the disabled worker has 
not returned to work after 1 year of receiving short-term 
benefits, the social insurance agency assesses the person's 
condition to determine eligibility for long-term disability 
benefits. The assessment involves evaluations of the 
applicant's physical and mental capabilities, which are then 
matched against different occupations to determine whether the 
person is capable of performing any work.

SSA Does Not Incorporate Return-to-Work Efforts Into Its 
Eligibility Assessment Process

    Unlike the private sector and foreign countries, SSA does 
not integrate efforts to return individuals to work into either 
its initial or continuing eligibility assessment process. To be 
considered initially eligible for DI benefits, applicants must 
meet the Social Security Act's definition of disability--an 
``all-or-nothing'' definition that characterizes individuals as 
either unable to work or having the capacity to work.\14\ 
Because the result of the decision is either full award or 
denial of cash benefits, applicants have a strong incentive to 
emphasize their limitations to establish their inability to 
work and a disincentive to demonstrate any capacity to work. 
The act's definition of disability--under which a person is 
unable to do any substantial work in the national economy--is 
comparable to the private sector's most restrictive definition.
---------------------------------------------------------------------------
    \14\ There are also distinct differences between the methods used 
by SSA and the private insurers to determine a level of earnings beyond 
which an individual no longer qualifies for benefits. SSA regulations, 
on one hand, apply a standard level of countable monthly income for all 
people other than the blind (currently $700), regardless of 
predisability earnings. In contrast, the private insurers we studied 
establish an individualized level that is a proportion of each person's 
predisability earnings. For disabled beneficiaries with high 
predisability earnings, the private sector's individualized level 
represents a much greater incentive to work than does SSA's standard 
level. However, the private sector's individualized level may provide 
less of a barrier to qualify for benefits and thus may encourage more 
people to apply for disability benefits.
---------------------------------------------------------------------------
    In recent years, SSA has piloted numerous initiatives to 
redesign and thereby improve its disability determination 
process. But while an internal SSA evaluation recently 
recommended that the agency ``create an awareness and 
attitudinal change to accept employment support as a core SSA 
mission,'' the agency has not yet integrated return-to-work 
considerations into its efforts to redesign its disability 
determination process.\15\ Moreover, the recently enacted 
Ticket to Work Act was intended to increase beneficiary access 
to vocational services but does not change the point in the 
process at which beneficiaries may receive assistance. Only 
those individuals who have met the Social Security Act's 
definition of disability and are approved for DI benefits will, 
under the Ticket to Work Act, receive a ticket entitling them 
to receive return-to-work services. There can be a long delay 
in receiving services: SSA's eligibility determination process 
ranges up to 18 months or longer for individuals who are 
initially denied benefits and who then appeal. Since many 
applicants have been unemployed before applying and remain 
unemployed during the eligibility determination process, it is 
likely that their skills, work habits, and motivation to work 
deteriorate during this wait, thus decreasing their readiness 
to work\16\ However, the Ticket to Work Act authorizes SSA to 
carry out a demonstration project to test the advantages and 
disadvantages of earlier referral of applicants and 
beneficiaries for rehabilitation.\17\ SSA may also gain 
additional insights into early intervention approaches through 
its funding of demonstration projects in 12 states.\18\
---------------------------------------------------------------------------
    \15\ Social Security Administration, Employment Support Concept 
Development Plan, Apr. 12, 1999.
    \16\ See GAO/HEHS-96-62, Apr. 24, 1996.
    \17\ SSA has not yet designed such a project, and it is unclear how 
early SSA will be intervening after onset of disability in this 
demonstration.
    \18\ For example, one state is testing the provision of short-term 
vocational services to DI applicants with recent work histories, with 
an emphasis on early intervention and quick employment.

Other Systems Provide Incentives for Claimants and Employers to 
---------------------------------------------------------------------------
Encourage and Facilitate Return to Work

    To facilitate return to work, all of the insurers and the 
countries we studied employ incentives both for claimants to 
participate in vocational activities and receive appropriate 
medical treatment, and for employers to accommodate claimants. 
For claimants who could benefit from vocational rehabilitation, 
insurers and the countries we studied require participation in 
an individualized return-to-work program. They also provide 
financial incentives to promote claimants' efforts to become 
rehabilitated and return to work. To better ensure that medical 
needs are met, the insurers and the countries we studied 
require that claimants receive appropriate medical treatment 
and assist them in receiving this treatment. In addition, they 
provide financial incentives to employers to encourage them to 
provide work opportunities for claimants. Although these 
practices are common to the private sector insurers and the 
countries we examined, limited data exist to determine whether 
these incentives for claimants and employers yield positive 
outcomes. In contrast to the practices of other systems, the 
Ticket to Work Act makes participating in rehabilitation and 
return-to-work services voluntary for DI beneficiaries. In 
addition, under law and SSA regulations, receiving appropriate 
medical treatment is not a prerequisite for award or continuing 
receipt of DI benefits. Moreover, DI applicants and 
beneficiaries may not have access to appropriate medical care.

Private Insurers Offer Incentives to Claimants and Employers to 
Promote Return to Work

    All the private insurers we reviewed require claimants who 
could benefit from vocational rehabilitation to participate in 
a customized program or risk loss of benefits. As part of this 
program, the return-to-work plan for each claimant can include, 
for example, adaptive equipment, modifications to the work 
site, or other accommodations. All the private insurers mandate 
the participation of claimants whom they believe could benefit 
from rehabilitation, because they believe that voluntary 
compliance has not encouraged sufficient claimant participation 
in these plans.\19\
---------------------------------------------------------------------------
    \19\ Although claimants may be involved in the development of the 
individualized rehabilitation plans, the insurers make the final 
decision as to the types of rehabilitation services claimants will 
receive.
---------------------------------------------------------------------------
    These insurers also make special financial incentives 
available to claimants who participate in rehabilitation 
programs, as appropriate. All insurers may defray costs 
associated with rehabilitation, such as child care expenses. 
For example, one insurer may pay $250 a month per child, up to 
$1,000 per month. This insurer also increases claimants' 
benefit payments by 10 percent, up to a maximum of $1,000 a 
month, for those who participate in rehabilitation.
    In addition, all of the insurers told us that they 
encourage rehabilitation and return to work by allowing 
claimants who work to supplement their disability benefit 
payments with earned income.\20\ During the first 12 or 24 
months of receiving benefits, depending upon the particular 
insurer, claimants who are able to work can do so to supplement 
their benefit payment and thereby receive total income of up to 
100 percent of predisability earnings.\21\ After this period, 
if the claimant is still working, the insurers decrease the 
benefit amount so that the total income a claimant is allowed 
to retain is less than 100 percent of predisability income.
---------------------------------------------------------------------------
    \20\ The private disability insurers we reviewed told us that their 
benefits generally replace 60 percent of predisability earnings, 
depending upon the insurer.
    \21\ To illustrate, assume that Ms. Jones is a claimant with 
predisability earnings of $1,000 per month and an insurance policy that 
replaces 60 percent of her predisability earnings. She is currently not 
working. Under this scenario, her income would be limited to $600 per 
month in disability benefits. However, if she returned to work, even 
part-time, she would have the opportunity to increase her total income 
to 100 percent of her predisability earnings or, in this instance, 
$1,000. If she returned to work and earned $500 per month, the insurer 
would reduce her benefit payment from $600 to $500 per month, so that 
her combined earnings and benefit payment would provide a total monthly 
income equal to her predisability income of $1,000.
---------------------------------------------------------------------------
    However, when a private insurer determines that a claimant 
is able, but unwilling, to work, the insurer can reduce or 
terminate the claimant's benefits. Moreover, to encourage 
claimants to work to the extent they can, even if only part-
time, two of the insurers may reduce a claimant's benefit by 
the amount the claimant would have earned if he or she had 
worked to maximum capacity. One insurer uses the claimant's 
physician or three independent experts qualified to evaluate 
the claimant's condition to determine a claimant's maximum 
capacity to work. One of the insurers may also reduce a 
claimant's monthly benefit during the first year by the amount 
that the claimant could have earned if he or she had not 
refused a reasonable job offer--that is, a job that was 
consistent with the claimant's background, education, and 
training. Claimants' benefits may also be terminated if 
claimants refuse to accept a reasonable accommodation that 
would allow them to work. For example, if a claimant with 
impaired vision refuses the offer of a large-screen terminal 
that would allow the claimant to work, the insurer can 
terminate his or her benefits.
    Since medical improvement or recovery can also enhance 
claimants' ability to work, the private insurers we studied not 
only require, but also help, claimants to obtain appropriate 
medical treatment. To maximize medical improvement, private 
insurers require that the claimant's physician be qualified to 
treat the particular impairment. Additionally, two insurers 
require that treatment be provided in conformance with medical 
standards for type and frequency. Moreover, to help ensure that 
a claimant is receiving appropriate treatment, the insurers' 
medical staff work with the treating physician as needed to 
ensure that the claimant has an appropriate treatment plan. The 
insurers may also provide funding for those who cannot 
otherwise afford treatment.
    All private sector insurers we studied may also provide 
financial incentives to employers to encourage them to provide 
work opportunities for claimants. By paying for accommodations 
and offering lower insurance premiums to employers, private 
insurers encourage employers to become partners in returning 
disabled workers to productive employment. For example, to 
encourage employers to adopt a disability policy with return-
to-work incentives, all the insurers offer employers a 
discounted insurance premium that they can continue to receive 
if their disability caseload declines to the level expected for 
those companies that assist claimants in returning to work. To 
this end, these insurers fund accommodations, as needed, for 
disabled workers at the employer's work site.\22\
---------------------------------------------------------------------------
    \22\ Educating employers about the size and extent of disability 
costs is an important element in motivating the employer to promote 
efforts to return claimants to work. For example, private insurers 
educate employers about the direct and indirect costs of not 
controlling lost time associated with disability, which was estimated 
by one insurer to be 4 to 6 percent of an employer's payroll.

Other Countries Also Provide Incentives to Claimants and 
---------------------------------------------------------------------------
Employers to Encourage Return to Work

    Germany and Sweden also require participation in 
rehabilitation. Individuals there may be denied benefits for 
not participating in rehabilitation when it is recommended by 
the social insurance offices. Both these countries, as well as 
The Netherlands, also provide financial incentives to encourage 
participation in rehabilitation. For example, they provide 
supplementary benefits to cover rehabilitation-related 
expenses, such as transportation and housing costs and the cost 
of educational courses, books, and study aids.\23\ Germany and 
Sweden also offer transitional work opportunities that enable 
people with disabilities to return to work part-time while 
earning disability benefits. These individuals can gradually 
increase their daily work hours, and thus their earnings, until 
they reach their maximum work capacity, with a corresponding 
decrease in benefits.\24\ Similarly, The Netherlands provides a 
supplemental wage to beneficiaries who work, allowing them to 
earn a wage equal to their predisability earnings. The 
countries we studied also provide appropriate medical treatment 
and rehabilitation services to disabled individuals, and social 
insurance offices in Germany and Sweden may terminate the 
disability benefits of individuals who refuse to follow such 
medical recommendations.
---------------------------------------------------------------------------
    \23\ Germany and Sweden also promote disabled workers' efforts to 
return to work by providing them with financial assistance to purchase 
technical aids; workplace adaptations; and other work-related needs, 
such as personal assistants or payment of transportation costs. 
Additionally, Sweden provides grants to subsidize the purchase or 
modification of a vehicle if it is considered necessary for vocational 
training or for traveling to work.
    \24\ In Sweden, individuals with reduced work capacity may work 
full-time and still take part in the transitional work program.
---------------------------------------------------------------------------
    In addition, Germany, Sweden, and The Netherlands provide 
financial assistance to employers for the purchase of workplace 
accommodations needed by disabled employees. For example, such 
assistance may pay for technical aids, special staff or 
personal assistants to help a disabled worker perform various 
work functions, or adaptations of the work environment to meet 
the special needs of a disabled worker. These countries also 
offer financial incentives for the employment of disabled 
individuals by subsidizing the wages that employers pay them. 
Wage subsidies are provided for a time-limited period of 3 to 4 
years, with the amount of the subsidy declining each year.\25\ 
Furthermore, in The Netherlands, employers have an additional 
incentive to assist employees in returning to work because the 
employers' contributions to the disability insurance fund are 
partially determined by the number of their employees who 
became disabled in the prior year.
---------------------------------------------------------------------------
    \25\ In Sweden, wage subsidies may be maintained at the same level 
and extended beyond the 4-year period if authorities determine it is 
appropriate.

SSA's Return-to-Work Incentives Are More Limited Than Those 
---------------------------------------------------------------------------
Used in Other Systems

    In contrast to the private sector and the countries we 
studied, SSA's disability programs do not require 
rehabilitation for beneficiaries, regardless of their capacity 
to work. Instead, the recently enacted Ticket to Work Act 
establishes a voluntary system that depends upon the 
beneficiary's motivation to pursue rehabilitation services. 
Thus, a beneficiary who could benefit from rehabilitation might 
not choose to seek such services. Further, in contrast to the 
private sector requirement that an individual work to his or 
her maximum capacity, the Social Security Act does not have 
such a requirement, which may act as a disincentive to work. In 
particular, beneficiaries with low earnings may find it more 
financially advantageous to periodically stop working, or work 
part-time and continue to receive disability payments, than to 
earn more than SSA's limit of $700 a month in countable income 
and lose all cash benefits after completing a trial work 
period. In recognition of the potential work disincentive from 
this all-or-nothing benefit structure, the Ticket To Work Act 
requires SSA to conduct demonstration projects under which 
benefits are reduced by $1 for each $2 of a beneficiary's 
earnings above a level determined by SSA.
    SSA also differs from the private sector and the countries 
we studied in requiring medical treatment. The Social Security 
Act, along with SSA regulations, requires that benefits be 
denied when an individual fails, without good cause, to follow 
treatment prescribed by his or her physician.\26\ However, if 
an applicant is not receiving treatment, SSA still assesses the 
applicant's eligibility for benefits and--if the applicant 
qualifies--awards benefits, even if the applicant would not 
qualify for benefits if treated. And unless medical treatment 
is prescribed, it is not a prerequisite for continued receipt 
of benefits once they have been awarded. Indeed, SSA found in 
1999 that some beneficiaries with affective disorders--who 
constitute one of the fastest-growing groups on the DI rolls--
were receiving no medical treatment. However, SSA has recently 
begun a demonstration project to determine whether providing 
access to the right medical treatment for beneficiaries with 
affective disorders will enable them to return to work.\27\ 
Nevertheless, access to medical treatment may be limited for 
many DI applicants and beneficiaries.\28\
---------------------------------------------------------------------------
    \26\ For benefits to be denied, treatment must be prescribed by the 
individual's treating physician (the licensed physician who attends to 
an individual's medical needs). When an individual has no attending 
physician, the treating physician is the hospital or clinic where the 
individual goes for medical care.
    \27\ In addition, many beneficiaries with affective disorders were 
not being treated by mental health professionals. Yet, research 
suggests that as many as 60 percent of affective disorder cases can be 
controlled with appropriate treatment, and SSA believes that providing 
appropriate medical treatment to beneficiaries with affective disorders 
could help them return to work. Outside of the ongoing demonstration 
project, SSA does not routinely intervene in the delivery of medical 
services for its beneficiaries.
    \28\ DI applicants may not be covered by health insurance. In 
addition, new DI beneficiaries have a 24-month waiting period before 
Medicare eligibility. Moreover, Medicare generally does not cover the 
costs of certain treatment--such as prescription drugs--that may be 
necessary to improve functioning for a return to work.
---------------------------------------------------------------------------
    In contrast to the private sector and The Netherlands, SSA 
does not have the legal authority to use financial incentives 
to encourage employers to assist those with disabilities to 
return to work, thus limiting the agency's ability to influence 
employers. SSA, however, is currently funding demonstration 
projects in 12 states to develop ways to increase employment of 
DI beneficiaries and other people with disabilities and is 
looking to employers for help. For example, a goal of one state 
project is to solicit employer views on barriers to hiring DI 
beneficiaries and identify strategies for, and educate 
employers about, increasing employment opportunities for DI 
beneficiaries. In addition, the federal government provides tax 
incentives, and states may provide other assistance to 
employers to encourage them to return people with disabilities 
to work.\29\
---------------------------------------------------------------------------
    \29\ For example, small businesses may take an annual tax credit 
for a variety of costs incurred in providing employee accommodations, 
such as readers, sign language interpreters, and adaptive equipment 
Also, all businesses may take an annual deduction for the expense of 
removing physical, structural, and transportation barriers to disabled 
workers Further, state vocational rehabilitation agencies can provide 
various services to employers, such as rehabilitation engineering 
services for architectural barrier removal and work site modifications.
---------------------------------------------------------------------------
Other Systems Strive to use Appropriate Staff to Achieve 
Accurate Disability Decisions and Successful Return-to-Work 
Outcomes

    Officials of each of the disability insurers and countries 
that we studied told us that they have developed techniques for 
using the right staff to assess eligibility for benefits and 
return those who can to work. Both the insurers and the 
countries have access to individuals with a range of skills and 
expertise. Moreover, officials told us that they selectively 
apply this expertise as appropriate to cost-effectively assess 
and enhance claimants' capacity to work. In contrast, SSA's DDS 
teams of medical and psychological consultants and disability 
examiners are hired and trained to assess eligibility of 
applicants to receive cash benefits rather than to enhance 
claimants' capacity to work. As a result, the staff of SSA and 
the DDSs do not have the expertise to carry out the role of 
returning disabled workers to productive employment.

Private Insurers Seek to Use Appropriate Staff to Assess 
Eligibility and Provide Return-to-Work Services

    Each of the private disability insurers that we studied has 
access to multidisciplinary staff with a wide variety of skills 
and experience who can assess claimants' eligibility for 
benefits and provide needed return-to-work services to enhance 
the work capacity of claimants with severe impairments. The 
private insurers' core staff generally include claims managers, 
medical experts, vocational rehabilitation experts, and team 
supervisors.\30\ The insurers explained that they set hiring 
standards to ensure that these multidisciplinary staff are 
highly qualified. Such qualifications are particularly 
important because assessments of benefit eligibility and work 
capacity can involve a significant amount of professional 
judgment when, for example, a disability cannot be objectively 
verified on the basis of medical tests or procedures or 
clinical examinations alone.\31\ Table 4 describes the 
responsibilities of this core staff of experts employed by 
private disability insurers, as well as its general 
qualifications and training.
---------------------------------------------------------------------------
    \30\ The insurers also employ disability income specialists to 
assist claimants in applying for DI benefits.
    \31\ According to one insurer, disabilities with subjective 
diagnoses include certain types of mental illness, fibromyalgia, 
chronic pain (often back pain), and chronic fatigue syndrome.

Table 4: Responsibilities and Qualifications of Staff Employed 
by Disability Insurers to Assess and Enhance a Claimant's Work 
---------------------------------------------------------------------------
Potential



----------------------------------------------------------------------------------------------------------------
      Type of staff                     Responsibilities                      Qualifications and training
----------------------------------------------------------------------------------------------------------------
      Claims managers        Determine disability benefit      One insurer gives preference to those
                                                     eligibility.         with a college degree and requires
                            Develop, implement, and monitor          insurance claims experience and
                               an individualized claim management        specialized training and education.
                                                        strategy.       Another requires a college degree, a
                            Serve as primary contact for the   passing grade on an insurer-sponsored
                            claimant and the claimant's employer.         test, and specialized training and
                                Focus on facilitating the                                  coaching.
                           claimant's timely, safe return to work.
                             Coordinate the use of expert
                                                       resources.
  Medical and related       Collect and evaluate medical and   Medical staff include registered nurses
             experts a     functional information about the claimant     with case management or disability-
                           to assist in the eligibility assessment         related experience and experts in
                           and help to ensure that claimants receive   behavioral and mental issues, such as
                           the appropriate medical care to enable      psychologists, experienced psychiatric
                                          them to return to work.      nurses, and licensed social workers. Two
                            At one insurer, physicians also     insurers also employ board-certified
                                        help train company staff.        physicians in various specialties.b
Vocational rehabilitation      Help assess the claimant's      Rehabilitation experts are masters-level
               experts                           ability to work.      vocational rehabilitation counselors. In
                            Help overcome work limitations by  addition, one insurer requires board-
                           identifying needed assistance, such as      certification and 5 years of experience.
                           assistive devices and additional training,
                                and ensuring that it is provided.
          Supervisors       Provide oversight, mentoring, and  One insurer gives preference to those
                                                        training.       with a college degree and requires 3
                                                                          years' disability experience, some
                                                                       management experience, and specialized
                                                                       training. Another insurer require's a
                                                                         college degree, more than 12 years'
                                                                           disability claims experience, and
                                                                          completion of courses leading to a
                                                                                   professional designation.
----------------------------------------------------------------------------------------------------------------
a In one company, the medical expert is an employee of a company subsidiary but is often colocated with the
  insurers' employees.
b One company, for example, employs 85 part-and full-time physicians, including psychiatrists, doctors of
  internal medicine, orthopedists, family practice physicians, cardiologists, doctors of occupational medicine,
  and neurologists.

    The disability insurers we reviewed use various strategies 
for organizing their staff to focus on return to work, with 
teams organized to manage claims associated either with a 
specific impairment type or with a specific employer (that is, 
the group disability insurance policyholder). One insurer 
organizes its staff by the claimant's impairment type--for 
example, cardiac/respiratory, orthopedic, or general medical--
to develop in-depth staff expertise in the medical treatments 
and accommodations targeted at overcoming the work limitations 
associated with a particular impairment. The other two insurers 
organize their staff by the claimant's employer, because they 
believe that this enables them to better assess a claimant's 
job-specific work limitations and pursue workplace 
accommodations, including alternative job arrangements, to 
eliminate these limit ations.\32\ Regardless of the overall 
type of staff organization, each of the insurers facilitates 
the interaction of its core staff--claims managers, medical 
experts, and vocational experts--by pulling these experts 
together into small, multidisciplinary teams responsible for 
managing claims. Additionally, one insurer engenders team 
interaction by physically colocating core team members in a 
single working area.
---------------------------------------------------------------------------
    \32\ All three insurers, however, have behavioral care specialists 
specifically for managing psychiatric claims.
---------------------------------------------------------------------------
    The disability insurers expand their core staff through 
agreements or contracts with subsidiaries or other companies to 
provide a wide array of needed experts. These experts--deployed 
both at the insurer's work site and in the field--provide 
specialized services to support the eligibility assessment 
process and to help return claimants to work. For instance, 
each insurer we studied contracts with medical experts beyond 
its core employee staff--such as physicians, psychologists, 
psychiatrists, nurses, and physical therapists--to help test 
and evaluate the claimant's medical condition and level of 
functioning. In addition, the insurers contract with vocational 
rehabilitation counselors and service providers for various 
vocational services, such as training, employment services, and 
vocational testing.\33\
---------------------------------------------------------------------------
    \33\ Two insurers also contract with investigators and surveillance 
personnel to investigate potential inconsistencies between the 
claimant's statements and actual activities. One company employs field-
based investigators who verify claimant information and assess the 
conformance of the claim to observed claimant activities. These 
investigators usually have prior investigative experience and receive 
ongoing training on current medical issues and other professional 
education.
---------------------------------------------------------------------------
    All of the private insurers we examined told us that they 
strive to apply the appropriate type and intensity of staff 
resources to cost-effectively return to work claimants with 
work capacity. The insurers described various techniques that 
they use to route claims to the appropriate claims management 
staff, which include separating (or ``triaging'') claimants 
with work potential and directing their claims to staff with 
the appropriate expertise. According to one insurer, the 
critical factor in increasing return-to-work rates and, at the 
same time, reducing overall disability costs is proper triaging 
of claims. In general, the private insurers separate claims by 
those who are likely to return to work and those who are not 
expected to return to work. The insurers told us that they 
assign the type and intensity of staff necessary to manage 
claims of people who are likely to return to work on the basis 
of the particular needs and complexity of the specific case. 
This selective staff assignment is shown in Table 5.

Table 5: Triage of Claims and Illustrations of Selective Staff 
Assignment for Claims Management



----------------------------------------------------------------------------------------------------------------
      Triage category                    Staff assigned               Types of return-to-work services provided
----------------------------------------------------------------------------------------------------------------
Likely to return to work
 Condition requires                 Medical specialist            Recommend improvements in
 medical assistance and                                               treatment plan to treating physician.
    more than 1 year to                                                     Refer claimant for more
   stabilize medically.                                                  specialized or appropriate medical
                                                                                                  services.
                                                                      Ensure frequency of treatment
                                                                             meets standards for condition.
 Condition requires                     Claims manager           Monitor medical condition.
    less than a year to                                               Maintain contact with employer and
             stabilize.                                                 physician to ensure return to work.
                                                                      Obtain input from medical and
                                                                          vocational specialists as needed.
  Condition is        Multidisciplinary team including       Evaluate claimant's functional abilities
 stabilized and claimant             Vocational expert                                    for work.
 needs rehabilitation or                Medical expert        Customize return-to-work plan.
   job accommodation to              Claims specialist        Arrange for needed return-to-work
        return to work.          Specialists as needed                                    services.
                                                                      Monitor progress against expected
                                                                                       return-to-work date.
Unlikely to return to work
   Claimant is                          Claims manager        Review medical condition and level
   determined unable to                                                           of functioning regularly.
        return to work.
----------------------------------------------------------------------------------------------------------------

    As shown in Table 5, claimants expected to need medical 
assistance, such as those requiring more than a year for 
medical stabilization, are likely to receive an intensive 
medical claims management strategy. A medical strategy 
involves, for example, ensuring that the claimant receives 
appropriate medical treatment. Claimants who need less than a 
year to stabilize medically are managed much less intensively. 
For these claims, a claims manager primarily monitors the 
claimant's medical condition to assess whether the claimant has 
stabilized sufficiently medically to begin vocational 
rehabilitation, if appropriate. Alternatively, claimants with a 
more stable, albeit serious, medical condition who are expected 
to need vocational rehabilitation, job accommodations, or both 
to return to work might warrant an intensive vocational 
strategy. The private disability insurers generally apply their 
most resource-intensive, and therefore most expensive, 
multidisciplinary team approach to these claimants. Working 
closely with the employer and the attending physician, the team 
actively pursues return-to-work opportunities for claimants 
with work potential.
    Finally, claimants who are likely not to return to work (or 
``stable and mature'' claims) are generally managed using a 
minimum level of resources, with a single claims manager 
responsible for regularly reviewing a claimant's medical 
condition and level of functioning.\34\ The managers of these 
claims carry much larger caseloads than managers of claims that 
receive an intensive vocational strategy. For example, one 
insurer's average claims manager's caseload for these stable 
and mature claims is about 2,200 claims, compared with an 
average caseload of 80 claims in the same company for claims 
managed more actively.
---------------------------------------------------------------------------
    \34\ One of the insurers reviewed cases of claimants who were not 
expected to recover medically and to remain work-disabled for the 
duration of the policy every 12 to 36 months.
---------------------------------------------------------------------------
    Regardless of the category into which a claim is placed, 
the claims manager is responsible for identifying the 
appropriate experts and involving them in the management of the 
claim as an essential element of developing and implementing a 
customized claims management strategy. The claims manager may 
informally use the assistance of experts or hold an 
interdisciplinary team meeting, including clinical and 
rehabilitation experts, to obtain advice on developing the 
claims management strategy and help in determining which 
specialized experts need to be deployed to manage the claim. 
Further, if the claims manager refers the claim to a 
specialist, that specialist may determine that additional 
expertise is required as well. But the insurers told us that 
they escalate a claim to staff with progressively more training 
and specialization, and thus higher cost, only if needed to 
resolve increasingly complex claims management issues. To 
ensure that staff are utilized cost-effectively, the private 
insurers said that they compute the return-on-investment 
accruing from investing in return-to-work resources for a 
particular claimant.

Other Countries Also Selectively Apply Specialized Staff to 
Return Claimants to Work

    Other countries' social insurance offices also call upon 
various specialists, such as physicians, vocational experts, 
and psychologists, in the process of evaluating and enhancing a 
person's ability to work. If the needed expertise is 
unavailable in-house, the social insurance agency may purchase 
the necessary services from other organizations. The expertise 
applied is decided on a case-by-case basis depending on the 
case's complexity. For example, the social insurance offices in 
Sweden are responsible for working with the regional and local 
employment and rehabilitation offices to determine the 
appropriate types of rehabilitation services for a claimant. 
Medical assessments of work capacity in Germany and The 
Netherlands may also be supplemented by advice from vocational 
or other experts.
    Social insurance offices in Germany and Sweden select the 
appropriate staffing and services to dedicate to particular 
cases on the basis of the likelihood of a successful outcome. 
The staff assignments made and the return-to-work actions taken 
by the social insurance offices depend on an assessment of each 
applicant's potential for returning to work. In complex cases 
of potential long-term disability, more extensive evaluations 
involving psychologists and vocational specialists may be 
conducted to assess the work capacity of an applicant. In 
Germany, medical rehabilitation is provided before an 
applicant's condition is assessed to determine whether 
vocational rehabilitation is necessary. Only if successful 
rehabilitation seems unlikely, or if rehabilitation has been 
provided without success, will the social insurance offices in 
Germany and Sweden typically grant the person long-term 
disability benefits. But, in contrast with the private insurers 
we examined, once an individual is granted long-term benefits 
and therefore considered too severely disabled to benefit from 
services, the social insurance offices rarely reassess the 
person's return-to-work potential and generally do not offer 
any return-to-work services or benefits.
    The Netherlands also dedicates resources to evaluating 
return-to-work potential and providing rehabilitation services 
on the basis of the particular return-to-work potential and 
needs of individuals. But unlike Germany and Sweden, The 
Netherlands offers vocational rehabilitation to disability 
beneficiaries who choose to pursue a work goal even after they 
are granted long-term benefits.

SSA Staff Are Not Focused on Returning Claimants to Work

    In contrast to the private insurers and the foreign social 
insurance offices, the focus of DDS staff who make 
determinations for SSA is to assess the eligibility of 
applicants to receive cash benefits. The DDSs do not assess 
what is needed for an individual to return to work or help an 
individual with work capacity to return to work. Neither do 
they ensure that DI applicants or beneficiaries receive medical 
treatment. To make initial benefit eligibility determinations, 
DDSs rely on teams comprising a disability examiner and a 
medical or psychological consultant. Since the DDS teams do not 
carry out the variety of roles related to return to work, they 
do not include staff with the vocational skills and expertise 
who are incorporated in teams used by the private and foreign 
disability systems. However, under the Ticket to Work Act, 
beneficiaries who voluntarily choose to attempt a return to 
work may tap into vocational expertise outside SSA that could 
provide the additional services, expertise, and supports to 
help them in their effort, but only after benefit award.
    Moreover, while SSA funds the state DDSs, SSA's regulations 
delegate authority to each DDS to set hiring policies and 
determine how to organize staff charged with carrying out the 
eligibility assessment function. Consequently, in contrast to 
the standardized hiring practices used by the private insurers, 
considerable variation can exist among the states in the 
requisite qualifications for hiring key staff. For example, 
among the DDSs, the required educational background for 
disability examiners ranges from a high school diploma to some 
college to a college degree.
    In addition, SSA separates beneficiaries into groups 
according to their likelihood of medical improvement for the 
purpose of assessing continuing eligibility for benefits, in 
accordance with law and regulation. The agency invests greater 
staff resources in reviewing beneficiaries who are most likely 
to medically improve than in reviewing those with less 
likelihood of improvement. In contrast to practices of the 
private insurers and foreign social insurance offices, SSA uses 
its resources to determine continuing eligibility on the basis 
of medical improvement and does not separately evaluate whether 
a beneficiary has the potential to return to work \35\
---------------------------------------------------------------------------
    \35\ The law contains several exceptions that allow benefits to be 
terminated even when a person's medical condition has not improved. For 
example, benefits may be disallowed when new or improved diagnostic 
techniques reveal that the impairment is less disabling than originally 
determined.
---------------------------------------------------------------------------

                        Concluding Observations

    Return-to-work practices used in the U.S. private sector 
and in other countries reflect the understanding that people 
with disabilities can and do return to work. In 1996, we 
recommended that SSA place greater priority on helping disabled 
beneficiaries return to work. We also recommended that the 
agency develop a comprehensive strategy for this effort. While 
SSA has begun to focus more on return to work, it has yet to 
adopt a comprehensive strategy for implementing this new 
approach. For example, it has yet to integrate its return-to-
work efforts with its initiatives to improve the disability 
decision-making process. In short, we continue to believe SSA 
is still not placing enough priority on identifying and 
enhancing the work potential of its beneficiaries with 
disabilities. We also continue to believe that SSA could do 
this more effectively without jeopardizing the availability of 
benefits for people who cannot work.
    We acknowledge that limited data exist on the cost-
effectiveness of the return-to-work approaches used in the 
other systems we examined. In addition, SSA may face greater 
difficulty in returning some of its beneficiaries to work than 
private sector insurers do, since DI covers a broader 
population than the private insurers. Moreover, significant 
differences exist between SSA's disability programs and those 
of private sector disability insurers and social insurance 
programs in other countries. Some of these differences can be 
attributed to the particular laws and regulations governing the 
programs. Although SSA would face substantial constraints and 
challenges in applying the return-to-work practices of other 
programs, we believe opportunities exist for providing the 
return-to-work assistance that could enable more of SSA's 
beneficiaries to reduce or eliminate their dependence on cash 
benefits.
    The Congress recognized the need to focus more on return to 
work when it passed the Ticket to Work Act, which authorizes 
and requires SSA to conduct return-to-work demonstration 
programs. Program managers and policymakers will be able to 
learn from the experiences of these demonstrations, and they 
can also draw upon the approaches of the other systems to 
further strengthen and enhance a comprehensive return-to-work 
focus. Adopting such a focus will, however, require fundamental 
changes to the underlying philosophy and direction of the 
disability programs, including the determination of disability. 
Policymakers will need to carefully weigh the implications of 
such changes, but compelling reasons exist to try new 
approaches. Current estimates project that the DI trust fund 
will become insolvent in 2023. This financial strain, along 
with advances in technology and medicine that can help 
individuals improve their productive potential, provides ample 
reason for examining how practices from other systems could be 
applied to improve SSA's return-to-work outcomes.
    Mr. Chairman, this concludes my prepared statement. I would 
be pleased to respond to any questions you or Members of the 
Subcommittee may have.

                 GAO Contact and Staff Acknowledgments

    For future contacts regarding this testimony, please call 
Barbara D. Bovbjerg at (202) 512-7215. Carol Dawn Petersen, 
Barbara H. Bordelon, Kelsey M. Bright, Julie M. DeVault, 
William E. Hutchinson, and Mark Trapani also made key 
contributions to this testimony.

                          Related GAO Products

    Social Security Disability Insurance: Raising the 
Substantial Gainful Activity Level for the Blind (GAO/T-HEHS-
00-82, Mar. 23, 2000).
    Social Security Disability: Multiple Factors Affect Return 
to Work (GAO/T-HEHS-99-82, Mar. 11, 1999).
    Social Security Disability Insurance: Factors Affecting 
Beneficiaries' Return to Work (GAO/T-HEHS-98-230, July 29, 
1998).
    Social Security Disability Insurance: Multiple Factors 
Affect Beneficiaries' Ability to Return to Work (GAO/HEHS-98-
39, Jan. 12, 1998).
    Social Security Disability: Improving Return-to-Work 
Outcomes Important, but Trade-Offs and Challenges Exist (GAO/T-
HEHS-97-186, July 23, 1997).
    Social Security: Disability Programs Lag in Promoting 
Return to Work (GAO/HEHS-97-46, Mar. 17, 1997).
    1SSA Disability: Return-to-Work Strategies From Other 
Systems May Improve Federal Programs (GAO/HEHS-96-133, July 11, 
1996).
    Social Security: Disability Programs Lag in Promoting 
Return to Work (GAO/T-HEHS-96-147, June 5, 1996).
    SSA Disability: Program Redesign Necessary to Encourage 
Return to Work (GAO/HEHS-96-62, Apr. 24, 1996).
      

                                


    Chairman Shaw. Thank you, Ms. Bovbjerg. Ms. Petersen, do 
you have something to add to the remarks?
    Ms. Petersen. No, I do not.
    Chairman Shaw. Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman. Thank you very much, 
Barbara, for your testimony. You indicated in your actual 
written report that it is difficult to ascertain the cost that 
is expended on the various programs that you just mentioned for 
the disabled in terms of job retraining programs and obviously 
others. Is that part of your conclusion that there is not a lot 
of transparency in what the expenditures are in some of the 
European and other countries?
    Ms. Bovbjerg. Well, we could not get cost information from 
the other countries and frankly, were we to get that, it would 
be difficult to know how we could translate it into a 
projection for SSA if SSA were to do these things. We did get 
cost information from private insurers and, as you might 
expect, they told us that the cost ranged depending on the 
intensity of the intervention. If a claimant was assessed as 
being very unlikely to be able to work it cost them $100 a 
claim.
    On the other end of the spectrum, if they are working with 
someone who they think really has a very good shot at going 
back to their job, they might spend $2,300 a claim. So there is 
a wide variation and it is unclear when you look at it in the 
aggregate how this would translate to the Social Security 
system because as you have pointed out there are some 
differences in client populations.
    Mr. Matsui. So for the foreign countries it is just 
difficult to get information from them in terms of what the 
actual overall cost is in terms of comparison with the U.S., 
our Social Security system, unemployment system, and obviously 
other aspects of the Federal Government, state government in 
terms of cost that goes into it. Then on the private side they 
could give you the numbers but because each individual case 
differs so much it is hard to make an evaluation as to the 
effectiveness of the programs. Is that kind of what you are 
concluding or part of the summary?
    Ms. Bovbjerg. It was hard to know whether those costs 
predict what SSA would experience if they were to do similar 
things. I think in terms of effectiveness the private sector 
was uniform in saying that these measures they took were not 
only effective but they were cost-effective or they wouldn't do 
them.
    Mr. Matsui. OK, good. Have you in your studies brought 
together unemployment insurance, the health policies, you know, 
health care coverage, and rehabilitation services, did you use 
all those different aspects that are outside of the Social 
Security Administration and compare it to the private sector 
plus the foreign countries?
    Ms. Bovbjerg. Well, when we looked at private sector and 
foreign countries, we noticed that they did take quite an 
integrated approach--
    Mr. Matsui. Right.
    Ms. Bovbjerg [continuing]. In their return-to-work 
strategy. That they do work with medical providers. In the 
private sector they are often working with people who have 
health insurance and if they are unable to get access to the 
kind of treatment that the insurer thinks they need some, 
insurers will help assure that that happens. That would be 
harder for the Social Security Administration. We have a 
different system. And in other countries it is much more 
integrated, with fewer separate agencies.
    Mr. Matsui. It is hard to make comparisons. What about the 
earlier intervention by some of these other countries as well? 
I mean obviously there is Sweden and a few others, they move 
very quickly when it comes to the disabled compared to in our 
country, is that correct as well?
    Ms. Bovbjerg. Private insurers and the other countries all 
move quickly. They intervene very early. They assess work 
capacity, work potential right away. After that assessment they 
then work with the claimants who have potential to try to see 
what kinds of support they need and to try to plan an 
individualized approach for each of them.
    In Social Security the claimant goes through the process, 
which may be lengthy as you know, for determining eligibility 
and it is only at that point now under the Ticket to Work Act 
that they will be offered vocational rehabilitation services, 
so it is quite a different approach.
    Mr. Matsui. One of the problems that I am having is I think 
we need to re-examine all of this. I think it really has to be 
done but in a very comprehensive way. And I am afraid--this 
Subcommittee can only take so much and then you have labor and 
education, you have other Committees that are involved in this 
as well.
    And somehow we have to find a way to integrate this because 
I think the next major step is obviously to provide full 
services and quick early services, early intervention, and 
obviously universal coverage indefinitely while the need is 
there, but, you know, how do we go about that? And the 
comparisons are very difficult now because we don't have that 
unified approach in this country.
    Ms. Bovbjerg. But I think that what we tried to point out 
in our statement is that these other systems offer ideas to 
draw upon. They are doing these things. They think they are 
effective. It becomes up to us in the Federal Government to 
think about how do we select the things that are going to work 
best for us and create a comprehensive strategy?
    Mr. Matsui. Right. And I guess what I want to make sure is 
that we get the overall cost comparisons so that we don't 
mislead ourselves to think that, well, we can do this with the 
same dollars that we have or the same resources that we have 
and expect the same results because I don't know if that is 
necessarily the case. And your studies cannot give me, and it 
is not your fault, but your studies cannot give me any 
assurance that we are moving in that direction because you 
can't get information from the foreign countries and obviously 
the private insurers are a much different situation.
    And somehow we need to--and again I am suggesting that the 
next step may be to try to get a more comprehensive idea of 
what the overall cost is in these other studies that are being 
done and compare them to ours and then see how we can 
reallocate our resources but also find additional resources 
should they become necessary.
    Ms. Bovbjerg. And to think about what we need, what fits in 
with our policy priorities for disability.
    Mr. Matsui. Exactly. Thank you.
    Chairman Shaw. Barbara, to follow up on what Mr. Matsui was 
talking about, I want to talk about the fragmented services 
across many governmental agencies. I assume that other 
countries have the same problem and perhaps even in the private 
sector. How would you compare that as far as the expeditious 
nature of the handling of these to go ahead and process all 
these things together so that the disabled get the help that 
they need, how can that be rearranged or arranged?
    Ms. Bovbjerg. Carol knows a great deal about how some of 
these things work in foreign countries.
    Ms. Petersen. Well, in the foreign countries, in some 
instances, services will be provided within an agency and in 
other instances there may be services that they need to draw 
upon from another agency. For example, in Sweden you have a 
social insurance board that handles everything from sickness 
benefits to long-term disability but when it comes to assessing 
work capacity, that is done in the labor ministry and in the 
agencies that are run under that ministry.
    And in that country and similarly in Germany there seems to 
be very well-developed interagency coordination and 
cooperation. The agencies work very closely with one another. 
They are all operating with the same mission and goal to return 
people to work--for those that can--and so there are strong 
linkages between the agencies. The private sector relies on 
contractual agreements with other firms to provide it with 
services that it does not provide in-house.
    Chairman Shaw. Contrast that with our government services.
    Ms. Petersen. I am sorry?
    Chairman Shaw. Contrast that with our government delivery 
system.
    Ms. Petersen. Our Federal agencies could contract for some 
of these services as well but I think they would need to put 
them together.
    Chairman Shaw. Contrast it with existing--with the way we 
do it now.
    Ms. Petersen. Oh. Again, you would need to examine what 
type of new system you would want, what elements you wanted in 
place and then see whether the existing agencies provide those 
services or could provide those services or whether you would 
want to contract some of that with the private sector. This 
would have to be part of a comprehensive strategy that would be 
developed.
    Chairman Shaw. What I would like to see is sort of walk us 
through the process that somebody with a disability goes 
through when they come in trying to seek some assistance. Maybe 
that would be helpful to us.
    Ms. Bovbjerg. To seek return to work assistance or to the 
application process?
    Chairman Shaw. The whole thing, just very, very briefly.
    Ms. Bovbjerg. Well, when someone comes to SSA and says that 
they are disabled the first thing SSA has to do is determine 
whether they are eligible for the program, you know, are they a 
citizen, do they have 20 of the last 40 quarters in covered 
employment. Once they do that the person's disability claim is 
then referred to the state-run Disability Determination 
Service, under contract with Social Security and that is where 
the claim is evaluated for whether it meets SSA's standards for 
disability.
    At this point they were looking at what the nature of the 
impairment is, does it fit with their medical listings and if 
the person has been working. The person cannot be able to earn 
above substantial gainful activity. And at various points in 
the process maybe Social Security tells them, yes, you are 
disabled and they put them on the rolls. At that point under 
Ticket to Work, they can be offered vocational rehabilitation 
services but at no point is the person evaluated for work 
capacity.
    We did a report a couple of years ago where we talked to 
about 70 DI recipients who had returned to work and we asked 
them what were the things that were most important to them, why 
could they return to work when maybe other people with similar 
disabilities couldn't do that. Clearly personal motivation is a 
factor. They talked about how they couldn't possibly have done 
it without the support of their family, their friends, their 
employer, without medical insurance, without the support of 
their physician.
    And virtually everyone said they didn't get much support 
from Social Security but that these supports were really 
important and it would have been helpful to have gotten more 
from the Social Security Administration. So I think if you are 
someone who wants to return to work, you can avail yourself of 
the ticket to get vocational rehabilitation but you are not 
getting the kind of help that I think we see in some of these 
other systems, where the program really focuses on individual 
needs and capacity.
    Chairman Shaw. How would that affect cost containment or 
cost efficiency? Are we utilizing our dollars to our best 
ability?
    Ms. Bovbjerg. I think that if there are people who can work 
and who want to work who are on the disability rolls and we are 
not helping them work, then we are not spending that money 
wisely. I will say that I think as Mr. Matsui points out, this 
is not necessarily a small expenditure. We don't know what it 
would cost to try to do some of these earlier interventions. 
That is something that I think we might know more about once 
the Social Security Administration embarks on their 
demonstration projects that are authorized under Ticket to 
Work.
    They are considering an early intervention demonstration 
which under a mandate under Ticket to Work we will be looking 
at once they start it and that may provide some of the 
information that we would need to make these decisions.
    Chairman Shaw. Thank you. Mr. McCrery.
    Mr. McCrery. Thank you, Mr. Chairman. This is a very 
interesting hearing because as Members of Congress we become 
involved trying to help constituents qualify, in essence, for 
Social Security disability benefits and we become kind of with 
tunnel vision just looking to get them on the program, you 
know, if they are qualified and make sure they don't slip 
through the cracks and we often don't become involved in their 
efforts to return to work so this is a very, I think, 
worthwhile hearing and subject for us to get into.
    You mentioned, Ms. Bovbjerg, that an individual's 
motivation is obviously important in whether he or she returns 
to work. I am wondering if in your analysis of other countries' 
programs or even in private sector programs what incentives you 
found in those programs for either the individuals or maybe the 
individual's former employer to get that individual back to 
work.
    Ms. Bovbjerg. The incentives that insurers provide were 
among the most important things that we thought we saw. 
Insurers begin working with claimants really early in the 
process to make sure that they get vocational rehabilitation. 
Insurers also review the medical treatment that they are 
getting, and make sure that they get the right medical 
treatment, help them with a second opinion, another physician, 
whatever is necessary.
    In terms of employers, the private insurers have the 
ability to set the premium that the employer pays, so they are 
almost uniquely able to create some direct incentives. They can 
set premiums to be lower if the employer is re-employing 
disabled workers, and they can subsidize the wages of the 
disabled worker, and that is also true in the other countries.
    There are a number of things that are done both on the 
employer's side and on the individual's side but I did want to 
make the comment about motivation, that what we see is that 
motivation is higher the sooner that the disability insurer or 
the agency works with the claimant; the longer the claimant is 
not involved in a return-to-work strategy or is not getting 
vocational rehabilitation, the less motivation they have.
    Mr. McCrery. And you mentioned the pilot programs that SSA 
can do under the Ticket to Work Act. Do you think that one or 
more of those pilot programs will include this early 
intervention? Is there anything that we can do, Mr. Chairman, 
as a Committee to encourage SSA to include those types of 
activities in their pilot programs?
    Ms. Bovbjerg. I believe that SSA is considering that. We 
are hopeful that they will look at early intervention because 
that would be another source of information and experience.
    Mr. McCrery. Yeah, I mean the evidence that you brought to 
us certainly seems to indicate without any doubt that early 
intervention is very important but Mr. Matsui and the Chairman 
have both raised the question of cost and we don't have any 
answers for that so it seems to me that if we know it is 
effective in getting people back to work but we don't know the 
cost, we ought to encourage SSA to utilize some of the money 
under Ticket to Work that they are authorized to use to 
discover what in fact the costs are and the benefits are of 
early intervention.
    It is a rather novel concept in this country, as you know, 
for SSA to get involved with rehab before the person is even 
qualified for benefits. I mean that is--and sometimes as you 
know it takes months and even years for somebody to qualify for 
disability benefits so there could be a lot of intervention in 
that interim but for us to pay for early intervention before 
the person is even qualified is a novel concept so I think we 
need some evidence as to the effectiveness of that and whether 
it would in the end or in the long run actually save us money 
or at least break even. Thank you, Mr. Chairman.
    Chairman Shaw. Yes. Mr. Matsui. Mr. Weller, do you have any 
questions at this point? Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman. I just have a few more 
questions and I am sorry I didn't get to them in the first part 
of when I asked you. In terms of the private insurance side of 
it, it is hard to make comparisons I would imagine because 
private insurers can actually, and correct me if I am wrong, 
but can pick and choose the various industries in which they 
seek to make coverage so they don't have to get, for example, 
mine workers if they choose not to but they could go to 
lawyers, for example, and so they have a little more 
opportunity, I don't want to use the word cherry pick, but at 
least selectively pick cases in which it might be a little 
easier. So your studies are based upon that first premise, is 
that correct?
    Ms. Bovbjerg. In talking to private insurers, we really 
talked about people with severe disabilities in their group so 
I don't want you to think we are talking about returning people 
with broken legs to work.
    Mr. Matsui. No, no, I am not saying that, but I am just 
saying that overall they can survive and make a profit because 
their universe is one in which they decide who they are going 
to cover.
    Ms. Bovbjerg. Yes. That is correct. And I think a big 
difference or the most significant difference between the 
caseload in the private sector and the caseload under DI is 
mental impairment.
    Mr. Matsui. That is why to me it is a difficult thing to 
make comparisons because if I can select the people I want to 
cover, I could probably pick folks that I--you know, it would 
be severe disabilities in some cases but on the other hand, you 
know, just in terms of the overall efficiency of what I can do 
is probably much better than Social Security which has to take 
all comers. That is the only thing I am suggesting.
    Ms. Bovbjerg. Although I would think that because there is 
this triaging concept in the private sector that even with a 
different population you wouldn't expend significant return-to-
work resources on claimants who were judged unable to work.
    Mr. Matsui. And the second point I would like to just 
explore with you is that in your document you indicate that of 
those that are insured and receiving benefits from the private 
sector two-thirds of those same people receive Social Security 
disability benefits as well. And as a result of that it is 
really hard then to make a comparison as to how they are 
getting along, these people that are disabled, because they 
still are receiving SSI, Social Security disability benefits, 
is that correct?
    Ms. Bovbjerg. Yes, that is right.
    Mr. Matsui. And so it makes it difficult then to--you know, 
quality of life issues. Is that correct?
    Ms. Bovbjerg. It is difficult.
    Ms. Petersen. Well, I was going to add that because there 
is such a high proportion of people on the private rolls, that 
also qualify for DI that we felt that helped us in some ways 
make comparisons between the two insurers, the public SSA and 
the private sector, because at least for a very large portion 
of people the degree of impairment severity was comparable, 
although as you point out there are some differences in terms 
of occupations and the types of impairments. The biggest one, 
as you mentioned, is that the private insurers do not have the 
same proportion of people with mental impairments.
    Mr. Matsui. Thank you. Thank you, Chairman.
    Mr. Weller. Thank you, Mr. Chairman. I got a couple 
questions I would like to direct to Ms. Bovbjerg. In your 
testimony you stated that you believe that SSA should intervene 
earlier to foster a greater emphasis on assisting disabled 
applicants and beneficiaries in returning to the work force. 
How do you believe this should work? What would you recommend?
    Ms. Bovbjerg. Our recommendation for SSA is actually a 
little bit of a step back from that; it is to develop a 
comprehensive strategy for return-to-work. Part of that might 
include earlier intervention because, as Mr. McCrery mentioned, 
earlier action is really so central to what is done in these 
other systems and the people we spoke to seem to believe that 
that is crucial to their success.
    But I think that SSA really needs to consider how they 
would integrate this within their current policies--what would 
be most effective, what would have to change, how does it work 
with the process that is now in place or with a redesigned 
disability process. So I would be very reluctant to recommend 
just taking what one of the private sector companies does and 
dropping it into SSA because I think it is much more complex 
than that. And as we have discussed earlier, we are not at all 
clear on what these things would cost and what the benefits 
would be.
    Mr. Weller. Also in looking at your testimony you of course 
focused attention on the less stringent definition of 
disability that was used initially by private sector companies. 
How would it work if SSA departed from its current all or 
nothing definition disability and shifted it to recognize the 
possibility of improvement in the capacity to work through the 
provisions of supports and services such as retraining?
    Ms. Bovbjerg. That is one way that other systems address 
early intervention. They have this transitional period where 
they help people return to work before a more rigorous 
definition of disability is applied. That would require a 
change in law and that would be something that you would want 
to look at in light of this comprehensive strategy, and you 
might want to consider things that could be done within current 
law first. I just wouldn't think about these things in 
isolation.
    Mr. Weller. Ms. Petersen, do you have anything to add?
    Ms. Petersen. Well, it is true that the private sector and 
the other countries start off with a less restrictive 
definition and they move to the more restrictive definition but 
even when they are assessing their applicants against the more 
restrictive definition their determination process looks very 
different from that of SSA.
    Again, SSA's process of determination focuses on an 
applicant's ability to prove incapacity to work, to focus on 
the degree of impairment severity, whereas the private sector's 
and the other countries' determination processes focus on an 
approach to determine what type of work capacity exists, the 
potential that the claimant has to return to work, and what 
types of supports and accommodations and other types of 
assistance, whether it be medical or vocational, could be put 
in place to facilitate a person returning to the workplace. So 
even under more restrictive definitions, the process looks 
very, very different.
    Mr. Weller. OK, thank you. Thank you, Mr. Chairman.
    Chairman Shaw. Thank you, and I thank the panel. Thank you 
very much.
    Ms. Bovbjerg. Thank you, Mr. Chairman.
    Chairman Shaw. We now have a rather large panel, Dr. Edward 
Berkowitz, Professor and Chair, Department of History at George 
Washington University; Donald Lollar, Chief, Disability and 
Health Branch, National Center for Environmental Health, Center 
for Disease Control and Prevention, Department of Health and 
Human Services, from Atlanta, Georgia; Richard Baron, who is 
the Project Director of the Pew Fund for Health and Human 
Services for Vulnerable Adults, OMG Center for Collaborative 
Learning in Philadelphia, Pennsylvania; Dr. Richard Burkhauser, 
Sarah Gibson Blanding Professor of Policy Analysis and Chair of 
the Department of Policy Analysis and Management, Cornell 
University; Ralph Mohney, who is the Senior Vice President, 
Customer Care Center; and Tony Young, who is Co-Chair, Social 
Security Taskforce, Consortium for Citizens with Disabilities 
and Director of governmental Affairs, NISH, Vienna, Virginia.
    Welcome, gentlemen. We have each of your full statements, 
which will be made a part of the record and you may proceed as 
you see fit. Dr. Berkowitz.

 STATEMENT OF EDWARD D. BERKOWITZ, PH.D., PROFESSOR AND CHAIR, 
      DEPARTMENT OF HISTORY, GEORGE WASHINGTON UNIVERSITY

    Mr. Berkowitz. Thank you. I believe that history provides 
the best means of explaining why our disability programs have 
the structures that they do. Once we know why something was 
done in the first place, we can begin to decide whether it is 
worth changing. Planners in the Social Security Administration 
wrote a tough definition of disability into their proposals so 
as to distinguish sharply between unemployment and disability 
but they knew that if the program were administered in too 
severe a manner then the courts and the Congress would force 
Federal officials to admit more people to the rolls.
    They realized that disability was an elastic concept. By 
1949 the opponents of SSDI had begun to argue that people with 
disabilities should receive rehabilitation rather than a 
pension that allowed them to retire from the labor force for 
life. Conferees considering disability legislation in 1952 came 
up with the idea of letting the states rather than the Federal 
Government make the initial determinations of disability, a 
feature of the program that survives to the present day and 
which can only be explained by understanding the historical 
context in which it arose.
    In 1954 officials in the Eisenhower administration argued 
that rehabilitation should be expanded rather than passing a 
disability insurance program. They wanted to limit tickets out 
of the labor force and instead encourage people to enter the 
labor force. The Secretary of Health, Education and Welfare 
recommended, for example, that Social Security trust fund money 
be used to provide rehabilitation services but not cash 
benefits to insured people who became disabled.
    Congress passed SSDI in 1956 but in its formative years 
between 1956 and 1960 SSDI paid benefits only to workers who 
were 50 years of age or older. That meant that the linkage 
between applicants for disability benefits and vocational 
rehabilitation never took hold since older individuals were not 
good candidates for rehabilitation. The SSDI program became, 
like Social Security itself, a retirement program. SSI arose as 
part of a discussion of welfare reform that began in 1969.
    But policy makers failed to anticipate important trends. 
Few people thought to ask what effect the new law would have on 
disability. Instead, Congress reflexively assigned welfare 
beneficiaries to the administrative apparatus already 
established to administer SSDI benefits. In thinking about SSI, 
policy makers envisioned that it would apply mainly to the 
elderly who had traditionally dominated the adult welfare 
categories. At the beginning, people with disabilities made up 
less than half of the SSI caseload.
    But when Congress was considering SSI the incidence of 
disability was growing at a unprecedented rate; hence, 
circumstances that could have been foreseen favored a rise in 
the disability categories of SSI. Armed with that knowledge, 
policy makers might have designed SSI differently. As things 
turned out, adults and children who were either blind or 
disabled represented nearly two-thirds of the SSI caseload by 
1994.
    That meant that just as disability was grafted onto a 
retirement program for the elderly in the SSDI program so it 
was added to a welfare measure that Congress intended primarily 
as a means of serving the elderly. Another anomaly in SSI was 
that the entire discussion focused on the so-called adult 
welfare categories but many SSI recipients turned out to be 
children. That meant that a disability determination system 
intended to serve people who had been in the labor force was 
forced to handle many claims for children.
    It shouldn't be surprising that a disability system 
developed in the thirties and created during the political 
conflicts of the fifties and seventies should expenience 
strains after nearly a half century of operation, but as we 
modernize the system we might want to keep in mind that things 
seldom work out as planned. If we restrict benefits, for 
example, we have to be careful to avoid the situation that 
occurred after 1981 in which policy makers sought to tighten 
the rolls but ended up greatly increasing the size of the 
rolls.
    As we modernize, we shouldn't be blinded by false hopes as 
I think have arisen in the implementation of the Americans with 
Disabilities Act. The ADA has not led to the substitution of 
jobs and independent living for cash disability benefits 
despite the hopes of those who lobbied for the law's creation. 
In the field of welfare, we should remember that the SSI 
Program was itself an attempt to modernize the system but 
because policy makers failed to spot emerging trends the new 
program developed its own problems.
    So I would end by saying that sometimes the only 
explanation for a particular policy is historical but even if 
we know that we are not ourselves immune from historical 
forces. Thank you.
    [The prepared statement follows:]

Statement of Edward D. Berkowitz, Ph.D., Professor and Chair, 
Department of History, George Washington University

    I am Edward Berkowitz, and I am the chair of the Department 
of History at George Washington University. Much of my research 
has focused on disability policy and on Social Security policy.
    My job today consists of providing a historical overview of 
Social Security Disability Insurance and Supplemental Security 
Income. My hope is that by observing these programs with a 
historical eye, members of this committee, who have inherited 
the present system, will be able to see just why our disability 
income policy has the structure that it does. Armed with this 
information, policymakers can begin to decide which aspects of 
the system are worth changing. In the process of making those 
changes, I would hope that Congressmen would attempt to spot 
emerging trends of the sort that have so often have caused 
outcomes to diverge from expectations in the field of 
disability policy. Because this hearing marks a step in that 
direction, I applaud its intent.

Social Security Disability Insurance

    Although Social Security Disability Insurance did not 
become law until July, 1956, a long period of discussion both 
in the executive agencies and in Congress preceded its passage. 
Planners in the Social Security Administration began their 
consideration of this measure in 1936. They devised a program 
that they felt could withstand the pressures of the depression. 
In particular, they wrote a tough definition of disability into 
their proposals so as to distinguish sharply between 
unemployment and disability. Instead of adopting a definition 
similar to the ones in the existing workers' compensation and 
veterans pension laws, they chose to define disability as ``an 
impairment of mind or body which continuously renders it 
impossible for the disabled person to follow any substantial 
gainful occupation,'' and was likely to last for ``the rest of 
a person's life.''
    Even with this tough definition, which is similar to the 
one in the present law, many doubted the ability of federal 
officials to administer a disability program. As an actuary who 
served on the 1938 Social Security Advisory Council put it, 
``You will have workers like those in the dust bowl area, 
people who have migrated to California and elsewhere, who 
perhaps have not worked in a year or two, who will imagine they 
are disabled.'' The actuary warned that unless a highly 
qualified medical staff examined each applicant, the cost of 
the program would be higher than ``anything that can be 
forecast.''
    Although the Social Security officials sought a strict 
definition of disability, they knew that, if the program were 
administered in too severe a manner, then the courts and the 
Congress would act to make federal officials admit more people 
to the disability rolls. One of the principal Social Security 
researchers thought of disability as an elastic concept. ``Too 
strict a system invites pressure to swing in the opposite 
direction,'' he said. His remarks foreshadowed the volatility 
that would accompanied disability insurance after 1956 and in 
particular the sequence of rapidly expanding rolls in the 
1970's, attempts to stop the growth of the rolls in the early 
1980's, and the rise in the rolls in the later 1980's and early 
1990's.
    Much of the conceptual work that underpinned Social 
Security Disability Insurance took place in the 1930's and 
early 1940's. Passage of the measure did not occur until the 
1950's. The delay reflected the understandable lack of 
attention to domestic policy during the years of World War II 
and the reality that public assistance paid higher benefits and 
reached more people than did Social Security between 1935 and 
1950. Members of Congress who represented constituents in areas 
that contained few industrial and commercial workers had no 
reason to wish to expand Social Security, much less to 
acquiesce to the passage of Social Security Disability 
Insurance.
    Social Security Disability Insurance did not receive 
serious attention from Congress until the Committee on Ways and 
Means held hearings on this topic, and other topics related to 
Social Security, in 1949. By this time the depression was over, 
and wartime conditions had helped to bring rehabilitation 
medicine to maturity. As a consequence, the opponents of Social 
Security Disability Insurance argued that people with 
disabilities should receive rehabilitation, rather than a 
pension that allowed them to retire from the labor force for 
life. Social Security officials conceded the importance of 
rehabilitation and even gave serious consideration to 
recommending that applicants to the disability rolls should 
receive rehabilitation services and interim payments before 
they entered the rolls on a permanent basis. They managed to 
persuade the Committee, however, that, important as 
rehabilitation was, it did not supersede the need for cash 
benefits. As a consequence, the Committee included a disability 
insurance program in the bill that the House of Representatives 
passed in 1949.
    The Senate chose to emphasize rehabilitation, rather than 
cash benefits, and did not include disability insurance in its 
version of the Social Security bill that was passed in 1950. 
The House receded in conference, and as a compromise measure 
Congress adopted a new public assistance category, Aid to the 
Permanently and Totally Disabled. Up until 1950, Aid to the 
Blind had stood alone as a federally assisted public assistance 
program that reached people with disabilities.
    After 1950 Social Security became a popular program that 
received bipartisan support, both within the Committee on Ways 
and Means and in Congress itself. Social Security Disability 
Insurance, by way of contrast, remained a controversial 
measure, and the Senate Finance Committee, in particular, 
refused to recommend it to Congress. A series of incremental, 
compromise laws in 1952 and 1954 paved the way for the final 
passage of SSDI in 1956.
    The 1952 legislation introduced the idea of a disability 
freeze, in which a person could receive Social Security 
benefits at the normal retirement age, even if he or she 
dropped out of the labor force for a substantial period of time 
because of a disability. This measure passed Congress only 
after the conferees considering the legislation agreed to the 
unusual step of letting the disability freeze expire before it 
could take effect. More importantly, the conferees came up with 
the idea of letting the states, rather than the federal 
government, make the initial determinations of disability--a 
feature of the program that survives to the present day and 
which can be explained only by understanding the historical 
context in which it arose.
    In 1954, as part of the Eisenhower administration's plan to 
expand the vocational rehabilitation program and to use the 
Social Security program as a means of identifying candidates 
for rehabilitation, Congress passed a disability freeze 
measure. At this time, Secretary Oveta Culp Hobby, the second 
female cabinet officer in the nation's history, recommended 
that Social Security trust fund money be used to provide 
rehabilitation services, but not cash benefits, to insured 
people who became disabled. She argued that the investment of 
OASI funds would be small but ``no accountant can estimate the 
physical rewards, the sense of independence, pride and 
usefulness and the relief from family strains which accrue to 
one of the disabled when he returns to his old job or to a 
newly learned job suited to his limitations.'' Her sentiments 
reflected the feelings of many within the Eisenhower 
administration such as those of Assistant Secretary of Health, 
Education, and Welfare Roswell Perkins who said that the 
administration's philosophy was that ``the first line of attack 
on disability should be rehabilitation, in order that people be 
restored to useful and productive lives.''
    In 1955 the House once again passed a disability insurance 
measure and in 1956 the Senate Finance Committee once again 
opposed it. That set up a dramatic fight on the floor of the 
Senate that resulted in the passage, by the barest of margins, 
of Social Security Disability Insurance. As a means of 
gathering support, the proponents of the legislation limited 
benefits to those fifty or older and did not include benefits 
for the dependents of disabled workers.
    In its formative years between 1956 and 1960, therefore, 
SSDI paid benefits only to workers who were fifty years of age 
or older. That meant that the linkage between applicants for 
disability benefits and vocational rehabilitation never took 
hold, since everyone agreed that older individuals made the 
worst candidates for rehabilitation and the state vocational 
rehabilitation agencies were simply unable to cope with the 
large numbers of people who applied for disability benefits. It 
also meant that the caseload contained a disproportionate 
number of people with impairments that affected older 
individuals, such as heart disease and arthritis, rather than 
people with impairments or conditions that affected younger 
individuals, such as mental disorders. In effect, despite the 
eventual use of trust fund money to pay for the rehabilitation 
of people on the SSDI rolls, the SSDI program became, like the 
Social Security itself, a retirement program.
    At the time, policymakers tended to think of the system for 
caring for people with mental illness, who occupied the 
majority of the beds in the nation's hospitals, as a state 
responsibility. There was little desire to use Social Security 
money to subsidize state mental health hospitals. In the 
earliest drafts of the disability insurance legislation, 
prepared in the 1930's and 1940's, the planners specified that 
no benefits were to be paid to those with mental disabilities. 
In defense of this position, they argued that most people with 
mental disabilities were already taken care of in state 
hospitals, that mental disabilities were difficult to 
diagnosis, and that mental disabilities had created problems in 
foreign disability insurance programs, such as the one in 
Sweden. They worried that benefits for people with mental 
disabilities would result in malingering. This suspicion of 
mental illness as a basis for disability benefits persisted in 
the program that was passed in 1956 and made it difficult for 
the system to cope with the revolution in social policy 
unleashed by the deinstitutionalization movement in the 1960's.

Supplemental Security Income

    Supplemental Security Income, the other pillar of our 
modern disability system, arose as part of a discussion of 
welfare reform that President Richard Nixon initiated in 1969. 
Here, as with SSDI, historical particulars mattered. As it 
became clear that the President's comprehensive plan to change 
the Aid to Families with Dependent Children Program would not 
pass Congress, attention shifted to the reform of what 
policymakers called the adult welfare categories. In 
particular, the notion arose that the administration of Aid to 
the Blind, Aid to the Permanently and Totally Disabled, and Aid 
to the Elderly should be federalized and run by the Social 
Security Administration.
    Because policymakers did not engage in the sort of 
oversight (that, for example, the present hearing represents), 
they failed to anticipate important trends. At the time people 
pointed to more adequate benefits as a reason for the creation 
of the program. In particular, Congress hoped to do away with 
such things as lien laws and to model the new law on practices 
in the more progressive states. Social Security Administration 
officials supported the law because they hoped it would take 
away some of the pressure to raise the minimum benefit under 
Social Security and hence strengthen the relationship between 
contributions and benefits. Few people thought to ask what 
effect the new law would have on disability. Instead, 
policymakers reflexively assigned welfare beneficiaries to the 
administrative apparatus already established to administer SSDI 
benefits. Hence, states made the initial disability 
determinations under SSI, just as they did under SSDI, and the 
two programs used a common definition of disability.
    In thinking about the new program, policymakers envisioned 
that it would apply mainly to the elderly, who had 
traditionally dominated the adult welfare categories. Social 
Security officials believed that many SSI recipients would be 
people already receiving Social Security benefits but who found 
that these benefits were not enough to bring them out of 
poverty. At first these assumptions proved to be correct. When 
SSI began in 1975, blind and disabled adults and children 
represented only 42% of the caseload. At the same time that 
Congress considered SSI, however, the incidence of disability 
was growing at an unprecedented rate. The highest rates of 
growth of the SSDI rolls, for example, occurred between 1971 
and 1975. Hence, circumstances favored a rise in the disability 
categories of SSI. Furthermore, in the same year that Congress 
created SSI, it also provided a 20% increase in Social Security 
benefits and indexed benefit levels to the rate of inflation. 
This action had the effect of raising replacement rates under 
Social Security and lessening the chance that an elderly Social 
Security recipient might also need to receive SSI. As a result 
of these two forces, adults and children who were either blind 
or disabled represented nearly two thirds of the SSI caseload 
by 1994.
    That meant that just as disability was grafted on to a 
retirement program for the elderly in the Social Security 
Disability Insurance program so it was added to a welfare 
measure that Congress intended primarily as a means of serving 
the elderly.
    Another anomaly in Supplemental Security Income was that 
the entire discussion focused on what nearly everyone called 
the ``adult welfare categories.'' As things worked out, 
however, many SSI recipients turned out be children. By 1992, 
for example, 16 percent of SSI beneficiaries under age 65 were 
children. That meant that a disability determination system 
intended to serve people who had been in the labor force was 
forced to handle many claims from children. Friction developed 
between the courts and other overseers of the disability 
determination process and the Social Security Administration, 
leading to such cases as the 1990 Sullivan v. Zebley decision.

Conclusion

    It should not be surprising that a disability system 
developed in the 1930's and created during the political 
conflicts of the 1950's and 1970's should experience strains 
after nearly half a century of operation. Still, the warnings 
of the system's founders remain relevant Simply put, things do 
not always work out as planned in disability policy. Correcting 
the system's flaws by restricting benefits can, for example, 
lead to a reaction of the sort that occurred between 1981 and 
1984. By the time that Congress acted in 1980 in response to 
rising disability rolls, the disability incidence rate was 
already heading down. After the administration moved to 
implement the new law in an aggressive manner beginning in 
1981, the system nearly fell apart, as governors ordered their 
state disability determination offices not to cut people from 
the rolls and administrative law judges and the courts reversed 
many of the policies of the Social Security Administration. The 
ultimate result was that more people, rather than less, entered 
the rolls.
    Similarly, the creation of important civil rights laws such 
as the Americans with Disabilities Act has failed to have an 
immediate impact on the disability rolls. The ADA has not led 
to the substitution of jobs and independent living for cash 
disability benefits, despite the hopes of those who lobbied for 
the law's creation.
    In the field of welfare, the SSI program, because 
policymakers failed to spot emerging trends, developed in ways 
unanticipated by its founders.
    As my testimony has demonstrated, outcomes do sometimes 
diverge from expectations. It seems to me that fact only 
increases the responsibility of this subcommittee to survey the 
landscape and identify emerging trends. As it does so, the 
subcommittee should realize that sometimes the only explanation 
for a particular policy is historical.
      

                                


    Chairman Shaw. Thank you. Dr. Lollar.

STATEMENT OF DONALD LOLLAR, ED.D., CHIEF, DISABILITY AND HEALTH 
 BRANCH, NATIONAL CENTER FOR ENVIRONMENTAL HEALTH, CENTERS FOR 
 DISEASE CONTROL AND PREVENTION, U.S. DEPARTMENT OF HEALTH AND 
                HUMAN SERVICES, ATLANTA, GEORGIA

    Mr. Lollar. Mr. Chairman, Members of the Committee, I 
appreciate having the opportunity to speak to the Committee 
today. I am Dr. Don Lollar, Chief of the Disability and Health 
Branch in the National Center for Environmental Health at the 
Centers for Disease Control and Prevention. The mission of the 
CDC is to promote health and quality of life by preventing and 
controlling disease, injury, and disability.
    We do this by identifying public health problems, 
determining the scope of these problems, conducting research to 
identify their preventable causes and then implementing public 
health interventions. The Disability and Health Branch's 
mission at CDC is to promote the health and well being of all 
people with disabilities. Our branch is currently supporting 
both research to better measure the disabling process and we 
support state programs to improve the health of people with 
disabilities.
    I want to focus on two primary areas. First, I will 
describe how the social and physical environment plays a vital 
role in either inhibiting or encouraging people with a 
disability to participate fully in society. Second, I will 
describe in broad terms how an emerging World Health 
Organization (WHO) classification system can influence how 
society better defines and meets the needs of people with 
disabilities.
    Typically when a person with a physical, intellectual or 
emotional impairment is not participating in society the way 
other people do, we assume that it is because the person's 
disabling condition itself prevents them from doing so. In 
reality, disability is a complex interaction of the person with 
their environment. Some factors that influence participation 
are within a person, including medical conditions, personal 
strength and limitations, but other factors are outside a 
person including the physical and social environments. Advances 
in technology and changes in attitudes have made it clear that 
people with disabling conditions are capable of doing many 
things. Technology has provided the tools to help people with 
disabilities perform daily life tasks vital to their autonomy 
such as personal care, mobility, communication and even 
learning.
    Assistive devices and technologies that allow more personal 
autonomy include power chairs, voice synthesizers and special 
telephones and computers; but, in addition, factors such as 
accessibility to buildings or transportation and acceptance by 
others also influence participation at work or school. 
Unfortunately, not all people with disabilities have access to 
these technologies nor have all attitudes in our society 
changed. As a result, the opportunities for complete 
participation that are possible have not been extended to all 
persons with a disability.
    To describe these various disability dimensions, the World 
Health Organization has developed the International 
Classification of Functioning and Disability, the so-called 
ICIDH-2. This classification is a way to understand and 
communicate more clearly about the disabling process. The 
system describes the various dimensions of the disabling 
process, which includes physical or body functions, everyday 
personal activities, societal participation, and the 
environmental factors.
    ICIDH-two can enable society to better define and meet the 
needs of people with a disability. The advantages of this 
system are that it combines an understandable framework, which 
includes environmental factors, and provides a classification 
system as the basis for future research. While the concepts of 
ICIDH-2 are useful its implementation is just beginning. The 
future utility of the system will depend on how widely it is 
used and how well users are able to apply it.
    A useful system of classifying disability elements needs to 
recognize the complexity of the interactions between people 
with disabilities and their physical and social environments. 
Disability policy should more broadly address the various 
environmental barriers that restrict full participation by 
people with disabilities. CDC would be pleased to work with 
this Committee, with other Federal and state agencies and 
researchers in the private sector to improve the health and 
participation of people with disabilities. Thank you, Mr. 
Chairman.
    [The prepared statement follows:]

Statement of Donald Lollar, Ed.D., Chief, Disability and Health Branch, 
National Center for Environmental Health, Centers for Disease Control 
and Prevention, U.S. Department of Health and Human Services, Atlanta, 
Georgia

    Mr. Chairman, Members of the Committee.
    I appreciate being given the opportunity to speak to the 
Committee today. I am Dr. Donald Lollar, Chief of the 
Disability and Health Branch in the National Center for 
Environmental Health at the Centers for Disease Control and 
Prevention. The mission of the CDC is to promote health and 
quality of life by preventing and controlling disease, injury, 
and disability. We do this by identifying emerging and 
reemerging public health problems, determining the scope of 
these public health problems, conducting research to identify 
preventable causes of public health problems, and developing 
and evaluating public health intervention programs. Since 1988, 
the mission of the Disability and Health Branch has been to 
promote the health and well being of all people with 
disabilities in the U.S. including the millions of people 
served by Supplemental Security Income and Social Security 
Disability Insurance. The Disability and Health Branch is 
currently supporting both research to better measure the 
disabling process and state programs to improve the health of 
people with disabilities.
    I will focus on two primary areas. First, I will describe 
how the social and physical environment plays a vital role in 
either inhibiting or encouraging people with a disability to 
participate fully in society. Second, I will describe in broad 
terms how an emerging World Health Organization classification 
system might influence how society better defines and meets the 
needs of people with disabilities.
    Typically, when a person with a physical, intellectual, or 
emotional impairment is not participating in society the way 
other people do, one assumes that it is because the person's 
disabling condition prevents them from doing so. In reality, 
disability is a complex interaction of a person with their 
environment. Some factors that influence participation are 
within a person, including medical conditions, personal 
strengths and limitations. Other factors are outside a person, 
including the physical and social environments. Advances in 
technology and changes in attitudes have made it clear that 
people with disabling conditions are capable of doing many 
things.
    Technology has provided the tools to help people with 
disabilities perform daily life tasks vital to their autonomy 
such as personal care, mobility, communication, and learning. 
Assistive technologies that allow more personal autonomy 
include power wheelchairs, voice synthesizers, and special 
telephones and computers. In addition, factors such as 
accessibility to buildings or transportation and acceptance by 
others also influence participation at work or school. 
Unfortunately not all people with disabilities have access to 
these technologies, nor have all attitudes in our society 
changed. As a result, the opportunities for complete 
participation that are possible have not been extended to all 
persons with a disability.
    Let me give you an example. Jonathan is a young 21 year old 
with cerebral palsy. Without assistance, he is substantially 
limited in personal activities, such as mobility and 
communication. With the aid of a power wheelchair and a voice 
synthesizer, he can move around and communicate with others. 
His family has purchased an adapted van that allows him to 
travel.
    Jonathan faces several types of barriers to his full 
participation, some at the person-level and some at a broader 
societal level. Technology has removed several of his person-
level limitations, such as in the areas of freedom of movement 
and accessibility. If, however, Jonathan wants to participate 
more fully in society, such as by working or developing 
friendships, other environmental factors must be addressed. In 
addition to matching his abilities with potential jobs he might 
consider, the work place must be accessible for his wheelchair 
and, not unlike many of us, his work setting may need to be 
adapted to accommodate his needs. Coworkers' attitudes toward 
Jonathan--both positive and negative--also impact his 
participation.
    To assess the various disability dimensions, the World 
Health Organization (WHO) has developed the International 
Classification of Functioning and Disability (ICIDH-2). The 
ICIDH-2 is a way to understand and communicate more clearly 
about the disabling process. The system describes the 
relationships between the various parts of the disabling 
process--the physical or body functions, the personal everyday 
activities, participation in society, and environmental 
factors. ICIDH-2 provides a common language that allows us to 
talk with one another about the different life dimensions 
people with disabilities experience. The language describes 
each individual dimension separately and then focuses on how 
they may interrelate with each other. Jonathan, for example, 
experiences impairments of various body systems, has difficulty 
with everyday activities of moving around, personal care, and 
communication. With the intervention of assistive technology, 
his activity limitations are reduced. Even with greater 
performance in personal everyday activities, however, he may 
still be restricted from participating in work, recreation, or 
even social relationships. This restriction in participation 
is, in this case, not associated with his impairments or his 
personal activity limitations, but rather due to environmental 
factors, such as architectural barriers, social program 
guidelines, or attitudes toward people with disabilities.
    The ICIDH-2 may enable society to better define and meet 
the needs of persons with a disability. The advantages of 
ICIDH-2 are that it combines an understandable framework, which 
includes environmental factors, addresses the interaction of 
the person and the environment on participation in society, and 
creates a commonly used classification system for future 
research. While the concepts of ICIDH-2 are useful its 
implementation is just beginning. The future utility of the 
system will depend on how widely it is used and how well users 
are able to apply it.
    To put it another way, participation in work, school, or 
any other area of daily life depends on both the individual and 
their environment. As their circumstances or situations change, 
an individual with an impairment or disability who was not 
previously able to do so may be able to attend school or work.
    A useful system of classifying disabilities needs to 
recognize the complexity of the interactions between people 
with disabilities and their physical and social environments. 
Disability policy should more broadly address environmental 
barriers, which restrict full participation by people with 
disabilities. CDC would be pleased to work with this Committee, 
other federal and state agencies, and researchers to improve 
the health and participation of people with disabilities.
    Thank you, Mr. Chairman and members of the Committee, for 
the opportunity to come before you today. I will be happy to 
answer any questions you have about CDC's Disability Program or 
any other areas of my remarks today.
      

                                


    Chairman Shaw. Thank you, Dr. Lollar. Mr. Baron.

STATEMENT OF RICHARD C. BARON, M.A., PROGRAM DIRECTOR, PEW FUND 
FOR HEALTH AND HUMAN SERVICES FOR VULNERABLE ADULTS, OMG CENTER 
     FOR COLLABORATIVE LEARNING, PHILADELPHIA, PENNSYLVANIA

    Mr. Baron. Good morning. My name is Richard Baron, and I 
want to focus today on the sometimes surprising results of a 
research project I recently completed, and the implications of 
those results for the Social Security disability program's 
dramatically large number of beneficiaries and recipients who 
have a serious mental illness. Let me tell you the gist of my 
comments first. The vast majority of people with serious mental 
illness are desperately poor, and are likely to remain at or 
near the poverty level for the remainder of their lives, 
whether they work or not.
    It is time that the country and SSA commit itself not 
merely to getting people back to work or off the SSA rolls, but 
more significantly to helping people with serious mental 
illness who work to claim a fair share of the nation's 
prosperity. Although I have recently taken a job at the OMG 
Center in Philadelphia, where I direct the Pew Fund's Health 
and Human Services grant making program for vulnerable adults, 
for the past 2 years I have been engaged in an independent 
research project funded by a Switzer Fellowship from the 
National Institute on Disability and Rehabilitation Research, 
exploring the long-term career patterns of people with serious 
psychiatric disabilities.
    In extensive, qualitative interviews people with serious 
mental illness talked with me about their attitudes toward 
work, the many jobs they had held in the past, their employment 
aspirations, and the impact of the Social Security disability 
program on their careers. This research offers some 
surprisingly encouraging news. First, the people I interviewed 
were overwhelmingly enthusiastic about working. They readily 
understood the financial, psychiatric, and social benefits that 
work provides.
    There is no great value divide between the rest of us and 
those with disabilities. Nearly everyone wants a good job. 
Second, most of those I talked to had worked a great deal and 
had worked successfully, both before and after their diagnosis 
and before and after their eligibility for Social Security. 
Those I interviewed had each held many jobs with an average job 
tenure at each job of 18 to 24 months. Interviewees reported 
that they had been both productive and personable on the job. 
They had been well worth their paychecks and they had gotten 
along with their colleagues.
    Third, the people I interviewed reported that they were 
only rarely fired. Indeed, about half of my interviewees left 
jobs for reasons that had nothing at all to do with mental 
illness: a company closed down or left town, elderly parents 
got sick or moved, the boss made unreasonable demands, or the 
salary was just too low. Almost no one had the kind of on-the-
job meltdown our rehabilitation programs dread although people 
sometimes did lose jobs because they were too depressed to get 
out of the house, too manic to resist an adventure or too 
paranoid to face co-workers.
    Fourth, I want to underline that people did not receive 
their first diagnosis of serious mental illness and grab the 
next cab for the local Social Security office. Despite mounting 
psychiatric problems people often worked for years trying to 
avoid a life of public dependency before turning to SSA. And, 
as you know, many continue to work after SSA eligibility but 
only at levels that would allow them to sustain their critical 
life line to consistent medical support.
    However, beneath these positive notes about the work 
motivation and work success of people with serious mental 
illness lies a harsh reality. Most people with serious mental 
illness who have worked in the past or are working now are 
employed in entry level, low wage, minimal benefit, and part-
time jobs that do not provide them access to prosperity. More 
than 75% of the job placements made by rehabilitation agencies 
only help people toward the kinds of secondary labor market 
jobs that they have already proven fairly adept at obtaining 
for themselves.
    Thus, there is often little discernible economic difference 
for people with serious mental illness between working and not 
working. Such limited outcomes are unfortunate not only because 
those jobs simply do not provide living wages that lift people 
out of poverty but also because such jobs no longer serve as 
stepping stones to permanent full-time jobs with decent 
benefits, and those I interviewed were acutely aware of how 
unlikely it was that they would be able to find good jobs in 
the future.
    Many understood that this had as much to do with their lack 
of educational qualifications as it did with their psychiatric 
disability. Their work prospects today are similar to those of 
many working class people without disabilities. The gap between 
the rich and the poor is widening most often because good jobs 
are beyond the grasp of poor people. Either they cannot manage 
the full-time demands of the careers emerging in the new 
economy or they haven't the college degrees, technical skills, 
or work histories these jobs demand.
    We ought not to delude ourselves that helping someone with 
a serious psychiatric disability, or with any serious 
disability or educational disadvantage, to obtain an entry 
level part-time or even full-time job is enough. Our economy 
does not provide the right kinds of opportunities for the 
typical SSA client to make real economic progress in the 
secondary labor market. We have to establish longer term 
programs that genuinely help people to move into the economic 
mainstream, and this means that we have to make more 
substantial educational, training and other investments in 
beneficiaries and recipients themselves.
    It is clearly a failure of public policy to pretend that 
getting off the SSA rolls or extending medical eligibility is 
enough to escape poverty. It is just not so. I was struck in 
the course of these interviews by how many women talked about 
wanting a decent place of their own and how many men talked 
about their longing to own a used car. These are not elaborate 
delusions or self-indulgent ambitions for today's Americans but 
they remain at present completely beyond the grasp of most 
people with serious mental illness. This should not be so. 
Thank you.
    [The prepared statement follows:]

Statement of Richard C. Baron, M.A., Program Director, Pew Fund for 
Health and Human Services for Vulnerable Adults, OMG Center for 
Collaborative Learning, Philadelphia, Pennsylvania

    Good morning. My name is Richard Baron, and I want to talk 
to you today about the sometimes surprising results of a 
research project I have recently completed, and the 
implications of those results for the Social Security 
disability program as it continues to work toward meeting the 
changing needs of people with disabilities, particularly the 
large number of individuals on the SSA rolls who have a serious 
mental illness.
    Let me tell you the gist of my comments before I fill in 
some of the details: the vast majority of people with serious 
mental illness are desperately poor, and are likely to remain 
at or near the poverty level for the remainder of their lives, 
and will do so--unless there are significant changes in our 
national policies--whether they work or not. It is time that 
the country commit itself not merely to getting people 'back to 
work' or 'off the SSA rolls,' but, more significantly, to 
helping people with serious mental illness who work to claim 
some fair share of the nation's remarkable prosperity.
    Although I have recently taken a job at the OMG Center for 
Collaborative Learning, in Philadelphia, where I direct the Pew 
Fund's Health and Human Services grant making program for 
vulnerable adults, from 1973 to 1998 I worked at Matrix 
Research Institute, a private nonprofit research and training 
center, also in Philadelphia, with a focus on improving 
rehabilitation and employment services for people with serious 
mental illness.
    For the past two years, however, I have been engaged in an 
independent research project, funded by a Switzer Fellowship 
from the National Institute on Disability and Rehabilitation 
Research, in which I explored the long term career patterns of 
individuals with substantial and sustained psychiatric 
disabilities, through in-depth qualitative interviews with 
individuals across the Eastern half of the United States. In 
these interviews, people with serious mental illness talked at 
length about their attitudes toward work, each one of the many 
jobs they had held in the past, their employment aspirations 
for the future, and the impact of the Social Security 
disability program on all of this.
    First, then, this research has some surprisingly 
encouraging news. The people I interviewed were overwhelmingly 
enthusiastic about working: they understood all too well the 
financial, psychiatric and social benefits that work provides, 
and although they report that neither their clinicians nor 
their rehabilitation programs are very encouraging with regard 
to work, they long for the sense of independence and normalcy 
that working offers. There is no great 'value divide' between 
the rest of us and those with disabilities: nearly everyone 
wants a good job.
    Second, most of those I interviewed had worked a great 
deal, and had worked successfully, both before and after their 
diagnosis, and before and after their eligibility for the 
Social Security disability program. Those I interviewed had 
each held 6 -8 jobs, and their average job tenure was around 18 
months. They reported that they had been both productive and 
personable on the job: they had been well worth their 
paychecks, and they had gotten along with their colleagues. 
They knew full well that they both should and could work in the 
competitive labor market.
    Third, the people I interviewed reported that they had left 
far more jobs than they had been fired from. About half of the 
reasons people left jobs had nothing at all to do with mental 
illness: a company closed down or left town; elderly parents 
got sick or moved; their boss made unreasonable demands or 
their salary was just too low--all the kinds of reasons you 
hear from people without psychiatric disabilities in a 
turbulent job market. While the other half of job losses were 
indeed related to their psychiatric disabilities, almost no one 
had the kind of on-the-job meltdown our rehabilitation programs 
dread: most people lost their jobs because they were too 
depressed to get out of the house, too manic to resist an 
adventure, too paranoid to face coworkers, or too quickly 
hospitalized to open up the shop that morning.
    Fourth, people did not receive their first diagnosis of 
serious mental illness and grab the next cab for their local 
Social Security Office: despite their mounting psychiatric 
problems, people often worked on and off for years before 
entering the SSA rolls, trying to avoid a life of public 
dependency. And, as you know, many continue to work after SSA 
eligibility, walking the fine line that the system of 
disincentives forced them to walk in order to sustain their 
critical lifeline to consistent financial and medical support.
    However, beneath this positive news about their motivation 
and relative success at work lies a harsh reality. Most people 
with serious mental illness who have worked in the past or are 
working now are employed in those entry-level, low-wage, 
minimal-benefit, and part-time secondary labor market jobs that 
do not provide them access to any reasonable measure of 
prosperity. More than 75% of the job placements made from the 
state/federal vocational rehabilitation system or the nation's 
critically-needed network of psychosocial rehabilitation 
agencies--including those that are part of the nation's 
supported employment initiatives--help people toward the kinds 
of jobs that they had already proven themselves fairly adept at 
obtaining for themselves.
    Such limited outcomes are unfortunate not only because 
those jobs simply do no provide a 'living wage' that lifts 
people out of poverty, but also because such jobs no longer 
serve as a stepping stone to permanent full-time jobs with 
decent benefits. There was, among the people I interviewed, a 
pattern of significant gaps in their work histories. Some of 
these gaps were no doubt due to prolonged psychiatric 
hospitalizations and post-hospital recovery periods, but it was 
clear to me that a good percentage of unemployment was due to 
the fact that there is little discernible economic difference 
for them between working and not working.
    Those I interviewed were acutely aware of how unlikely it 
was that they would be able to substantially improve upon their 
current lifestyles, whether they worked or they did not, and 
that this 'parchment ceiling' had as much to do with their lack 
of educational qualifications as it did with their psychiatric 
disability. Their work prospects, like their work histories, 
are similar to those of many working class people without 
disabilities in the current economy, in which the gap between 
the rich and the poor is widening: the 'good jobs' are often 
beyond their grasp. Either they cannot manage the full-time 
ongoing demands of the careers emerging in the 'new economy,' 
or they haven't the college degrees, technical skills, or work 
histories these jobs demand. Like other's in the secondary 
labor market, they are often working very hard and getting 
nowhere, and now they are not even getting by.
    We ought not to delude ourselves that helping someone with 
a serious psychiatric disability--or anyone with any kind of 
disability, or educational disadvantage--to obtain an entry-
level, part-time job is enough. It is not. The economy of 
prosperity in which we live does not provide enough 
opportunities for the typical SSA disability beneficiary or 
recipient to make progress: people do not move readily from 
part-time to full-time employment, because the jobs are not 
there for them. People do not move from jobs with few benefits 
to jobs with full benefits because employer based health care 
systems are seeking to diminish rather than expand employee 
benefits, particularly in the secondary labor market. People do 
not move from minimal responsibilities to major assignments 
because they lack the educational qualifications to do so.
    We have to begin to think about longer term programs that 
help people to move into the economic mainstream, and this 
means that we have to think in terms of more substantial 
investments in SSA beneficiaries and recipients. My research 
doesn't allow me to presume that I can readily suggest the 
public policy alternatives that address the problem of 
desperate poverty among people with serious disabilities, but 
stronger economic support for people with the most severe and 
medically demanding disabilities, rehabilitation programs that 
provide people with access to a job with a living wage, and a 
stronger support for educational programs, certainly would seem 
to move us in the right direction.
    But, it is clearly a failure of public policy to pretend 
that simply getting off the SSA rolls or extending medical 
insurance eligibility is enough to escape poverty. It's just 
not so. I was struck in the course of these interviews by how 
many women talked about wanting a decent home of their own and 
how many men talked about their longing to own a car. These are 
not overly-elaborate delusions or self-indulgent ambitions for 
Americans at the beginning of this new century, but they are, 
at present, completely beyond the grasp of most people with 
serious mental illness. This should not be so. Thank you.
      

                                


    Chairman Shaw. Thank you, Mr. Baron. Dr. Burkhauser.

    STATEMENT OF RICHARD V. BURKHAUSER, PH.D., SARAH GIBSON 
BLANDING PROFESSOR OF POLICY ANALYSIS, AND CHAIR, DEPARTMENT OF 
POLICY ANALYSIS AND MANAGEMENT, CORNELL UNIVERSITY, ITHACA, NEW 
                              YORK

    Mr. Burkhauser. Thank you. My name is Richard Burkhauser. 
Before I became a university professor, I taught every grade 
from kindergarten through high school and that experience has 
made me a show and tell speaker. So I would like to confine my 
remarks to three tables that are at the end of my written 
statement and are samples of the cross national research that I 
have done on disability programs over the last couple of years.
    Table one looks at disability transfer recipients per 
thousand workers by age in the four countries that the GAO 
report talked about. There are some similarities in the four 
countries: the United States, the Netherlands, Sweden and 
Germany. That is, the ratio of people on the disability 
transfer rolls rises with age in all four countries. That is to 
be expected because the onset of a disability is much higher at 
older ages. But there are also tremendous differences in these 
ratios across countries and across time that clearly can't be 
driven by differences in underlying health conditions. My 
research suggests that there differences are really driven by 
policy decisions, decisions that you, Mr. Shaw, and others in 
Congress must make as leaders of our country.
    In the Netherlands the transfer recipient rates increase 
from 55 per 1000 to 138 per 1000 in the seventies, a 151% 
increase in beneficiaries. In the eighties this enormous growth 
slowed down in the Netherlands and in the other countries in 
Table 1. However but it wasn't until the nineties that the 
Dutch made a concerted effort to contain their program growth. 
Consequently, the ratio of people on the rolls per 1000 workers 
between 1990 and 1998 actually fell by 10% in the Netherlands.
    How did this happen? Benefit levels were cut and a legal 
basis for disentangling the risks of disability and employment 
were introduced. In 1993 periodic reviews of those on the 
disability rolls were made part of the system. All 
beneficiaries younger than age 45 received elegability reviews 
based on these new standards. In contrast, the United States 
had the highest growth in their disability rolls in the 
nineties, a 63% increase, and most disturbing there was an 87% 
increase in the ratio of younger workers on the rolls.
    We have long known that disability programs serve as an 
early retirement program for folks with disabilities who would 
like to get out of the labor force but are too young for early 
Social Security benefits. Table two shows how dramatic the 
differences are in the way the Netherlands and the United 
States provide benefits to such workers. If you look at the 
employment rate of men aged 51, 52 and 53 in the United States 
and the Netherlands they are about the same in the two 
countries. Labor force participation rates then fall gradually 
in the United States to about 67% by age 60.
    In contrast, the Dutch go from 82% at age 53 to 21% at age 
60. Fully 33% of men in the Netherlands receive disability 
transfers at age 60. This suggests that if there is a will, 
there is a way to put as many people on the disability rolls as 
policymakers desire and the Dutch have succeeded in 
demonstrating this point. You might argue that this is 
appropriate social policy for older people. However, it is not 
so clear that it is appropriate social policy for younger 
people.
    Table 3 looks at the United States employment rates of men 
and women with and without disabilities and their median 
household incomes between 1982 and 1998. What it shows is that 
business cycles affect all of us in about the same way. Growth 
is good for everyone. Recessions are bad for everyone. If you 
look at employment rates from 1982 to 1989, which is the growth 
period of the Reagan boom of the 1980s, you will see that 
employment of both those with and without disabilities 
increased between 1982 and 1989 as did their median household 
income.
    We had a recession between 1989 and 1993 in which 
employment fell and median household income fell for both 
groups. Now here is the most serious news about what is going 
on in the 1990s in the United States for folks with 
disabilities. After 1993, we have had stupendous economic 
growth in this country which has led to increases in employment 
for men and women without disabilities, and has led to 
substantial increases in their real median household income.
    In contrast, the employment rates of men and women with 
disabilities are actually lower in 1998 than they were in 1993, 
the employment trough of the last business cycle. Real 
employment of men with disabilities has fallen about 25% since 
the last business cycle peak of 1989. (For women it is about 
24%.) Median household income of men with disabilities has 
fallen by about 5%. What is going on? In my view, there has 
been a major shift from work to the disability rolls, both 
Disabilities Insurance and Supplemental Security Income, by 
folks with disabilities in the 1990s.
    Let me conclude by saying that the lesson of the 
Netherlands is that the disability transfer population can be 
quite large if disability transfer rolls are used as an 
alternative to long-term unemployment or welfare programs. But 
the experience of Germany and Sweden suggests that these rolls 
can be kept within socially acceptable limits, if a work force 
strategy of accommodation, rehabilitation, and integration of 
people with disabilities in the labor market is implemented.
    The recently implemented Ticket to Work Act is certainly a 
step in the right direction but future legislation is likely to 
be needed to shift United States disability policy toward more 
work-orientated outcomes. Thank you.
    [The prepared statement and attachment follow:]

STATEMENT OF RICHARD V. BURKHAUSER, PH.D., SARAH GIBSON BLANDING 
PROFESSOR OF POLICY ANALYSIS, AND CHAIR, DEPARTMENT OF POLICY ANALYSIS 
AND MANAGEMENT, CORNELL UNIVERSITY, ITHACA, NEW YORK

           Lessons from European Disability Policy Experience

    Work in the marketplace is the principal source of income 
in modern industrial societies, and ameliorating economic risks 
associated with exits from the labor force due to health 
problems or ``old age'' is a fundamental goal of all modern 
social welfare systems. Yet the mix of private and public 
insurance against such risks varies greatly across countries, 
and the resulting structure of retirement and disability 
programs and the signals they send with respect to how and when 
to leave the labor market are more likely to explain the 
dramatic differences in across country disability rolls and in 
employment at older ages than differences in underlying health 
conditions in those countries.
    International evidence suggests that public policies are 
the most important factor in determining the relative size of 
the disability-transfer population. Over time, countries have 
used different eligibility criteria to define this protected 
population and different processes to implement this 
protection. Table 1 shows that the percentage of the working 
age population receiving disability transfers in the United 
States, The Netherlands, Sweden, and the western states of 
Germany varies across age groups and over time. As would be 
expected, since the prevalence of health-related impairments 
increase with age, disability transfers among working age 
people increase at older ages in all four countries. Past that 
similarity, dramatic differences are observed across countries 
and within each country over time.
    No country demonstrates the power of policy to affect the 
rate of growth in the disability-transfer population better 
than The Netherlands. No one would suggest that the underlying 
health of the Dutch working age population has deteriorated at 
a more rapid pace than that of the other countries in Table 1. 
Yet the growth in the prevalence of the Dutch working age 
population receiving disability transfers in the 1970s far 
exceeded those of other countries. Policy changes in the 1980s 
slowed that growth, and dramatic policy changes in the 1990s 
have turned it around. Benefit levels were cut and a legal 
basis for disentangling the risks of disability and 
unemployment were introduced. But real changes in the rolls 
only began in 1993 when eligibility standards and the process 
for continuing benefits were dramatically tightened. In 1993, 
periodic review of those on the disability rolls was made a 
part of the system. All beneficiaries younger than age 45 were 
reviewed based on the new standards.
    As can be seen in Table 1, as a result of these reforms and 
others, the prevalence of disability transfer recipients per 
1000 workers fell by 10 percent between 1990 and 1998. While 
the ratio of disability transfer recipients to workers in 1998 
is still higher in The Netherlands than in the other countries, 
it is the United States which experienced the greatest growth 
in its disability rolls among the four countries in Table 1 in 
the 1990s. Most ominously, the fastest growth in the United 
States disability transfer rolls was among younger persons aged 
15 to 44.
    It has long been recognized that disability transfer 
programs act as a form of early retirement for older workers 
with some level of disability. Hence transfer payments rather 
than rehabilitation or integration into the workforce via job 
creation or quotas, have dominated policy in all four countries 
for this older age group. Table 2 compares the age specific 
employment rates of men aged 51 through 61 in The Netherlands 
and the United States in 1992 and shows how disability 
transfers and private employer pensions are used as a bridge to 
the earliest social security retirement age in these two 
countries.
    But the rapid increase in the disability rolls among 
younger workers is a much more controversial policy outcome and 
one that has already pushed the United States ahead of Sweden 
and Germany in the prevalence of disability transfers in this 
age group. The rapid increase in the SSI-children program 
population in the early 1990s is a major example of the 
increased use disability based transfers to provide a minimum 
income level to younger persons. In contrast, both Swedish and 
German policies are much more focused on integrating younger 
workers with disabilities into the labor market than is United 
States disability policy.
    One possible consequence of the relaxation of eligibility 
standards for SSI-disability and SSDI benefits in the late 
1980s in the United States is that while the disability 
transfer rates have been rapidly rising, the employment rates 
of men and women with disabilities in the United States have 
been falling. As Table 3 reports, not only did the employment 
rates of men and women with disabilities fall as the country 
moved from a business cycle peak in 1989 to a business cycle 
trough in 1992 but they continued to decline thereafter despite 
six consecutive years of economic growth.
    The lesson of The Netherlands suggests that the size of the 
disability transfer population can be quite high if disability 
transfer rolls are used as an alternative to long term 
unemployment or welfare programs. But experience in Germany and 
Sweden suggests that these rolls can be kept within socially 
acceptable limits if a ``work first'' strategy of 
rehabilitation and integration of people with disabilities into 
the labor market is implemented. The recently implemented 
Ticket to Work/Work Incentives Improvement Act is certainly a 
step in the right direction, but future legislation is likely 
to be needed to shift United States disability policy toward 
more work orientated outcomes.

                               References

    Aarts, Leo J.M., Richard V. Burkhauser, and Philip R. de 
Jong (eds.). Curing the Dutch Disease: An International 
Perspective on Disability Policy Reform. Aldershot, Great 
Britain: Avebury, Ashgate Publishing Ltd. (1996).
    Burkhauser, Richard V., Mary C. Daly and Andrew J. 
Houtenville. ``How Working Age People with Disabilities Fared 
Over the 1980s and 1990s Business Cycle.'' Cornell University 
Working Paper. (2000).
    Burkhauser, Richard V., Debra Dwyer, Maarten Lindeboom, 
Jules Theeuwes, and Isolde Woittiez. ``Health, Work, and 
Economic Well-Being of Older Workers, Aged 51 to 61: A Cross-
National Comparison Using the United States HRS and The 
Netherlands CERRA Data Sets.'' In James Smith and Robert Willis 
(eds.), Wealth, Work, and Health: Innovations in Measurement in 
the Social Sciences. Ann Arbor, MI: University of Michigan 
Press, (1999), pp. 233-265.

                        Table 1.--Disability Transfer Recipients Per Thousand Workers by Age in Four OECD Countries, 1970 to 1998
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Growth                         Growth                         Growth
                                                                               Change 1970-                   Change 1980-                   Change 1990-
                        Age                           1970     1975     1980       1980       1985     1990       1990       1995    1998 a      1998
                                                                                (percent)                      (percent)                      (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aged 15 to 64 Years
  United States...................................       27       42       41           52       41       43            5       64       70           63
  The Netherlands.................................       55       84      138          151      142      152           10      142      137          -10
  Sweden..........................................       49       67       68           39       74       78           15      106       27
  Germany.........................................       51       54       59           16       72       55           -7       57       60            9
Aged 15 to 44
  United States...................................       11       17       16           45       20       23           44       39       43           87
  The Netherlands.................................       17       32       57          235       58       62            9       57       59           -5
  Sweden..........................................       18       20       19            6       20       21           11       32       34           62
  Germany.........................................        7        6        7            0        8        5          -29        6        8           60
Aged 45 to 59
  United States...................................       33       68       83          151       71       72          -13      103      104           44
  The Netherlands.................................      113      179      294          160      305      339           15      271      241          -29
  Sweden..........................................       66       95       99           50      108      116           17      151      145           25
  Germany.........................................       75       64       84           12      103       75          -11       87       81            8
Aged 60 to 64
  United States...................................      154      265      285           85      254      250          -12      314      329           32
  The Netherlands.................................      299      437    1,033          245    1,283    1,987           92    1,872     2025            2
  Sweden..........................................      229      382      382           67      512      577           51      716      709           23
  Germany.........................................      419      688    1,348          222    1,291    1,109          -18    1,347    1,020           -8
--------------------------------------------------------------------------------------------------------------------------------------------------------
(a) U.S. data are from 1997.
Source: Derived and updated from Aarts, Burkhauser, and De Jong (1996), Table 1.1.


                      Table 2.--Prevalence of Work and Transfer Benefits for Men by Age in The Netherlands and in the United States
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              United States                                      The Netherlands
                                                 -------------------------------------------------------------------------------------------------------
                       Age                                                  Not Working                                         Not Working
                                                   Working a    Disability    Employer     Other d     Working a    Disability    Employer     Other d
                                                               Transfers b   Pension c                             Transfers b   Pension c
--------------------------------------------------------------------------------------------------------------------------------------------------------
51..............................................         82.6          4.1          0.9         12.4         83.3         13.7          0.0          3.0
52..............................................         84.9          3.0          2.4          9.9         87.5          8.1          1.9          2.5
53..............................................         82.8          3.5          0.5         13.2         81.9         14.1          1.7          2.3
54..............................................         84.6          2.9          2.7          9.8         74.6         17.2          1.9          6.2
55..............................................         78.5          4.5          1.8         15.3         72.2         16.7          3.5          7.5
56..............................................         76.9          5.0          6.3         11.8         59.0         23.9         10.2          6.8
57..............................................         80.3          4.6          7.0          8.0         58.7         17.4         15.6          8.3
58..............................................         71.5          7.5          9.2         12.0         49.0         25.0         19.0          7.0
59..............................................         68.9          6.5          9.3         15.3         44.1         23.2         27.5          5.2
60..............................................         67.9          6.1         12.6         13.3         20.9         33.3         42.3          3.5
61..............................................         65.9          5.6         16.0         12.5         16.8         26.9         50.5          5.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
a Those who are working at the time of the interviewC1993 in The Netherlands and 1992 in the United States.
b Those who are not working and are receiving disability transfers at the time of the interview.
c Those who are not working or receiving disability transfers but who are receiving private pension benefits at the time of interview.
d Those who are not working and receiving neither disability transfers nor private pension benefits at the time of interview.
Source: Burkhauser, Richard V., Debra Dwyer, Maarten Lindeboom, Jules Theeuwes, and Isolde Woittiez.(1999) Data from The Netherlands are weighted values
  of the 1993 Wave 1 CERRA Household Survey. Data from the United States are weighted values of the 1992 Wave 1 Gamma Release of the Health and
  Retirement Survey.

Table 3.--Employment Rates and Median Household Size-Adjusted 
Income of Civilian Aged 25 through 61 by Gender and Disability 
Status in 1982, 1989, 1992, and 1998a


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Employment Rate c                            Percentage Changed
                           Groups b                           ------------------------------------------------------------------------------------------
                                                                   1982         1989         1993         1998       1982-89      1993-98      1989-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Men without Disability.......................................         95.1         96.1         94.5         95.1          1.0          0.6         -1.0
Men with Disability..........................................         41.7         44.0         37.2         34.4          5.4         -7.8        -24.5
Women without Disability.....................................         69.3         77.0         78.3         80.8         10.5          3.1          4.8
Women with Disability........................................         29.3         37.5         33.4         29.5         24.6        -12.4        -23.9
--------------------------------------------------------------------------------------------------------------------------------------------------------



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Median Income e                            Percentage Change d
                           Groups b                           ------------------------------------------------------------------------------------------
                                                                   1982         1989         1993         1998       1982-89      1993-98      1989-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Men without Disability.......................................       27,399       31,888       30,076       33,486         15.1         10.7          4.9
Men with Disability..........................................       13,948       16,477       14,490       15,717         16.6          8.1         -4.7
Women without Disability.....................................       24,486       28,841       27,512       30,384         16.3          9.9          5.2
Women with Disability........................................       13,200       14,789       13,061       14,173         11.4          8.2        -4.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Burkhauser, Daly and Houtenville (2000) calculations based on the March Current Population Survey, 1981-1999.
a Those less than age 25 or more than age 61 or in the Armed Force are excluded. In our study, persons are considered to have a disability if they
  report having a health problem or disability, which prevents them from working or limits the kind or amount of work they can do.
b Disability status is for year following income year. Beginning in survey year 1994, computer assisted interviews were used which slightly modified the
  question we use to define disability.
c Includes as employed only those who work 52 hours or more in a given year and have positive earnings.
d When calculating percentage change, we use the average of the two years as the base.
e All dollar amounts are in 1998 dollars. Income is household size-adjusted by dividing income by the square root of household size. Negative sources of
  income were converted to zero. In addition, the bottom and top 5 percent of the household size-adjusted income distribution are excluded from the
  analysis.

Richard Burkhauser, Ph.D.

    Department of Policy Analysis and Management, Cornell University

    The experiences of other countries can shed some light on 
the search for appropriate Social Security Disability Insurance 
(SSDI) and Social Security Income (SSI) program eligibility 
criteria for people with disabilities. This discussion focuses 
primarily on experiences with disability-transfer programs in 
four countries--the Netherlands, Germany, Sweden, and the 
United States (Aarts et al., forthcoming).
    Before recommending dramatic changes in our current SSDI 
and SSI eligibility criteria, one has to ask several questions. 
Is the current system sufficiently in trouble to warrant such 
changes? If so, what is the evidence of the failure of the 
current system to achieve its objectives, and what criteria 
were used to determine the size of this failure? Without 
answers to these questions, it is difficult to either put a new 
system into place or to determine whether or not the new system 
is superior to the current system.
    International evidence suggests that public policies are 
the most important factors in determining the relative size of 
the disability-transfer population. Over time, countries have 
used different eligibility criteria to define their protected 
population and different processes to implement this 
protection. Described below are some of the differences across 
countries and over time in these criteria and processes as well 
as an overview of the tradeoffs that should be considered in 
establishing them.
    Table 5-1 shows that the working age population receiving 
disability transfers in the Netherlands, Germany, Sweden, and 
the United States varies across age groups and over time. As 
would be expected, since the prevalence of health-related 
impairments increases with age, disability transfers among 
working age people increases at older ages in all four 
countries. Past that similarity, dramatic differences are 
observed across countries and within each country over time.

                       Table 5.1 Disability Transfer Recipients per Thousand Workers by Age, in Four OECD Countries, 1970 to 1995
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Growth                            Growth                  Growth
                                                                                  Change 1970-                      Change 1980-            Change 1990-
                        Age                           1970      1975      1980        1980        1985      1990        1990        1995        1995
                                                                                    (percent)                         (percent)               (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aged 15 to 64 Years
  United States...................................       27        42        41            52        41        43             5        64            49
  The Netherlands.................................       55        84       138           151       142       152            10       142            -7
  Sweden..........................................       49        67        68            39        74        78            15       106            36
  Germanya........................................       51        54        59            16        72        55            -7        47           -15
Aged 15 to 44
  United States...................................       11        17        16            45        20        23            44        39            70
  The Netherlands.................................       17        32        57           235        58        62             9        57            -8
  Sweden..........................................       18        20        19             6        20        21            11        32            52
  Germany.........................................        7         6         7             0         8         5           -29         6             8
Aged 45 to 59
  United States...................................       33        68        83           151        71        72           -13       103            43
  The Netherlands.................................      113       179       294           160       305       339            15       271           -20
  Sweden..........................................       66        95        99            50       108       116            17       151            30
  Germanya........................................       75        64        84            12       103        75           -11        87            16
Aged 60 to 64
  United States...................................      154       265       285            85       254       250           -12       314            26
  The Netherlands.................................      299       437     1,033           245     1,283     1,987            92     1,872            -6
  Sweden..........................................      229       382       382            67       512       577            51       716            24
  Germanya........................................    419 s       688     1,348           222     1,291     1,109           -18       890          -20
--------------------------------------------------------------------------------------------------------------------------------------------------------
a German data refer to the population in the states in the former Federal Republic of Germany.
Source: Derived and updated from Aarts, Burkhauser, and de Jong (1996), Table 1.1.

 [GRAPHIC] [TIFF OMITTED] T8103.002

    FIGURE 5-1.--Targeting social policies on the working age 
population with disabilities. SOURCE: Burkhauser, 1997. 
Reprinted with permission of Dr. Richard V. Burkhauser, Cornell 
University.
    Those differences have more to do with the policies that 
govern the disability eligibility determination process than 
with changes in the underlying health and disability patterns 
of those populations.
    The preponderance of evidence to date suggests that overall 
health in each of these countries, measured either by morbidity 
or mortality scales, has improved significantly over the last 
25 years. Yet the number of people on disability-transfer 
programs relative to the working population has increased in 
all four countries.
    No country demonstrates the power of policy changes to 
affect the rate of growth in the disability-transfer population 
better than the Netherlands. No one would suggest that the 
underlying health of the Dutch working age population has 
deteriorated at a more rapid pace than that of the other 
countries in Table 5-1. Yet the growth in the prevalence of the 
Dutch working age population receiving disability transfers in 
the 1970s far exceeded that of the other countries. Policy 
changes in the 1980s slowed this growth, and dramatic policy 
changes in the early 1990s have turned it around. (See Aarts et 
al. [forthcoming], for a fuller discussion.)
    The dramatic differences in disability-transfer populations 
seen in Table 5-1 can be explained using Figure 5-1. Circle A 
represents the entire working age population with disabilities, 
using the Americans with Disabilities Act of 1990 (ADA) 
definition, namely, working age people who have a physical or 
mental impairment that substantially limits one or more major 
life activities, or a record of such impairments, or who are 
regarded as having such impairments. This definition is more 
all-encompassing than that of Nagi or the World Health 
Organization, since it includes people who have limitations, 
but may or may not be failing in some socially expected role. 
Previous studies applying this broader definition to the United 
States have found that from 8 to 12 percent of the total 
working age population would be included in the population with 
disabilities depending on the data set and questions used 
(Bound and Burkhauser, forthcoming).
    When the ADA definition is applied across countries or over 
time in the same country, the size of the overall population in 
circle A does not dramatically change. However, two subsets 
within this population, circle B--the eligible disability-
transfer population--and circle C--the actual disability-
transfer population--will change dramatically.
    Circle A is more or less invariant to policy decisions. It 
is a function of demographic characteristics, such as age and 
gender. But it is also affected by the quantity and quality of 
medical care, the wealth of the country, and the education of 
the population with regard to their personal health. In the 
long run, circle A can increase or decrease as a result of 
medical innovations. It decreased when polio was eradicated and 
will do so again if a cure is found for AIDS. But circle A can 
also increase. If medical innovations prolong life but do not 
offset ensuing impairments and functional limitations, then 
circle A would increase, as, for instance, it did in the case 
of advancements in medical care for severe spinal cord 
injuries.
    By contrast, the size of the population in circle B has 
historically been a reflection of public policy in all four 
countries in Table 5-1. Eligibility rules vary across the 
countries. Only in the United States is eligibility limited to 
those who are totally disabled. In the other three countries, 
eligibility is offered to those who are partially disabled. The 
criteria for failure to perform work are also important in 
determining the size of the circle B population. In the United 
States, the definition is strict and relates to any substantial 
gainful employment, while Sweden and Germany use a commensurate 
work definition. That is, if the impairment prohibits a person 
from doing the kind of work the person has been doing in the 
past, this is sufficient to become eligible for disability-
transfer benefits. In 1993, in an effort to reduce system 
growth, the Netherlands abandoned its definition of 
commensurate work and adopted a ``substantial gainful 
employment'' criterion like the one used in the United States. 
This change in eligibility criteria is one of the reasons for 
the reduction in the relative size of the disability-transfer 
population in the Netherlands in the 1990s seen in Table 5-1.
    A major distinction between the United States disability-
transfer program and that of other countries in Table 5-1 is 
the availability of immediate benefits. The United States has a 
five-month waiting period and no universal short-term 
disability program, although many individual employers have 
short-term disability benefits programs. Sweden, Germany, and 
the Netherlands all have sickness benefits that can continue 
for several years. Since 1993, however, the Netherlands has 
required employers to pay for the first six weeks of sickness 
benefit. When that policy was imposed, the proportion of 
workers receiving sickness benefits declined.
    Labor market considerations affect the size of the eligible 
population. Prior to 1987, the Netherlands had an elaborate 
procedure to measure earning capacity in which officials looked 
at the characteristics of a person's past jobs. They tried to 
link the characteristics of these jobs to their measure of the 
person's impairments. They also had a very intricate six-
category system of partial disability, starting at the 15 
percent disability level. However, if a person was declared to 
be partially disabled, even if only at the 15 percent level, 
but was not currently employed, the person received a full 
disability benefit unless the government could show otherwise. 
Hence while the Netherlands had an elaborate system of trying 
to assign a share of disability to each individual, the 
overriding importance of labor market considerations 
effectively meant that very few people actually got partial 
benefits.
    Circle C represents the population currently receiving 
disability benefits. The size of the circle C population 
depends on application decisions by the potentially eligible as 
well as on acceptance decisions by program gatekeepers. 
Applications are sensitive to general economic conditions. They 
rise in bad economic periods and fall when the economy 
improves. For individuals, the size of their benefits and their 
ease of access to them relative to other alternatives is an 
important factor in their decision to apply. In disability 
systems that emphasize work through rehabilitation and quotas, 
such as in Germany and Sweden, even though disability-transfer 
benefits are relatively generous, transfer rolls remain 
relatively low because many in the transfer-eligible population 
work.
    The relative size of disability-transfer benefits compared 
to those offered by other government programs also makes a 
difference. For instance, transfer benefits in the German 
disability system are not much different from the benefits 
offered by other German transfer programs. By contrast, 
relatively easy access and high benefits relative to other 
transfer programs in the Netherlands and in the United States 
have meant that during the trough period of the business cycle, 
much greater pressure is put on their disability-transfer 
programs.
    Circle B and C populations do not necessarily have to 
coincide. Some in circle B work and therefore do not apply for 
benefits, while others in circle B do not know they are 
eligible and therefore do not apply. Finally, some in circle B 
have applied for benefits and are eligible, but they are 
mistakenly denied benefits. This is known as type-2 error.
    Circle C is not a subset of circle B, because some of the 
circle C population are awarded benefits even though they are 
not truly eligible. This is Type-1 error. These people are 
currently unemployed and have disabilities, but they are 
capable of substantial gainful employment and hence do not 
actually meet circle B eligibility criteria.
    Policy choices make a difference in the size of the two 
circles and in the degree that they coincide. In its effort to 
redesign the disability decision process, SSA must decide what 
it is trying to achieve--for example, reduce the size of circle 
C, insure that circle B and circle C coincide, insure that 
circle C is a subset of circle B, minimize Type-1 error, or 
minimize Type-2 error. If SSA is interested in reducing errors, 
which is more important--reducing false eligibility or false 
ineligibility? The discussion at this meeting suggests that we 
are primarily focusing on reducing Type-1 error. But in making 
judgments about what we are trying to achieve, it is important 
to think about the social costs of both types of error when 
discussing the tradeoffs between added administrative costs and 
the reduction of such errors.
    One important criterion that could be used in any 
evaluation of a redesigned system is its ability to reduce the 
uncertainty of outcomes on the part of all parties involved. Ex 
ante the system should provide better information about the 
likely outcome for people with disabilities who are required to 
make the difficult choice of if and when to apply for benefits.
    Half of the people with disabilities who have gone through 
this process and have been denied benefits never work again. 
There are two reasons why they never work again: (1) the system 
mistakenly denied them benefits, and (2) the scarring effect of 
the system itself. If a person invests in trying to get on the 
program, the rational way to do so is to do everything possible 
to diminish the possibilities of being judged capable of 
performing any substantial gainful activity. A person with 
disabilities planning to apply for benefits has to be 
unemployed for six months prior to application and during the 
determination process. Obviously, people out of the workforce 
for two years are much less likely to get back into the labor 
force, regardless of their initial condition, than those who 
try to get back to work before applying for benefits. 
Therefore, it is possible that a more complex method of 
reducing errors could lead to worse outcomes, if that system 
increased the uncertainty of the final outcome to the 
applicant. Rather than searching for a system that reduces 
errors based on some gold standard, which in the end will be to 
some degree arbitrary, a redesigned system should reduce the 
uncertainty of the process and hence the social costs 
associated with the disruptions in the lives of people with 
disabilities.
      

                                


    Chairman Shaw. Thank you. Mr. Mohney. Watch your cord 
there.

STATEMENT OF RALPH MOHNEY, SENIOR VICE PRESIDENT, CUSTOMER CARE 
       CENTER, UNUMPROVIDENT CORPORATION, PORTLAND, MAINE

    Mr. Mohney. Thank you, Mr. Chairman, Members of the 
Committee. My name is Ralph Mohney and I am Senior Vice 
President for the Customer Care Organization of UnumProvident 
Corp. I appreciate this opportunity to testify about 
UnumProvident's roll as the world's leading provider of 
disability insurance. First, however, I would like to commend 
this Congress for passing the return-to-work legislation that 
was enacted last year.
    Your efforts eliminated two significant return-to-work 
barriers by continuing government health insurance and by 
setting up trial return to work opportunities. My comments will 
focus on how to build upon this landmark legislation. 
UnumProvident is a publicly traded insurance holding company. 
We provide insurance solutions to a wide clientele ranging from 
individuals to small employers to several of the nation's 
largest industrial companies and internationally in Japan, 
Europe and Canada. We are the world's leading provider of 
disability insurance.
    UnumProvident's disability claim organization, which we 
call Customer Care, provides critical support for very diverse 
customers. The organization fulfills this traditional roll of 
thoroughly, fairly, and objectively evaluating claims, paying 
legitimate claims promptly and with a high level of service, 
and defending against those few claims that are not legitimate. 
But our claim management employees then go beyond the 
traditional role to proactively assist insureds in their 
return-to-work efforts.
    This involves providing specialized resources when 
appropriate to help each individual regain the ability to earn 
an income and become self-sufficient once again. The 
UnumProvident claim management model is driven by four 
important elements, triage, early intervention, impairment-
based claim management, and face-to-face interaction provided 
by our GENEX subsidiary. Nearly half of our new long-term 
disability claimants are able to return to work within 6 months 
of receiving benefits.
    For our claimants who are also receiving Social Security 
benefits, we experience a recovery rate that is roughly six 
times the reported Social Security recovery rate. As stated in 
the Ticket to Work legislation, one-half of 1% improvement in 
Social Security disability recovery rates would yield $3.5 
billion of savings for the program. Social Security can improve 
its experience if the logical next steps of last year's 
legislation are adopted.
    I recommend that this Subcommittee explore the following 
four key areas based on our experience in the private sector. 
The first area is triage. Over one million new claims are 
received for Social Security disability payments each year. The 
conditions of these individuals range widely from situations 
involving permanent and total disability to shorter term 
disability where recovery can be expected. An appropriate 
triage system applying the right resource to the right claim at 
the right time will enhance return-to-work effectiveness and 
insure appropriate use of resources.
    The second area is early intervention. For claimants with 
recovery potential early and ongoing clinical intervention is 
essential to return-to-work success. We have found that face-
to-face personal attention, particularly our expert GENEX 
resources, are invaluable in terms of evaluating 
appropriateness of care. The third area is continual claim 
management. Social Security policy should go beyond simply 
determining initial eligibility and focus more on the ongoing 
eligibility for benefits and more continual review of claims.
    Again, we return 50% of long-term disability claimants to 
work within the first year. Ongoing management is essential for 
this success and it is important to integrate medical advances 
into the continual review process. The fourth area is adaptable 
benefits and incentives. Recovering from disability really is 
an incremental process and adaptable benefits are essential to 
address the stages of disability. Features such as transitional 
work funding and partial payments, as well as assistance 
through vocational training.
    In addition, legislation could provide more incentives for 
employers who return employees to work. These recommendations 
will create financial value for the individuals and for the 
Social Security program. While there will be initial cost, the 
long-term savings will prove significant. In conclusion, let me 
say that there is dignity associated with a person's ability to 
work and great value in the ability to live a full and 
independent lifestyle. This philosophy and its focus on 
abilities is behind all of the customer care resources of 
UnumProvident. Thank you once again for allowing me this 
opportunity.
    [The prepared statement follows:]

Statement of Ralph Mohney, Senior Vice President, Customer Care Center, 
UnumProvident Corporation, Portland, Maine

    My name is Ralph Mohney, and I am the Senior Vice President 
for the Customer Care organization of UnumProvident Corporation 
(UnumProvident). I appreciate this opportunity to share our 
corporate best practices through testimony about 
UnumProvident's role as the world's leading provider of 
disability insurance.
    First, however, I would like to commend this Congress for 
passing the return-to-work legislation that was enacted last 
year. Your efforts eliminated two significant return-to-work 
barriers by continuing government health insurance and by 
setting up opportunities for trial return to work without 
forfeiting Social Security disability benefits if the process 
is not successful. My comments will focus on how to build upon 
this landmark legislation.

Corporate Background and Philosophy

    UnumProvident is a publicly traded insurance holding 
company formed by the merger of Unum Corporation of Portland, 
Maine, and Provident Companies, Inc., of Chattanooga, Tenn.
    UnumProvident has major centers of operation in 
Chattanooga, TN; Portland, ME; Columbia, SC; and Worcester, MA. 
Our international presence includes disability operations in 
the United Kingdom, Canada and Japan. In addition, the company 
utilizes the resources of its subsidiaries, GENEX and OCI, 
headquartered in Pennsylvania and Wyoming respectively. The 
single largest functional area within UnumProvident is our 
unique Claims Management area, which we have named Customer 
Care. It is an area of rapid growth--we recently held a ribbon-
cutting ceremony for a new claim management operation in 
Glendale, CA to serve the West Coast market.
    UnumProvident provides insurance solutions to a wide 
clientele, ranging from individuals through small employers to 
several of the nation's largest industrial companies. 
UnumProvident reported total revenue of $9.4 billion for the 
twelve months ending March 31, 2000. The company holds the 
following industry-leading positions:

        Individual income protection      #1
        Long-term disability income protection    #1
        Short-term disability income protection    #1
        Group long-term care          #1

    We strive to deliver on our customer commitment through our 
integrated product solutions, return-to-work expertise, and 
responsive service. We are dedicated to our purpose, 
``protecting everything you work for.''
    Having built the premier leadership position in the 
insurance industry's strongest growth markets, we are deploying 
our people, technology, integrated product and service 
offerings, and multiple channel network to deliver the value 
the marketplace demands. UnumProvident serves many customers. 
For this discussion, I will focus on the group long-term 
disability insurance solutions we provide to employers to 
assist their employees during times of disability.

Meeting Customer Needs

    UnumProvident is in the business of protecting our 
customers' income. Disability insurance is not a mandated form 
of financial protection. It is a choice. Therefore, we are 
committed to educating consumers about the value of disability 
insurance as an essential and necessary form of financial 
protection. The statistics clearly support this need. 
Approximately 54 million Americans (1 in 5) have a disability. 
This represents 21 percent of the total population of the 
United States.\1\ To place that in an employer perspective, in 
1995, 120,000,000 workdays were lost because of work 
injuries.\2\
---------------------------------------------------------------------------
    \1\ McNeil, J.M. (1997) Americans with Disabilities: 1994-95. U.S. 
Bureau of the Census Current Population Report P70-61. Washington, DC: 
U.S. Department of Commerce.
    \2\ National Safety Council, Accident Facts, 1996 Edition.
---------------------------------------------------------------------------
    We recognize that disability affects all walks of life, and 
our comprehensive and affordable income protection portfolio 
addresses this spectrum. Our company seeks opportunities to 
position our three leading product platforms--individual, group 
and voluntary benefits--to appropriately cover the continuum of 
life needs that are experienced by our customers.
    UnumProvident's product strategy is designed to fit the 
industries for which we write business. We recognize that 
today's consumer marketplace has a multitude of different 
needs, many of those being nontraditional. For example, we do 
not automatically exclude high-risk industries such as trucking 
or high-rise construction from insurance coverage; if otherwise 
eligible, they have the option to purchase catastrophic 
disability coverage. For customers who have suffered disability 
and wish to reenter the workforce in a self-employed fashion, 
we offer financial support they can use to start their own 
business. UnumProvident also participates in the important long 
term care market, leading the industry in providing group long 
term care. Our product pays benefits for the loss of two or 
more ``Activities of Daily Living'' or severe cognitive 
impairment. A simplified indemnity model pays the full monthly 
benefit amount selected, regardless of the actual expenses 
incurred.
    Through special risk coverages such as these, UnumProvident 
is able to help answer non-traditional financial needs through 
creative solutions.

Customer Care Background

    UnumProvident's disability claims organization provides 
critical support for these diverse customer needs. The 
organization fulfills the traditional role of thoroughly, 
fairly and objectively evaluating claims, paying legitimate 
claims promptly and with a high level of service, and defending 
against those few claims that are not legitimate. Our claim 
management employees then go beyond the traditional role to 
proactively assist insureds in their return-to-work efforts. 
This involves providing specialized resources when appropriate 
to help each individual regain the ability to earn an income 
and become self-sufficient once again.
    UnumProvident terms its claims management organization the 
Customer Care Center. This name was chosen because it truly 
reflects the department's mission--serving customers, 
protecting them against loss of income, and caring enough about 
our customers to assist them in return-to-work efforts when 
disability strikes. We believe that our success lies not just 
in how we manage claims, but in the policies and procedures 
that form the basis of our organization. Through appropriate 
contracts and service, we ensure that our customers are 
receiving the benefits for which they have paid. In 2000, we 
expect to manage more than 400,000 new disability claims across 
our six Customer Care Centers in the United States.

The Claim Management Model

    The response to our interpretation of marketplace needs has 
been the creation of a Customer Care organization focused on 
assuring that every income protection claim receives the most 
effective early intervention and the most appropriate 
management possible. The UnumProvident claim management model 
is driven by these four important elements:
    Triage: During triage, each claim is examined and the 
appropriate resources are assigned to meet the specific claim 
criteria. Claims are channeled to one of five different claim 
management pathways, depending on the level of clinical and 
other resources which would be appropriate for the claim. 
Detailed evaluation occurs within five days of claim receipt.
    Early intervention: An emphasis on early intervention 
speeds recovery and return to work. For claims with clinical 
issues, nurse case managers make contact with the attending 
physician, employer and insured within 48 hours of claim 
receipt. The purpose of this contact is to evaluate 
appropriateness of care, to develop treatment plans geared 
toward return to work, and to ensure that employers are willing 
to make reasonable accommodations.
    Duration-and impairment-based management: The state-of-the-
art initial triage process speeds claims to the most 
appropriate care pathway. In addition to duration-based units, 
our impairment-based specializations include cardiac, 
orthopedic, psychiatric, and general medical claims. This 
month, we will be staffing our newest impairment-based unit at 
all sites--the cancer unit.
    This approach is driven by teamwork and expertise. For 
example, in the psychiatric unit, a claim is received and 
evaluated by a consultant. After review, the consultant 
channels the claim to the appropriate claim specialist based on 
level of difficulty or complexity. The specialist builds a 
claim action plan and brings the claim to a roundtable that 
includes a psychiatrist or psychologist. The roundtable may 
refer the claim to an addictionologist or neurologist, or may 
seek external expert input. These experts will examine 
appropriateness of care as well as expected duration of the 
claim. Such teamwork allows us to place specific focus on the 
impairment in a way that promotes knowledgeable service and 
increased return-to-work potential.
    GENEX: When more personal face-to-face interaction is 
appropriate, field-based case managers and vocational 
rehabilitation specialists with our GENEX subsidiary work 
directly with the employer, employee, treating physician and 
customer care specialist to ensure that medical care and 
treatment are directed toward return-to-work goals.
    UnumProvident has invested significantly in medical and 
rehabilitative resources to support the claim management model. 
They include:

         Nearly 100 physicians and several hundred nurse case 
        managers and vocational rehabilitation counselors;
         More than 700 nurse case managers and vocational 
        rehabilitation professionals within our GENEX subsidiary, 
        located in over 100 offices across North America; and
         3,000 Customer Care Center employees organized around 
        specific durations and impairments.

    The claim management model is an important factor in 
UnumProvident's ultimate goal to offer a quality customer 
experience. By building a strong level of expertise in each 
duration-and impairment-based medical area, the company offers 
improved specialization, individualized customer service, and 
significantly improved return-to-work experience.
    Nearly half of our new claimants are able to return to work 
within six months of receiving benefits. For claimants who are 
also receiving Social Security benefits, we experience a 
recovery rate that is roughly six times the reported Social 
Security recovery rate. As stated in the return-to-work Ticket 
to Work legislation, a one-half of one-percent improvement in 
Social Security disability recovery rates would yield $3.5 
billion over the work life of such individuals. Social Security 
can improve its experience if the logical next steps are 
adopted to build on progress made by the legislation.

Return-to-Work Emphasis

    UnumProvident understands that the best insurance against 
unnecessary work disruption is the ability to return an 
employee to a productive lifestyle in a timely fashion. Each 
year, more than 750,000 Americans experience injuries or 
illnesses that keep them out of work for five months or 
longer.\3\ For the employer, this may mean absorbing extensive 
and unnecessary lost time costs. Employee replacement and 
retraining costs become an additional, unexpected expense.
---------------------------------------------------------------------------
    \3\ Annual Review of Disability Management, 1992, The Washington 
Group/Health Institute for Rehabilitation and Disability Management.
---------------------------------------------------------------------------
    Some large and small employers have corporate health and 
return-to-work practices and policies that are clear, 
comprehensive and coordinated--actively inviting employees back 
to work. Most employers, however, randomly tend to the work 
disruption in their work force. They may provide unclear or 
competing expectations about returning to work through their 
organizational policies and practices.
    The employers who demonstrate the greatest success in 
controlling the impact of work disruption and lost time are 
those who incorporate formal return-to-work strategies within 
their employee relations activities and benefit plans. At 
UnumProvident, our corporate Return to Work Dividend Program is 
a consultative service offered to employers to structure 
policies and procedures to achieve return-to-work success. The 
program offers a unique blend of policy and staff development 
opportunities through:

     Return-to-work programs that assist employers in 
defining the impact of lost time and creating practical return-
to-work strategies;
     Integrated disability management that assists 
organizations in determining its readiness and capacity to 
integrate the wide range of its disability insurance, workers' 
compensation, lost time and healthcare programs;
     Absence management strategies to evaluate, select 
and develop programs that manage FLMA, intermittent and casual 
lost work days; and
     Assistance that enhances the employer's capacity 
to apply computer-based assistive technology.

    Another important element of UnumProvident's return-to-work 
commitment is an understanding of the science of disability. 
The company is a leading proponent of disability research, with 
groundbreaking work based on the realization that disability 
management goes far beyond simply verifying and paying claims. 
We continually make investments in understanding both the 
scientific and human aspects of disability at every stage of 
life so we can offer more than just a benefit check to our 
customers.
    A core part of this commitment to understanding disability 
is the work done by our Disability Research Alliance. Current 
initiatives include active physician education and employer 
education programs. The Alliance is also partnering with the 
Washington Business Group on Health and Watson Wyatt Worldwide 
in the ``Progression of Disability'' study. This study, 
conducted with Virginia Commonwealth University, addresses the 
variables that occur in the progression from short-term 
disability to long-term disability to Social Security benefits.

Visible Impact

    I would like to illustrate the information I've shared with 
you about our claim process and philosophy through several 
return-to-work success stories. Increasingly, we are finding 
that some claims thought to be long-term in nature actually 
have the potential for recovery. These stories demonstrate the 
impact that return-to-work support and medical advances can 
have on claim results.

     A 48-year old Virginia AIDS claimant who stopped 
working in March 1996 saw his condition begin to improve in May 
1999 as a result of new drug therapy. A UnumProvident 
vocational rehabilitation counselor discovered in phone 
discussions with the claimant that he was interested in 
returning to work full-time. The outcome is shown in this 
letter from the claimant to the counselor:
     ``It was very nice to talk to you on the phone 
about the happy news of my new job. You were the first person 
with whom I shared this good news. I am thankful to you for 
your counseling and consultation. You gave me the inspiration 
and courage to stand once again on my own feet. It was very 
encouraging when you told me that I have the skills and 
potential, that I just needed to polish my skills and my 
resume. On a regular basis, you were in touch with me, asking 
how I was doing. By your blessings, I finally achieved my 
destination. I got a job in________International, Inc. Thank 
you very much once again for the blessings, inspiration, 
support and courage you gave me for the last nine months.''
     Kevin Bibeau was involved in a car accident that 
left him severely disabled. At the time of his accident, Kevin 
knew very little about his employer-provided disability 
insurance. He found that his UnumProvident coverage enabled him 
to meet his living expenses and allowed him to go back to work 
part-time and receive a continuous salary. UnumProvident then 
collaborated with his employer, helping him return to his full-
time job as an engineer sooner than originally expected. 
Kevin's experience with UnumProvident has caused him to 
encourage others to consider the value of long-term disability 
insurance. According to Kevin, ``Long-term disability insurance 
is the best-kept secret. . . I don't think people believe 
anything is going to happen to them that will cause them to go 
on long-term disability. It's nice to know it exists and that 
you have it just in case.''
     A North Carolina claimant has been physically 
disabled under our policy for 12 years and has been denied 
benefits by Social Security three times. After 12 years out of 
the workforce, she wants to move on with her life and find a 
way to rejoin the workforce. UnumProvident is now working to 
provide her a lump sum amount that will allow her to purchase a 
small franchise business that will allow her to actively return 
to work.

    These stories demonstrate creative solutions, as well as 
the honorable purpose and potential impact shared by all 
providers of disability insurance.

The Millennium Workforce

    Over the past 100 years, it is estimated that there have 
been more than 250,000 pieces of state and federal legislation 
defining and reforming the nature and scope of our response to 
work place injury and illness. In spite of these efforts, the 
fundamental nature of injury and illness in the work place 
remains the same. To address the challenges at hand, we must 
alter the basic concepts of disability.
    As we move ahead and form a new understanding of 
disability, research shows us several critical points about the 
work force of the new millennium:
    Impairment does not equal disability. Impairment is 
objective. Disability is subjective and is created by the 
benefit plan design. The plan determines how long someone stays 
out of work, not how long they suffer from the impairment.
    Ambiguity limits recovery and return to work. All too 
often, the employer fails to define the expectations for an 
individual to return to work. Clear corporate policies 
supported by well-defined work prescriptions reduce the 
incidence of lost time.
    Corporate policies sometimes disable employees. Corporate 
policies can be the greatest contributor to employee 
disability. The most common disabling corporate policy is the 
``100% or nothing'' threshold. This policy says that an 
employer is willing to wait until the employee is cleared of 
all impairment before coming back to work. In fact, the 
employee will regain functional capacity incrementally.
    In the case of Social Security, current policies encourage 
individuals to argue they are fully disabled and can not return 
to work. Otherwise, they are not eligible for benefits. In 
convincing the system, they also convince themselves.
    Physicians are not HR managers. Physicians are not prepared 
as HR managers. They understand impairments but not the 
occupation requirements of specific jobs. They need to be 
trained to be able to define the conditions under which an 
employee can resume a safe transition back to full work.
    Disability cloaks performance problems. Some supervisors 
use a disability program to solve job performance problems. 
This is a very expensive practice and reflects an inadequate 
human resource program.
    Return-to-work best practices. Proven strategies that 
reduce lost time and prevent extended disability are:

     Create clear, consistent and early return-to-work 
expectations;
     Implement a formal planning process;
     Provide formal supervisor training on the process; 
and
     Establish transitional return-to-work pathways 
based on job demands and worker functional capacities.

    These key points should serve as instruction for disability 
insurers as they craft programs and implement solutions for the 
marketplace.

    Recommendations

    Based on the experience and expertise of UnumProvident, I 
would like to provide recommendations to the Subcommittee on 
Social Security for consideration as the Subcommittee considers 
challenges in the 21st century.
    Let me reiterate, last year's Ticket to Work legislation 
removed important return-to-work barriers that were 
contributing to the historical less than one-half of one-
percent recovery rate of Social Security recipients. Now we 
need to take the next steps and change the infrastructure to 
facilitate return to work for Social Security disability 
claimants. Also it will require that the concept of disability 
be altered--disability does not mean inability, it means 
experiencing and recovering from disability in stages.
    I recommend that the Subcommittee explore the following 
four key areas based on our experience in the private sector:

     Triage: Approximately three million new claims are 
received for Social Security disability payments each year. The 
conditions of these individuals range widely from situations 
involving permanent and total disability to shorter-term 
disability where recovery can be expected. An appropriate 
triage system applying the right resources to the right claim 
at the right time will enhance return-to-work effectiveness and 
ensure appropriate use of resources.
     Early intervention: For claimants with recovery 
potential, early and ongoing clinical intervention is essential 
to return-to-work success. At UnumProvident, this intervention 
takes the form of three-point contact with the attending 
physician, claimant and employer. We have found that face-to-
face personal attention, specifically, our expert GENEX 
resources are invaluable in terms of evaluating appropriateness 
of care.
     Continual claim management: It is recommended that 
Social Security policies go beyond simply determining initial 
eligibility to achieve more focus on ongoing eligibility for 
benefits and more continual review of claims.

    It is important to maximize the level of expertise applied 
to claims, and to integrate medical advances into the continual 
review process. The impairment-based model used by 
UnumProvident has already resulted in a significant increase in 
applied expertise and medical resources, therefore better 
meeting the customer's needs. We feel this is the best way to 
leverage and apply specialized care.
     Adaptable benefits and incentives. UnumProvident's 
plan designs include return-to-work features such as 
transitional work funding and partial payments, as well as 
assistance through vocational training. It is recommended that 
Social Security continue to align its government assistance in 
a similar manner to encourage return-to-work efforts. 
Recovering from disability is an incremental process and these 
types of adaptable benefits are essential to address the stages 
of disability.
    In addition, legislation could provide more economic 
incentive for the employer to entice employees to return to 
work. It would also prove helpful to quantify ratings 
experience by industry to encourage employers to visualize how 
disability can drive up costs. With ratings as reference, 
employers will have more incentive to be actively involved in 
the disability management process, as has been the case in 
terms of worker's compensation management.
    These recommendations will create financial value for the 
individuals and for the Social Security program. While there 
will be initial costs incurred, the long-term savings will 
prove significant.

    Conclusion

    There is dignity associated with a person's ability to work 
and great value in the ability to live a full and independent 
lifestyle. This philosophy--and its focus on abilities--is 
behind all the Customer Care resources of UnumProvident.
    Quite simply, we believe that the general population does 
want to be active in society and part of the workforce. 
Statistics support this belief--sixty percent of Americans not 
working say that they would like to if the opportunity were 
made available.\4\
---------------------------------------------------------------------------
    \4\ Richardson, Mary, 1994. The Impact of the Americans with 
Disabilities Act on Employment for People with Disabilities. Annual 
Reviews, Public Health. 15:91-105.
---------------------------------------------------------------------------
    For those of us in the disability insurance industry, it is 
both our job and responsibility to ensure we make that 
opportunity a reality. In closing, I would like to thank you 
once again for offering me this opportunity to testify. I would 
now be happy to answer any questions.
      

                                


    Chairman Shaw. Thank you, sir. Mr. Young.

    STATEMENT OF TONY YOUNG, CO-CHAIR, TASKFORCE ON SOCIAL 
   SECURITY, CONSORTIUM FOR CITIZENS WITH DISABILITIES; AND 
     DIRECTOR, GOVERNMENTAL AFFAIRS, NISH, VIENNA, VIRGINIA

    Mr. Young. Thank you, Mr. Chairman, for this opportunity to 
testify on behalf of the Consortium of Citizens with 
Disabilities Taskforce on Social Security. Federal disability 
programs were created assuming that people with disabilities 
would remain unable to work throughout their lives. This static 
view of disability meant that little thought was given to what 
might happen if people returned to work after receiving 
benefits.
    However, we now know that disability is not static but a 
dynamic condition. Medical advances, new technologies, 
improvements in services and supports, along with enhanced 
expectations of people with disabilities, have all conspired to 
change the very definition of disability. The consequences of 
this new disability dynamic have rippled through the Federal 
disability system, revealing that it is not ready to meet the 
challenges ahead.
    Many people are surviving injuries, disabling diseases, or 
traumatic accidents to live with significant disabilities. Some 
have access to the latest technology, medications, surgeries, 
therapies, and other disability management procedures. However, 
many do not have access to these state-of-the-art services nor 
will they have access to potential advances in genetic 
treatments. This opportunity gap will widen the discrepancy in 
work opportunities for those in SSA disability programs.
    The changing demographics of individuals on the SSA 
disability programs, the nature of their disabilities, the age 
of onset, the length of time in the programs, and related 
factors has had and will have a profound impact on SSDI and 
SSI. We offer some brief statistics on page two of our written 
statement. It must be noted that people on Federal disability 
programs are markedly different than those on private 
disability or those on disability programs in other countries.
    What works for one population may or may not work for 
others, yet while there is much diversity among disability 
beneficiaries they share common concerns including an easy 
transition from benefits to personal support rather than a 
sudden cutoff of benefits, easy re-entry to benefits if work is 
not successful, no total cutoff of benefits until reaching a 
living wage with comparable health coverage, and a flexible 
benefit for individuals who can only work episodically such as 
those with mental illness.
    While Federal disability programs provide needed cash 
assistance and supports there are weaknesses in these programs 
we wish to discuss. These include Social Security's definition 
of disability which continues to focus on near complete 
inability to work, the unrealistically low substantial gainful 
activity level, the poor coordination among programs providing 
Federal assistance to people with disabilities, the poor 
integration of SSI with work programs for older, disabled 
children, the ineffective tracking of earnings, and the 
remaining work disincentives not addressed by the Ticket to 
Work and Work Incentives Improvement Act.
    In addition, SSA is facing complex future work challenges. 
During the next 20 years, the number of people who reach full 
retirement and early retirement ages will increase 
substantially and this will have an enormous impact on SSI's 
operations. The SSA customer population has changing 
expectations about technology and it has more claimants that 
are non-English speaking or limited English speaking.
    Further, SSA must provide increased employment services for 
people with disabilities, must maintain an aggressive schedule 
of continuing disability reviews, and other eligibility 
reviews, and must implement new approaches to prevent fraud and 
abuse all while operating a disability determination process 
that remains complicated and lengthy. These problems are 
aggravated by SSA's own aging work force which soon will lose 
significant numbers of experienced staff including senior 
leadership personnel.
    The task force recognizes no single hearing can capture all 
the questions that need to be addressed about the future of 
Federal disability programs and that this is just the beginning 
of an exploration of ways to modernize the disability program. 
We also recognize that some of these questions fall under other 
Committees' jurisdictions, which may indicate a need for 
greater coordination for disability programs within Congress.
    We offer several other issues in our written statement that 
the Committee should examine as it continues its 
investigations, including SSA policies on technology 
acquisition, CDRs under Medicaid section 1619(b) or Medicare, 
Medicaid's 209(b) provisions, and the Medicaid 1619(b) formula 
for individual determinations among others. We appreciate the 
Subcommittee's interest in these issues and look forward to 
continuing to work with you in modernizing the disability 
programs. I would be happy to answer any questions you have.
    [The prepared statement follows:]

Statement of Tony Young, Co-Chair, Task Force on Social Security, 
Consortium for Citizens with Disabilities, and Director, Governmental 
Activities, NISH, Vienna, Virginia,

ON BEHALF OF

    American Association on Mental Retardation
    American Council of the Blind
    American Network of Community Options and Resources
    American Occupational Therapy Association
    Brain Injury Association
    Easter Seals
    Epilepsy Foundation
    International Association of Psychosocial Rehabilitation 
Services
    InterNational Association of Business Industry 
Rehabilitation--INABIR
    National Association of Developmental Disabilities Councils
    National Association of Protection and Advocacy Systems
    National Association of Social Security Claimants 
Representatives
    National Mental Health Association
    National Multiple Sclerosis Society
    NISH--Creating Employment Opportunities for People with 
Severe Disabilities
    Paralyzed Veterans Of America
    The Arc of the United States
    Title II Community AIDS National Network

    Chairman Shaw, Mr. Matsui and members of the subcommittee, 
thank you for the opportunity to testify today on the Future of 
SSA Disability Programs. I am Tony Young, Director of 
Government Activities for NISH and Vice Chair of the Consortium 
for Citizens with Disabilities. CCD is a coalition of nearly 
100 national organizations advocating on behalf of people with 
all types of physical and mental disabilities. I am testifying 
today in my role as a Co-Chair of the CCD Task Force on Social 
Security.

                              Introduction

    We appreciate having this opportunity to examine the needs 
of persons with disabilities who are on, or who will be 
participants in, the SSA disability programs--Social Security 
Disability Insurance [SSDI] and Supplemental Security Income 
[SSI]. SSDI began in 1956 as an early retirement program for 
injured workers who could not struggle through to the regular 
retirement age of 65. SSI, created in 1972, was a program 
intended to supply a minimum level of economic support to the 
elderly, blind or persons with disabilities whose work history 
was insufficient to qualify them for SSDI.
    Since their inception, these disability programs have 
evolved unevenly whereby individual problems in the programs 
were identified and partially solved, not always with a 
comprehensive view or purpose. Changes have come only when 
program parameters have been found to be grossly out of line 
with reality. For instance, the substantial gainful activity 
[SGA] level was finally raised in 1999 to $700 per month after 
having been set at $500 per month since 1990. Some program 
criteria, such as the SSI earned income disregard, has not been 
changed since the program began in the early 1970s.
    Federal disability programs, as originally envisioned, were 
based on the assumption that people who became disabled would 
remain disabled throughout the rest their lives. This static 
view of disability meant that little thought was given to what 
might happen if people returned to work after becoming eligible 
for benefits. However, disability is not static. Disability is 
a dynamic condition. Medical advances, new technologies, 
improvements in rehabilitation services, and the expectations 
of people with disabilities have all conspired to change the 
meaning of disability, the very definition of disability. The 
consequences of this new disability dynamic have rippled 
through the federal disability system, revealing a system that 
has not adapted to meet the challenges ahead.

     Demographics, Society and the Role of People with Disabilities

    The changing demographics of individuals who might benefit 
from the SSA disability programs--the nature of their 
disabilities, the age of onset, the length of time in the 
programs, and related factors--has had and will have a most 
profound impact on SSDI and SSI. Some brief statistics provide 
a snapshot of Americans with disabilities and the circumstances 
in which they live.
    In 1996, the Government Accounting Office [GAO] \1\ 
reported that, during the period 1985 to 1994, the number of 
people with disabilities on SSI and SSDI increased from 4.2 
million to 7.2 million. By 1994, 57% of people on SSI aged 18 
to 64 were those with mental impairments. For those on SSDI the 
percentage was 31% of the DI population. The DI and SSI 
populations became somewhat younger during that time period: DI 
beneficiaries in ``middle age' [30 to 49] increased from 30% in 
1986 to 40% in 1994; for SSI beneficiaries the increase was 
from 36% in 1986 to 46% in 1994.
---------------------------------------------------------------------------
    \1\ GAO/HEHS-96-62, SSA Disability Program Redesign Necessary to 
Encourage Return to Work, April 1996
---------------------------------------------------------------------------
    The majority of Americans with disabilities are of working 
age [57.6%]. Native Americans have the highest disability rate 
of all racial groups [17.6%]; Asians and Pacific Islanders have 
the lowest rate [7.2%]. For whites and African Americans, the 
rates are 15.3 and 15.9 percent respectively but Hispanics 
report a disability rate of only 10.5%. Disability rates are 
highest in rural areas [although most people with disabilities 
live in metropolitan areas (74.8%)]. Disability rates are 3 
times higher among people who did not finish high school than 
among those with college degrees. People with disabilities, 
according to a 1992 National Health Interview Survey, include 4 
million Americans with heart disease, 3.7 million with 
arthritis, 1.5 million with mental disorders, 1.4 million with 
mental retardation or learning disabilities. There are over 
half a million Americans with spinal cord injuries or 
dysfunction and 654,000 with hearing impairments.\2\ Another 
1.4 million individuals have visual impairments.\3\
---------------------------------------------------------------------------
    \2\ Disability Watch, Disability Rights Advocates, Volcano Press, 
Volcano, CA, 1997
    \3\ American Council of the Blind
---------------------------------------------------------------------------
    Only 3 in 10 working-age adults with disabilities are 
employed full or part time, compared with 8 in 10 non-disabled 
adults. This low rate of employment has led to an income gap 
not reduced since 1986. One in 3 disabled adults, compared to 1 
in 8 non-disabled adults, live in households with incomes below 
$15,000.\4\
---------------------------------------------------------------------------
    \4\ 1998 N.O.D./Harris Survey of Americans with Disabilities
---------------------------------------------------------------------------
    Any examination of federal disability programs must be 
viewed in light of the evolving societal factors surrounding 
people with disabilities--such as the Individuals with 
Disabilities Education Act [IDEA] and Americans with 
Disabilities Act [ADA]--and the shifting expectations of the 
role that individuals with even the most severe disabilities 
can play in the lives of our communities and economy. Among the 
most exciting advances have been our expectations for 
individuals with the most significant support needs. For 
example, over the past twenty years we have moved from building 
institutions to creating individualized living arrangements in 
the community for individuals who have been labeled with a 
significant cognitive disability. Well over 200,000 individuals 
who once were never expected to spend their days beyond the 
protective walls of congregate settings such as sheltered 
workshops or adult day activity centers are now working in the 
community in real, competitively paid jobs through supported 
employment. They now do what the rest of us do: go to a wide 
array of jobs, collect their paychecks, and go home, many with 
supports, some with none.
    The nation will celebrate the tenth anniversary of the 
Americans with Disabilities Act later this month. That Act 
recognized what the disability community has known for years, 
that ``disability is a natural part of the human experience.'' 
The protections afforded by the ADA have opened the windows on 
the disability experience and revealed a myriad of individual 
skills and capacities that very closely parallel those of 
people without disabilities. This exposure, along with an 
explosive growth of technology, research and training, best 
practice services and supports, individual awareness and self-
determination have changed forever the way that we approach 
disability in this country from public policy to practice.

  New Technologies, Medical Advances and Improvements in Supports and 
                                Services

    Much of the changing attitudes toward people with 
disabilities and their capabilities have been driven by the 
transformation of the workplace and the environment through 
technology, breakthroughs in medical science, and innovations 
in supports and services used to enhance the independence of 
individuals with disabilities. Four years ago, the GAO noted 
that, despite poor return-to-work outcomes under SSI and SSDI, 
``many technological and medical advances have created more 
opportunities for some individuals with disabilities to engage 
in work. Electronic communications and assistive technologies--
such as scanners, synthetic voice systems, standing wheelchairs 
and modified autos and vans--have given greater independence to 
some people with disabilities, allowing them to tap their work 
potential. Advances in the management of disability--like 
medication to control mental illness or computer-aided 
prosthetic devices--have helped reduce the functional 
limitations associated with some disabilities. These advances 
may have opened new opportunities, particularly for some people 
with physical impairments, in the growing service sector of the 
economy.'' \5\
---------------------------------------------------------------------------
    \5\ GAO/HEHS-96-147, Social Security: Disability Programs Lag in 
Promoting Return to Work
---------------------------------------------------------------------------
    Finally, the development and replication of new supports 
and services has made it possible for many more people with 
disabilities to receive the rehabilitation and on-going 
supports they need to work. Psychosocial rehabilitation, 
occupational therapy, and job coaching are just some of the 
services now available to people with severe mental and 
physical disabilities. These services help people assume and 
maintain work and also include services to develop or enhance 
self-care skills so that the individual can function in 
society.
    Many people with significant disabilities are surviving 
injuries at birth, disabling diseases, or traumatic accidents. 
Some of these survivors are living longer, more healthy lives. 
Some, however, are not. Some of these survivors have access to 
the latest technological aides that make them productive and 
independent. Many other survivors do not have access to this 
technology. Some individuals have access to the latest 
prescription medications, surgical techniques, intervention 
therapies, and other modern disability management procedures. 
Most people with severe disabilities do not. The future holds 
potential for remarkable advances in gene therapy and similar 
genetic treatments that some will have access to, but many 
still will not. This opportunity gap will widen the discrepancy 
in work opportunities for those who might qualify for SSA 
disability programs.
    Different types of supports and expectations are needed and 
appropriate for people of different ages and with different 
types of disabilities. Disability is as individual as the 
person who experiences it. Each disability has its own 
personality, with strengths, weaknesses, and even quirks. Each 
must be treated appropriate to its own personality in order for 
the individual with the disability to be successful at whatever 
they might attempt to do.
    Clearly, age and disability are interrelated when it comes 
to work aspirations. A young adult who has never worked will 
have greatly different aspirations than an individual in mid-
work life with several years of work experience, and that 
individual will have different aspirations than an older 
individual who has many decades of work experience.
    Their needs for income and supports will vary greatly as 
well. To treat everyone equally is to mistreat the majority of 
those on the program. Individualized assessments of needs and 
services are essential to successfully assisting people with 
disabilities to work. There must be incentives for people to 
encourage them to risk leaving the benefit program, and there 
must be an easy transition from benefit support to personal 
support. It is essential that all persons be allowed to 
seamlessly reenter the benefit program should they fail in the 
effort to work.
    It is possible to identify common concerns for all as well 
as particular concerns of subgroups. Common concerns include: 
1) an easy transition from benefits to personal support rather 
than a sudden cutoff of benefits; 2) easy reentry to benefits 
if work is not successful; 3) no total cutoff of benefits until 
one reaches a living wage with comparable health coverage; and 
4) a flexible benefit for individuals who can only work 
episodically, such as those with mental illness.

                Weaknesses of Federal Disability Policy

    Definition of Disability--In a 1996 report, the GAO 
identified at least ``fourteen different definitions of 
disability used by federal programs alone, and many of these 
definitions provided considerable agency and state discretion 
in eligibility determinationa. . . For example, programs 
administered through the Department of Education, such as VR, 
defined eligibility in terms of physical or mental impairments, 
whereas the programs administered through SSA defined 
disability in terms of the inability to work.'' \6\
---------------------------------------------------------------------------
    \6\ GAO/HEHS-96-126, People with Disabilities: Federal Programs 
Could Work Together More Efficiently to Promote Employment, September 
1996
---------------------------------------------------------------------------
    One of the most serious problems with current disability 
program design and policy derives from the fact that Social 
Security's definition of disability continues to focus on near-
complete inability to work. Furthermore, the measure for 
ability to work is set at a level of income that does not 
provide even a base of support necessary for most people to 
live. Many of the policies that penalized people with 
disabilities for working have been addressed through last 
year's Ticket to Work and Work Incentives Improvement Act. Yet, 
the retention of the unrealistically low substantial gainful 
activity [SGA] level continues to punish rather than reward 
people who attempt to leave entitlement programs through work. 
We recognize that considerable debate has already occurred on 
this subject. However, we reiterate once again our firm belief 
that federal disability programs must respond to modern reality 
rather than remain mired in the mind-set of the last century.
    In the past, CCD has recommended changes in the definition 
of disability that would: retain the criterion of mental or 
physical impairment [or combination of both] verifiable by 
accepted clinical methods; replace the concept of SGA with an 
assessment of functional limitations in all areas of life 
activities; and consider vocational, medical and other factors 
in an overall assessment of an individual's functioning in 
areas of major life activity. Furthermore, attention must be 
paid to how temporary, recurring/intermittent, or partial 
disability is addressed by federal disability programs.
    Whatever future steps Congress may take in this regard, CCD 
urges you to proceed with caution. Any proposals to revise the 
definition of disability, whether through statute or 
regulation, should be subjected to careful analysis of the 
effects on people with disabilities and a realistic assessment 
of the true meaning of disability, including for those who are 
able to work with necessary, on-going supports.
    Multiplicity of Federal Disability Programs--In 1996, the 
GAO found that federal assistance to millions of people with 
disabilities was provided through 130 programs in 19 federal 
agencies.\7\ Very often, service delivery is performed through 
numerous public and private agencies at the state and local 
level. In the fiscal year studied [1994], GAO revealed that the 
federal government spent over $60 billion on 69 programs 
targeted exclusively to people with disabilities. In addition, 
people with disabilities benefited from between $81 billion and 
$184 billion in spending through 61 partially targeted 
programs. This list of programs did NOT include AFDC, the 
forerunner of Temporary Assistance to Needy Families [TANF]--as 
GAO eliminated programs not specifically intended to address 
disability. How well these programs coordinate with one another 
and how well they serve the people they were created to help 
are questions worth considering.
---------------------------------------------------------------------------
    \7\ Ibid.
---------------------------------------------------------------------------
    Interaction with Other Governmental Programs--As noted 
above, SSA disability programs do not exist in a vacuum. There 
are over 100 federal programs that affect people with 
disabilities. It is imperative to examine how the SSA 
disability programs interact with other poverty programs, e.g., 
job training, Food Stamps, housing subsidies, transportation 
supports, long-term supports, and similar programs. A major 
issue for individuals with severe disabilities concerns the 
need to stitch together a patchwork quilt of income, and in-
kind supports in order to live. Too often, taking a job 
unravels this quilt in ways that undermine the work effort and 
trap them in poverty and government cash assistance.
    For example, Medicaid policy allows some states to have 
stricter Medicaid income levels, asset levels, income 
disregards and even medical disability definitions than SSI. 
This means that incentives for SSI recipients to return to work 
are seriously undermined because the Medicaid needed to support 
work attempts is not always available if Medicaid rules are not 
the same as those of SSI. In addition, continuing disability 
reviews [CDRs] that find people ``no longer disabled'' not only 
deprive them of cash benefits but they cost such persons 
continued Medicaid and Medicare which, under current law, are 
supposed to be available to those who leave the SSI and SSDI 
rolls to work. Furthermore, the Medicaid formula for 
determining medical expenses used for individualized 
computations of earnings thresholds in determining continued 
eligibility under Section 1619(b) now only recognizes publicly-
provided attendant care costs and fee-for-service per capita 
Medicaid expenditures on behalf of that particular patient. 
Accounting for the true costs of supports becomes an issue when 
states' Medicaid reimbursements are only recorded as 
capitations to managed care contractors---and do not, 
therefore, fully recognize the high costs of services actually 
rendered to particular disabled individuals.
    HUD housing programs do not have earnings disregards. Local 
public housing authorities do have authority to institute 
earnings disregards for public housing units---but NOT for 
Section 8, vouchers, Section 212, Section 811 or the special 
subsidies for people with disabilities established by Congress 
in the late 1990s. And even this limited authority has so far 
been largely directed at helping TANF mothers in public units 
return to work.
    A growing body of research indicates that a large 
proportion of parents receiving TANF [or who have left TANF] 
have disabilities or health conditions that may affect their 
ability to succeed in the workforce if they are not provided 
with the appropriate supports and services to help them 
succeed.\8\ In addition, many families who are eligible for 
Medicaid or other publicly funded health insurance coverage are 
not enrolled in those programs, due to the de-linking which has 
occurred.
---------------------------------------------------------------------------
    \8\ Center for Budget and Policy Priorities, Feb. 2000, ``Recent 
Studies Indicate that Many Parents who are current or former welfare 
recipients have disabilities or other medical conditions''
---------------------------------------------------------------------------
    These are but a few of the complexities of the social 
security disability programs' interactions with other 
government programs.
    Integrating SSI with work programs for older disabled 
children--Children in the IDEA era have, generally speaking, 
been entitled to a free and appropriate public education and, 
theoretically, have had access to an array of services while in 
school. However, they lose these supports upon attaining a 
certain age and often fail to advance into the world of adult 
employment as a result. Children and their families need the 
services accorded by IDEA in order for them to perform at 
satisfactory levels to achieve their educational goals. These 
same or similar services may be required for them to then meet 
their vocational goals. In addition, there is the need to 
eliminate the penalties built into the current system for young 
people who need ongoing supports even while working.
    Work Incentives--The Ticket to Work and Work Incentives 
Improvement Act, in reality a major achievement in addressing 
certain deficiencies in federal disability programs, is placed 
here to draw attention to remaining hurdles confronting people 
on SSI and SSDI. Furthermore, because PL 106-170 has yet to be 
implemented, we cannot predict how successful it will be in 
eradicating barriers it was created to remove.
    A major problem with the SSDI program has been its 
eligibility determination system that forces applicants to 
assert that they have no residual work capacity in order to 
qualify for benefits. Then, if someone attempted to work, the 
system abruptly withdrew all supports that individual needed to 
survive. The Ticket to Work and Work Incentives Improvement Act 
took significant steps toward eliminating this bias through its 
provisions assuring extended Medicare coverage for workers with 
disabilities and the easier return to benefits should a work 
attempt fail. However, SSDI retains the assumption that work 
beyond a very modest, less-than-minimum wage level of earnings 
means that a person is no longer ``disabled''.
    The concept of appropriate supports means the elimination 
of all financial and psychological disincentives to work. In 
the past, applicants for SSDI had to undergo months of review 
in which they had to assert no capacity for work. They waited 
months for benefits, often after months of appeals, and waited 
again to qualify for Medicare coverage. Only recently, did they 
have the presumptive eligibility for entrance into the 
vocational rehabilitation system and, even if they did receive 
VR services, they were warned not to earn too much, lest they 
lose all of their benefits.
    If implemented properly, the Ticket to Work and Work 
Incentives Improvement Act could address many of these 
disincentives. The extension of Medicare will assure continued 
health care coverage for SSDI recipients. Depending on how and 
whether they are adopted by states, the Medicaid buy-in 
provisions have the potential to provide more complete health 
care supports to beneficiaries going to work. Again, depending 
on how SSA implements the Ticket to Work program, beneficiaries 
should have greater choice in provider and type of vocational 
rehabilitation services. And, the benefits outreach, counseling 
and assistance, if done properly, can offer beneficiaries 
clearer road maps to navigate the consequences of going to 
work. For those with a recently acquired disability, early 
intervention of the type envisioned through the counseling and 
assistance planners may mean the difference between returning 
to work and languishing on the disability rolls for years. 
Finally, the expedited reentry provisions offer some measure of 
reassurance that benefits will not be difficult to obtain 
should a work attempt fail.
    However, while the system manages to make initial 
disability determinations, it is totally inadequate at tracking 
income and earnings as people take advantage of the 
aforementioned services. This inadequacy will become more 
apparent as people take advantage of the recently enacted work 
incentives legislation. For example, while overpayments to 
beneficiaries who work have always been problematic, they 
promise to become catastrophic if left unchecked. Beneficiaries 
will more deeply mistrust the program, providers won't get paid 
under the Ticket if the benefits continue unnecessarily, the 
fiscal strain on the program will continue, and other parts of 
the disability program will suffer as SSA struggles to correct 
the problem without adequate resources. Congress must address 
the need for systems improvement and modernization.

                       Challenge of the Baby Boom

    It is no secret that during the next twenty years, there 
will be a large increase in the number of people who reach both 
retirement and early retirement ages. Strategies must be 
explored to help individuals reaching early retirement age, who 
lose their ability to perform their existing jobs, to remain in 
the workforce for as long as possible. Currently, the SSA 
disability programs only respond once someone's disability has 
reached the acute stage in which an individual is driven out of 
the workforce entirely.
    The sheer number of baby boomers will have an enormous 
impact on SSA's operations. According to SSA's Office of the 
Actuary, by 2010, SSDI applications will increase by 54% and 
SSI disability applications by more than 10%.\9\ Over the same 
period, the increase in the normal retirement age also will 
affect the number of disability applications.
---------------------------------------------------------------------------
    \9\ Testimony of Cynthia Fagnoni, Director, Education, Workforce 
and Income Security Issues, General Accounting Office, to the Ways and 
Means Social Security and Human Resources Subcommittees, Hearing on 
Social Security's Readiness for the Impending Wave of Baby Boom 
Beneficiaries, Feb. 10, 2000
---------------------------------------------------------------------------
    In addition, SSA has been faced with more complex and 
changing work challenges. The disability determination process 
is complicated and lengthy. The SSA customer population has 
changing expectations about technology. More claimants are non-
English speaking or limited-English speaking, leading to a need 
for more bilingual staff. Recent legislation requires SSA to 
provide increased rehabilitation and employment services for 
people with disabilities, to maintain a schedule of continuing 
disability reviews and other eligibility reviews, and to 
implement new approaches to prevent fraud and abuse.
    The problem is aggravated by the fact that SSA's workforce 
also is aging and will begin to lose significant numbers of 
experienced staff, including senior management and leadership 
personnel. More than one-half of SSA's 63,000 employees will be 
eligible to retire by 2009 or leave government service after 
twenty years with pension rights.\10\ Between 2007 and 2009, 
about 3,000 employees are expected to retire per year. The 
service delivery problems have been exacerbated by SSA's 
prolonged period of downsizing--since 1982, SSA's workforce has 
declined by 27%. At Subcommittee hearings earlier this year, 
the Social Security Advisory Board, the Commissioner of Social 
Security, and the General Accounting Office raised the issue of 
how SSA should plan to retain experienced staff and train new 
managers to meet these needs.
---------------------------------------------------------------------------
    \10\ Ibid.
---------------------------------------------------------------------------
    The CCD Social Security Task Force has voiced concern for 
some time over the continued long-term downsizing of the SSA 
workforce and believes that failure to conduct appropriate and 
timely CDRs and other eligibility reviews could lead to 
decreased trust in the integrity of the Social Security and SSI 
programs. In addition, the new efforts to assist people with 
disabilities to go to work, through the Ticket to Work and Work 
Incentives Improvement Act of 1999, will require new and 
expanded approaches for SSA interaction with beneficiaries. 
Adequate staffing levels are critical for these and other 
efforts to be successful, especially given the coming 
disability and retirement years of baby boomers.
    The independent, bipartisan Social Security Advisory Board 
has unanimously urged that SSA's ``administrative budget, like 
its program budget, be explicitly excluded from the statutory 
cap that imposes an arbitrary limit on the amount of 
discretionary government spending.'' \11\
---------------------------------------------------------------------------
    \11\ Testimony of the Honorable Stanford Ross, Chair, Social 
Security Advisory Board, before the House Subcommittee on Social 
Security, Committee on Ways and Means, February 10, 2000
---------------------------------------------------------------------------
    We believe that the entire Limitation on Administrative 
Expenses [LAE] should be removed from under the domestic 
discretionary spending caps so that SSA's administrative 
functions can continue to operate smoothly for beneficiaries. 
[For background, see CCD statement for the record, March 16, 
2000]

                         Issues for the Future

    No single hearing can capture the entire range of questions 
that need to be asked about the future of federal disability 
programs. The CCD Social Security Task Force recognizes that 
this is just the beginning of an exploration of ways to 
modernize SSDI and SSI. We also recognize that some of these 
questions fall under other committees' jurisdictions. That, 
however, may indicate a need for greater coordination among 
Congressional bodies responsible for programs affecting people 
with disabilities. Based on our testimony, we would like to 
offer several issues that the committee should examine as it 
continues its investigations.

     Does the definition of disability under social 
security adequately capture the spectrum and continuum of 
disability today? Does it reflect the interaction of 
vocational, environmental, medical and other factors that can 
affect the ability of someone on SSI or SSDI to attain a level 
of independence?
     Do current SSA program policies foster or hinder 
acquisition of technology that will lead to greater 
independence? Are these technologies covered under impairment 
related work expenses? Would someone acquiring necessary 
supports to go to work encounter problems with asset and 
resource limits imposed under federal disability programs. 
Should tax credits or other incentives be provided for people 
to obtain these supports to go to work?
     How competent is SSA at communicating with its SSI 
and SSDI beneficiaries with visual impairments? Frequent 
failure of SSA to produce notices and documents in accessible 
formats lead to penalties imposed on such beneficiaries and 
increased administrative expenses in dealing with the 
consequences.
     Should CDRs be reevaluated for those covered under 
Medicaid Section 1619(b) or individuals still relying on 
Medicare to prevent denial of the very health care coverage 
offered to encourage people to work?
     Can the stricter income, asset levels allowed 
under Medicaid's 209[b] provisions undermine promotion of 
Medicaid buy-ins and other initiatives designed to assure 
continued health care coverage for individuals on SSI and SSDI 
going to work?
     Are changes needed in the current Medicaid 1619[b] 
formula for individualized determinations to allow for other 
medical costs of working disabled persons met by other 
programs? [e.g. Medicare, state pharmacy assistance, AIDS Drug 
Assistance Programs, WIC, public maternal and child health 
programs, cash medical purchases and private health insurance.]
     Why are earnings disregards recognized for SSI, 
SSDI, Medicaid and Medicare purposes not so honored by housing 
subsidy programs as well? Income and assets excluded by the 
PASS program are excluded under the housing statutes. The HUD 
programs should similarly recognize other disability-related 
disregards.
     How well do veterans' programs interact with and 
serve veterans with disabilities who rely on SSDI and/or SSI?
     Can steps be taken to replicate the earnings 
disregards and work incentives of the SSI and SSDI programs in 
Medicaid and the AIDS Drug Assistance Programs? This is 
important for individuals dependent for drugs on non-SSI-based 
Medicaid (e.g., TANF-related cases) and the AIDS Drug 
Assistance Programs rely for essential pharmacy coverage on 
programs which currently have NO meaningful earnings disregards 
or other work incentives.
     Should state standards for exemption from welfare 
time limits and work/training requirements make allowances for 
families in which either a primary or secondary parent cares 
for a child with a disability? Studies suggest that at least 
20% of TANF cases have disabled primary caretakers, children or 
second parents (since many states can and do now include two 
parent families).
    Again, these are but a few questions that arise when 
considering the array of federal programs affecting Social 
Security beneficiaries with disabilities. We appreciate the 
subcommittee's attention to these issues and look forward to 
continuing to work with the members in examining the future of 
the disability programs.
      

                                


    Chairman Shaw. Thank you, Mr. Young. Mr. McCrery.
    Mr. McCrery. Professor Berkowitz, having been a history 
major in undergraduate school, I welcome the opportunity to 
grill a professor of history. I found your testimony very 
interesting and as was sometimes the case though in my history 
classes, I learned a lot of facts but I am not sure the point 
that I learned. So I am going to ask you, if you would, to 
describe for us any of these emerging trends that you cautioned 
us to be aware of. Can you identify any of those for us that 
you discovered in your research?
    Mr. Berkowitz. Yes, sir. I guess the most important one is 
simply that we should recognize that when you try to tighten 
the rolls as one might want to do in pursuing a work strategy 
then you have the risk always of expanding the rolls and what I 
meant to say by that is that this was tried in the eighties in 
a bipartisan way. Congress passed a law in 1980 which 
encouraged the Social Security Administration to periodically 
re-examine people who were on the disability rolls and in 1981 
aided by a GAO report the new administration decided to do that 
and to pursue that policy aggressively.
    What in fact happened though was that this policy was 
pursued so aggressively that administrative law judges who were 
part of the system of disability determination and the courts, 
which are part of this disability determination system, and 
ultimately the Congress itself, including this Subcommittee, 
but many others throughout Congress cautioned the Social 
Security Administration not to move aggressively on this 
matter. Too many people were being dropped from the rolls, and 
new legislation was passed in 1984 at the end of a very long 
process. As Professor Burkhauser pointed out, the disability 
rolls went up a great deal in the long run.
    So in trying to cut the rolls we can make the mistake 
sometimes of actually defeating our objective. That would be 
lesson number one.
    Lesson number two might simply be that when we pass a new 
law like as we did in 1972 with the creation of the 
Supplemental Security Income Program, we should try very hard 
to look at prevaling trends. What happened in the case of SSI, 
I think, is that the discussions that began in 1969 were all 
centered on President Nixon's welfare reform proposals.
    People didn't think much about the so-called adult welfare 
categories, and they failed to see that, just as the discussion 
was maturing over several Congresses, the disability incidence 
was going up. So by the time the law was passed and by the time 
it was put in place there was a tremendous rise in the 
disability rolls. This is an example of not looking at the 
trends in the middle of trying to put together a very delicate 
political deal, another lesson that we have to look at.
    I guess a third and final lesson is that I think we should 
emphasize here as we think about interventions on the 
disability rolls that the person who is trying to apply for 
disability benefits is facing a great deal of uncertainty. He 
doesn't know whether he is going to get benefits, and so 
therefore he is very reluctant to engage in rehabilitation. I 
am put in mind of a description from the thirties from Harry 
Hopkins' WPA and other welfare programs of how hard it was for 
someone in the thirties to actually go in and ask for help from 
the Federal Government. It was the last thing they wanted to 
do.
    Many of these people that are entered on the disability 
rolls are in similar positions and therefore as we think about 
our interventions we should think about the uncertainty that 
they face. These are all lessons I draw.
    Mr. McCrery. So are you suggesting that we should be more 
aggressive, the government should be more aggressive in getting 
individuals into rehabilitation from the outset rather than 
having this lingering doubt about whether they are going to 
qualify for benefits.
    Mr. Berkowitz. Well, I have suggested in the past that 
there might be an interim benefit status that we might call 
rehabilitation status which would precede full benefits. But 
there is a very delicate question of policy that you would have 
to consider at some length. The other thing that you might 
think about is that we have always put SSDI together with 
Social Security, just as we do in this Subcommittee.
    Maybe that is not the right way to think about disability 
policy. I think we have seen in the last 10 years or so, sort 
of a separation between the notion of retirement and Social 
Security and SSDI. Maybe we need to look at SSDI as a somewhat 
different program. Maybe there needs to be--the same way there 
is a Committee to consider the problems of the aging in 
Congress--some sort of oversight Committee that looks at 
disability. But these are all big changes that you would have 
to consider for a great deal of time before making.
    Mr. McCrery. Thank you, Mr. Chairman. I see my time has 
expired. I may want to come back after you all have finished 
and ask a couple more questions.
    Chairman Shaw. Mr. Tanner, do you have any questions?
    Mr. Tanner. Mr. Chairman, I apologize for being late. I 
have been unavoidably detained by about three other--this is 
the only job that I have ever had where one thinks nothing of 
it to be scheduled to be in three different places all at the 
same moment, and so I apologize and I am looking forward to 
reading through the record. Thank you.
    Chairman Shaw. OK. Mr. Baron. You indicated that a majority 
of the people with a serious mental illness are desperately 
poor and likely to remain at or near the poverty level for the 
remainder of their lives and will do so whether they work or 
not unless there are significant changes in our national 
policies. What changes would you want us to consider?
    Mr. Baron. I would want to consider a fairly broad range of 
changes. There are certainly a great many people in the 
disability community generally and among people with mental 
illness who have the capacity to go on to higher education and 
post-graduate degrees, who have the capacity to reach on any 
levels of professional engagement. We need to invest more 
heavily in making sure people have access to and financial 
support to increase their education. It is a commonplace 
observation that the higher your educational level the more 
substantial your income is likely to be.
    We need to help more people with disabilities and certainly 
more people with serious mental illness to get the educational 
qualifications that they need and to place a much greater 
emphasis on education. We need to place a much greater emphasis 
on specific skill training for those who are not going on to 
college educations so that they have a set of skills that make 
them much more likely to work. But I also think we need to take 
a look at those people who are not likely to go on to college 
educations, who are not likely to benefit from technological 
skilled training programs, and think clearly about how we 
provide greater financial and other sources of support to 
people who are, like many Americans, working to make a living 
within the working class in our country.
    We need to find a way to help people grab hold of 
prosperity in a job market that makes it very difficult for 
them. Further, we have among disabled populations in general, 
but certainly within the population of people with serious 
mental illness, a number of people who are not going to be able 
to work full time. Their disability is going to preclude full-
time work.
    I don't want to presume to suggest the specific policies 
that we need to mount to address those problems but we do need 
to find a way to make it possible for people whose optimal 
vocational level is at part-time to earn a decent living and to 
combine that living with disability payments and social 
supports that make it possible for them to go beyond the 
poverty level.
    Anybody who is working, full time or part time, and is 
dependent upon secondary labor market jobs lives at or near the 
poverty level. I am not sure that we want serious disability of 
any kind to relegate people to a poverty level existence.
    Chairman Shaw. Mr. Mohney--by the way your name tag there 
is misspelled. It is spelled with an A instead of an O. You 
reported a recovery rate among your clients, who are also 
Social Security beneficiaries, of roughly six times that of 
Social Security. Do all these recoveries represent successful 
return to work and what aspect of your claim management do you 
believe is most responsible for this success, which is rather 
startling?
    Mr. Mohney. I would say that the vast majority of these 
recoveries reflect successful return-to-work. In terms of the 
aspects of the claim management process clearly it is the 
things we talked about. It is triage, recognizing that 
different claims are different and have different recovery 
potential matching up the right types of resource with the 
right claim on a very individualized basis to understand and 
promote return to work.
    It involves continuing review. Disabilities, again our 
experience is that most disabilities do not last a long period 
of time and so we need to work with our insureds to focus on 
their abilities to focus on opportunities to provide vocational 
rehabilitation services that might benefit them. Early 
intervention is key and one of the problems with the length of 
time associated with the approval process for Social Security 
is that we find that many times insureds have to fight so hard 
to be accepted that they accept a disability mindset and that 
once that mindset has been accepted it is very difficult to get 
them to think in terms of return to work and be as interested 
in vocational rehabilitation.
    Motivation is key and I think we need a system that is fair 
on the front end in terms of the approval process and very 
interactive throughout the process geared toward return-to-
work.
    Chairman Shaw. Well, are you--compare that with the Federal 
system.
    Mr. Mohney. My impression of the Federal system is that 
there is opportunity for improvement, particularly along the 
lines of the ongoing claim management particularly in the areas 
of early intervention having clinical resources review the 
situations, look at the appropriateness of care, looking at 
whether treatment plans are developed toward returning the 
person to work versus simply getting them out of the hospital. 
I believe that there is tremendous opportunity there as it 
relates to the continual review and as it relates to getting 
individuals focused on their abilities and their potential for 
return to work and supporting that.
    Mr. Tanner. Mr. Chairman.
    Chairman Shaw. Yes. Mr. Tanner.
    Mr. Tanner. The thought occurred to me, in this system does 
it make sense to look at the definition of disabled--is the 
definition of disabled adequate or would a less restrictive 
definition be of any--make any sense?
    Mr. Mohney. Mr. Tanner, I clearly think that would be and 
we talked earlier about a comprehensive strategy and review of 
the situation. I believe the definition of disability needs to 
be revised. In particular, we find on the private side real 
benefit where individuals are able to return to work gradually 
and that is typically how return-to-works occur. It does not 
occur all at once but it occurs gradually with a buildup in 
time and hours. And on the private side we do provide partial 
benefits such that they are not simply dropped from our roll. I 
think that that would be a significant incentive that would be 
beneficial in the program, yes, sir.
    Mr. Tanner. Does anyone else have a comment about that?
    Mr. Berkowitz. May I, sir?
    Mr. Tanner. Yes.
    Mr. Berkowitz. Even if we did have a change in definition, 
it would be important to remember that the original system was 
created as a reaction against the workers' compensation 
program, which those of you who have served in state 
legislatures know is still a major concern in states today.
    The problem in the workers' compensation program in the 
states has been permanent partial disabilities, partial 
disabilities that prove to be a major problem, and if you were 
to move in a direction of some sort of partial disability 
definition, you would be opening up many problems for potential 
expansion of the rolls so that would have be looked at very 
carefully.
    Mr. Tanner. I understand that but I am talking about making 
sense as to the goal of helping people achieve independence. 
Yes, sir. Mr. Young.
    Mr. Young. CDC has long advocated for a modification of the 
way we look at disability, something that looks more at 
functional limitations and functional abilities and then uses 
those results to help serve people in the best way possible. 
What we do right now is just determine whether people are 
making $700 a month or not and that tells you something but it 
doesn't tell you a lot more.
    And that next look, the functional abilities, impairments, 
barriers, between that person and the job are the questions 
that need to be asked and the solutions that need to be 
determined for where a new definition of ability to really be 
effective and for us to really make progress on transforming 
the current early retirement program into a full support 
program for those who need to retire but a support program for 
those who want to work as well.
    Mr. Burkhauser. Mr. Tanner, my grandmother used to say that 
the road to hell is paved with good intentions. The Dutch had a 
partial disability program and the reason that their disability 
transfer rolls are so high today is that they had an 
elegibility test which if you were judged to be 15% disabled 
but weren't employed meant you were eligible for full 
disability benefits unless it could be shown by the agency that 
it was unemployment and not disability that was causing the 
problem.
    This type of entry into their system was probably the major 
reason why the Dutch rolls are twice the size of the United 
States or any other country in the world. We need to take 
serious the notion that folks with disabilities can work and 
change our policy goals so that our first priority is to get 
folks with disabilities into employment.
    That is what Sweden and Germany do. Even though they have 
very high replacement rates, much higher than we have in the 
United States, they have a view that no one can get onto the 
disability benefit rolls unless they have gone through a year 
or two of rehabilitation and it is shown that they can't work. 
Hence income benefits are definitely a second round program in 
those countries.
    Mr. Tanner. So the problem is not necessarily definitions 
but more execution of rehabilitation.
    Mr. Young. No, the problem is both. The definition does 
feed into the problem because you come into the system and you 
spend at least 5 months and maybe 2 years proving you have not 
a bit of residual work capacity. And then the next thing you 
get that happens is you get a letter saying would you like to 
go to voc rehab. And the disconnect in people's minds is just 
phenomenal.
    If we are serious about supporting people with severe 
disabilities who want to work, we have to change the way we 
start that mind process going and support people right up at 
the front but then recognize that no matter what you do, what 
supports you provide, what training, what technology, some 
people will not be able to work. Find those folks, give them 
what they need, find the folks who can work, support them as 
they need, and then let the process go on.
    Chairman Shaw. Mr. McCrery.
    Mr. McCrery. Professor Burkhauser, you mentioned just now 
again your work first strategy. In your testimony you said that 
in order to keep rolls at socially acceptable levels a work 
first strategy must be employed. Leaving aside the question of 
what is a socially acceptable level, could you expound a little 
on the work first strategy? What are some of the tools that we 
should look at to implement a work first strategy?
    Mr. Burkhauser. In both Sweden and Germany you go on a 
temporary disability benefits program before you go into the 
permanent system and every worker who comes onto the temporary 
rolls in Sweden and Germany is given rehabilitation that 
connects them to the work force. It is only after that has 
proven unsuccessful that people are allowed onto the permanent 
rolls.
    Mr. McCrery. Excuse me. Is this done prior to a 
determination of disability? In other words, is it done upon 
application of the individual for benefits or how does that 
work?
    Mr. Burkhauser. One of the things that goes on in these 
countries that is different than here is that each has a 
sickness benefit so people receive this benefit almost 
immediately and can be on that program for a couple of months. 
At that time employers are involved with the social agencies to 
see whether the worker needs rehabilitation. In addition there 
are in Sweden, jobs targeted for folks with disabilities. In 
Germany there are quotas. Firms with 16 or more workers are 
required to employ a worker with a disability for every 16 
workers.
    In Sweden and Germany firms are not allowed to fire a 
worker based on health conditions, so there are all sorts of 
firm level programs that are institutionalized that make it 
more likely than in the United States that firms will 
accommodate their employees who experience the onset of a 
disability. In our country, as Tony Young was saying, there is 
a long period following the onset of a disability before you 
are entitled to disability benefits and it is only after you 
get the benefits that there is some effort to do some 
rehabilitation.
    The key is to put the rehabilitation effort up front. One 
possibility would be to have a system where you pass an initial 
screen that is sufficient to get you into a rehabilitation 
program and possibly a temporary benefit. But this would 
strictly be a temporary benefit to go along with 
rehabilitation. The determination for permanent benefits would 
then occur after 6 months or even a year or 2 years.
    Mr. McCrery. OK. Thank you. Thank you, Mr. Chairman.
    Chairman Shaw. Thank you. I will throw this out to anyone 
who would like to take it. What are we doing here with regard 
to taking someone who may be physically impaired so that they 
cannot be rehabbed to get back into being a carpenter, an 
electrician or a plumber, but they are not mentally impaired, 
so that they can get into another field through advanced 
education. What are we doing about that?
    Mr. Young. We have the Rehabilitation Act that is supposed 
to address those issues and in fact.
    Chairman Shaw. How is that operating?
    Mr. Young. Well, there is a hearing in itself, sir. The 
Work Force Investment Act, which has lots of money for job 
training in there that I guess is part of what we need to talk 
about as far as coordination of disability programs and what 
Social Security can do and what the Rehabilitation Services 
Administration can do and what the Department of Labor can do 
as far as retraining people. But there are lots of people who 
do to rehab every year and I think about 200,000 or so get 
placed in new jobs.
    Of course, the demand is much greater than the number of 
people who actually go through the process and end up with jobs 
and that is the end of the story.
    Chairman Shaw. Do we need three agencies doing that or 
would it be better to try to focus on one agency?
    Mr. Young. Again, sir, I think that is a hearing of itself. 
I think we very well don't need three agencies doing that.
    Chairman Shaw. Maybe we ought to look into that next year.
    Mr. Young. I think that would be a good idea.
    Mr. Berkowitz. Mr. Chairman, there was a period when we 
spent a substantial amount of trust fund money essentially 
subsidizing the vocational rehabilitation program in an effort 
to get people rehabilitated. I think it is fair to say that 
that was not a particularly strong success and we changed it 
and no one is that sad that we did.
    The other thing that I might add is that over time as we 
have tried to organize the government, we have created a lot of 
distance between vocational rehabilitation and our SSDI 
program. Vocational rehabilitation is one of the bargaining 
chips in the creation of the Department of Education and so it 
went over there when it was created. And of course SSA is now 
an independent agency but that bureaucratic distance and indeed 
rivalry between vocational rehabilitation and SSA has been a 
factor in the historical record and that hasn't helped 
coordinate efforts between the two agencies.
    Mr. Mohney. Mr. Chairman, I would add that on the private 
side we have had great success in focusing on retraining and 
focusing on labor market surveys and functional capacity 
assessments to match up individuals who perhaps have some 
impairment, some restrictions and limitations, but are 
interested in working and finding other occupations that they 
can be successful in. It has been cost effective. It must be 
applied selectively. I don't think there is a broad, one 
category fits all approach, but when applied selectively to 
individuals it can be highly cost effective.
    Mr. Baron. Could I?
    Chairman Shaw. Yes, sir.
    Mr. Baron. Just one other observation that in thinking 
through how to better utilize government dollars to retrain and 
re-educate people, I would want to caution us to think as 
closely as we can about the kinds of jobs we want to train and 
educate and prepare people for and to be clear that the kinds 
of jobs that are going to be developing over the next decade or 
two are quite different than the kinds of jobs that we might 
have prepared people for a generation or even a decade ago and 
that if we want to provide people with retraining and re-
education for new careers it ought to be for new careers that 
lead them toward prosperity and do not lead them back into jobs 
that it is going to be hard for people to make economic 
progress through. And that is a different kind of investment 
and probably a much greater investment than many of us have 
currently been thinking about.
    Chairman Shaw. Well, thank you all very much. They called 
the vote at just the right time. I was afraid they were going 
to call it around 11 and we were going to have to make you 
gentlemen wait but I appreciate your time and I appreciate your 
testimony. It has been very helpful. Thank you. We are 
adjourned.
    [Whereupon, at 11:42 a.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of Kenneth Nibali, Associate Commissioner for Disability, 
Social Security Administration

    Mr. Chairman and Members of the Subcommittee:
    Thank you for providing me the opportunity to discuss 
initiatives to ensure that the Social Security Administration's 
beneficiaries with disabilities receive the supports needed to 
achieve independence. This is an important issue, and the 
Social Security Administration (SSA) has placed a high priority 
on helping its Social Security Disability Insurance (SSDI) and 
Supplemental Security Income (SSI) beneficiaries return to 
work.
    I will discuss SSA's disability process, the current work 
incentives available to individuals with disabilities and the 
Ticket to Work legislation that will provide more opportunities 
for individuals with disabilities to return to work. I will 
also discuss some of the differences between SSA's programs and 
private insurer programs.

Social Security Disability

    Generally, when people think about Social Security, they 
think about retirement benefits. Nearly one third of Social 
Security beneficiaries, however, are the surviving family 
members of workers who have died or are severely disabled 
workers or their wives and children. The protection provided by 
the SSDI program is extremely important, especially for young 
families. For a young, married, average income worker with two 
children, Social Security is the equivalent of a $223,000 
disability income insurance policy. In the event of severe 
disability, the SSDI program stands between these families and 
poverty. Additionally SSI serves the most economically 
vulnerable population with disabilities, most of whom are 
living in poverty.
    In June 2000, 5,884,200 beneficiaries were receiving Social 
Security benefits on the basis of disability--4,959,500 
disabled workers, 724,400 disabled adult children, and 200,300 
disabled widows and widowers. In addition, 170,800 spouses and 
1,419,800 minor and student children of disabled workers were 
receiving benefits. Further, 5,304,324 blind or disabled 
individuals received SSI benefits. About 30 percent of these 
individuals received both SSDI and SSI benefits. Thus, in June, 
SSA sent benefits to over 9.5 million individuals on the basis 
of disability. In fiscal year 1999, disabled workers and their 
dependents received over $50 billion in cash benefits under the 
SSDI program and disabled individuals received over $24 billion 
in cash benefits under the SSI program.
    Furthermore, SSDI benefits are the gateway to the Medicare 
program to those individuals who have been eligible for 
disability benefits for 24 months. These benefits provide 
health care coverage that to many SSDI beneficiaries is simply 
irreplaceable, since many would not be able to obtain insurance 
in private markets simply because they are disabled. The 
Medicare program paid over $24 billion in benefits in fiscal 
year 1999 to individuals whose entitlement to Medicare is based 
on their SSDI benefits. Thus, almost $75 billion was paid in 
fiscal year 1999 from the Social Security and Medicare programs 
on behalf of disabled workers and their families.
    As with the retirement program, SSDI is funded through a 
payroll tax on covered earnings, paid by employees, their 
employers, and the self-employed. The current DI payroll tax on 
earnings is 0.9 percent for employees and employers, each, and 
1.8 percent for the self-employed.
    SSDI is designed to protect workers covered under the 
Social Security program who become severely disabled, with 
applicants judged on the basis of a uniform set of standards. 
The criteria we use to award disability benefits requires that 
the condition either be expected to result in death or last at 
least 12 months. To qualify, the individual must be unable 
because of a medical condition to perform any substantial work 
in the national economy. Thus, the inability to do one's own 
past work or the inability to find suitable employment are not 
a sufficient basis for meeting the definition of disability. 
Our regulations provide for a five-step sequential evaluation 
based on the statutory definition of disability, and require 
that a claimant not currently be engaging in substantial 
gainful activity (SGA)--a level of work currently set at $1,170 
per month for blind beneficiaries and $700 per month for non-
blind beneficiaries, a level recently proposed to be adjusted 
annually to the national average wage index. Additionally, 
applicants must have worked 20 quarters during the 40 quarter 
period ending with the quarter in which disability began 
(special provisions apply for workers who are under age 31), 
and they must complete a 5-month waiting period after the onset 
of the disability.
    After a claim is taken in one of Social Security's field 
offices, it is forwarded to one of the State Disability 
Determination Services. These State employees are responsible 
for following up on at least one year's worth of medical 
evidence in support of the claim, scheduling consultative 
examinations if necessary, and making the disability 
determination at the initial and reconsideration (the first 
level of appeal of an adverse initial determination) levels. 
The States are fully reimbursed for making these 
determinations. The process of evaluating an individual's 
disability accounts for the administrative costs for the 
disability program being somewhat higher (3.0 percent of 
benefits) than those for the retirement and survivor program, 
largely because of the cost of obtaining medical evidence and 
the need for a thorough evaluation by a physician or other 
highly trained professional reviewer.
    While the Social Security eligibility criteria are very 
strict, we also have a very structured system to ensure that 
applicants' rights are protected and that those applicants who 
are eligible actually get their benefits. Currently, a 
physician must be part of the decision-making team, although we 
are testing a system where certain claims, generally the most 
severe and obvious cases, would be decided by a trained 
layperson. After a reconsideration denial, a claim can be 
appealed to an administrative law judge, then the Appeals 
Council and up to a federal court. We also are testing a model 
that would streamline the process by eliminating the 
reconsideration step. While the primary purpose of SSDI is to 
replace a portion of income, the program also includes 
provisions designed to encourage beneficiaries to return to 
work.

Current Work Incentive Provisions

    Work incentives assist beneficiaries with disabilities to 
enter or reenter the workforce by protecting entitlement to 
cash payments and/or health care until this goal is achieved. 
Some work incentives are common to both the SSDI and SSI 
programs, while some are unique to one program or the other. 
Because even the common work incentives may be treated 
differently by either program, I would like to briefly discuss 
work incentives as each program treats them.

SSDI Work Incentives

    There are several work incentives for SSDI beneficiaries 
built into the Act, most notably impairment-related work 
expenses (IRWE), the trial work period (TWP), the extended 
period of eligibility for reinstatement of benefits (EPE), and 
continuation of Medicare. The availability of these incentives 
is dependent upon the disabled beneficiary continuing to have a 
disabling impairment.
    Certain impairment-related work expenses may be deducted 
from gross earnings when determining SGA. An expense qualifies 
as an IRWE during a period of work when:

     The item or service enables them to work;
     They need the item or service because of their 
disabling impairment;
     They pay the cost and are not reimbursed by 
another source (e.g., Medicare, Medicaid, private insurance);
     The expense is ``reasonable''--that is, it 
represents the standard charge for the item or service in their 
community.

    The TWP enables disabled beneficiaries to test their 
ability to work by allowing them to receive full benefits 
regardless of how high earnings might be. The TWP continues 
until the accumulation of 9 months (not necessarily 
consecutive) of ``services'' performed within a consecutive 60-
month period. We use this ``services'' rule only to control 
when the TWP stops. ``Services'' means any activity in 
employment or self-employment for pay or profit or of the kind 
normally done for pay or profit (whether or not it is SGA). We 
currently consider work to be services if earnings are more 
than $200 a month (or more than 40 self-employed hours in a 
month). SSA recently proposed this level be increased to $530 
per month.
    Following the end of the TWP, beneficiaries have a 3-month 
grace period before beginning the 36-month extended period of 
eligibility. During the EPE, the beneficiary does not receive a 
cash benefit in any month earnings exceed SGA. Cash benefits 
can be reinstated anytime during this 36-month period that the 
beneficiary earns less than SGA and continues to meet the 
definition of disability. Currently, Medicare coverage 
continues during this period and for three additional months. 
At that point, individuals with disabilities can buy Medicare 
coverage. Effective October 1, 2000, based on the new Ticket to 
Work Incentives Improvement Act, premium-free Medicare is 
extended an additional 4 years.
    In addition to providing incentives to work, we also refer 
beneficiaries with disabilities to their local State Vocational 
Rehabilitation (VR) agency, or to other service providers in 
the public and private sector who try to help beneficiaries 
return to work. In fiscal year 1999, SSA paid State VR agencies 
about $120 million for their services provided to over 11,000 
beneficiaries with disabilities who worked at least 9 months at 
the substantial gainful activity level. Although this was a 
record year for reimbursements, we look forward to much more 
progress in this area.
    Under the Ticket to Work and Work Incentives Improvement 
Act of 1999 (TWWIIA), disabled beneficiaries will receive a 
ticket that they may use to obtain employment services, 
vocational rehabilitation services, or other support services 
from an employment service network (EN) or a State VR agency. 
The ticket will be assigned to the participating employment 
network of the beneficiary's choice, assuming the EN is willing 
to accept the assignment. Under the TWWIIA, the number and 
scope of available ``rehabilitation'' options for beneficiaries 
was expanded to include public and private VR services, 
including employment services and assistive technology. All ENs 
must meet the qualifications set by the Commissioner.
    A purpose of the TWWIIA is to provide disabled 
beneficiaries more supports to test their ability to work. In 
addition to improving access to services, a disabled 
beneficiary using the ticket is not subject to continuing 
disability reviews. Thus, disabled beneficiaries receive a 
greater opportunity to become self-sufficient without losing 
their benefits.

SSI Work Incentives

    Some general information about the SSI program is useful to 
explain the work incentive provisions as they apply to that 
program. The SSI program differs from Social Security in that 
the monthly Federal benefit standard (currently, $512 for an 
individual and $769 for an eligible couple) is reduced 
dollarfordollar by the amount of the individual's ``countable'' 
income--i.e., income less all applicable exclusions. The result 
of this computation determines whether the individual (or 
couple) is eligible and the amount of the benefit payable.
    SSI law defines two kinds of income: earned and unearned. 
Earned income is wages, net income from selfemployment, 
remuneration for work in a sheltered workshop, royalties on 
published work, and honoraria for services. All other income 
(including income received in kind) is unearned.
    When determining an individual's countable income, 
exclusions are taken for various types of income. There is a 
general $20 exclusion, applied to an individual's unearned 
income. In the case of earned income, we exclude a portion of 
the $20 general exclusion that has not been used, and then 
exclude the first $65 and one-half of the remainder of the 
earnings. This greater exclusion for earned income acts as a 
work incentive for all SSI recipients.
    In determining the benefits of individuals with 
disabilities, we exclude IRWEs. For these individuals, we 
exclude work expenses directly related to the individual's 
disability, such as attendant care services, assistance in 
travelling to and from work and personal assistance related to 
work.
    Under SSI we also exclude income saved or being used to 
pursue a plan for achieving selfsupport (PASS) that has been 
established by a disabled or blind person. These plans are 
established to help blind and disabled individuals become self-
supporting by excluding income that is set aside to help the 
individual reach a specific occupational goal. In December 
1999, there were 1,045 SSI recipients with a PASS established, 
although not all of those individuals reported earnings for 
that month.
    We also encourage self-sufficiency among SSI recipients who 
are under the age of 22. Under the Student Earned Income 
Exclusion, students can exclude up to $400 of earned income per 
month when determining their eligibility. The maximum yearly 
exclusion is $1,620. Recently, President Clinton proposed 
raising the monthly and yearly exclusions to $1,290 and $5,200, 
respectively.
    Finally, the laws governing SSI contain provisions that 
enable blind and disabled individuals to continue working and 
receiving income beyond the limit that would normally result in 
ineligibility.
    Under section 1619(a) of the Social Security Act, a 
disabled beneficiary who would cease to be eligible because of 
earnings over the SGA limit (currently $700 a month) can 
continue to receive cash benefits until the amount of earnings 
would cause him or her to be ineligible for benefits under SSI 
income counting rules. Being a recipient of this special 
benefit equals being an ``SSI recipient'' for Medicaid 
eligibility purposes.
    Section 1619(b) provides ``SSI recipient'' status for 
Medicaid eligibility purposes for certain SSI recipients. These 
individuals have earnings that preclude the continued payment 
of an SSI benefit but are not sufficient to provide a 
reasonable equivalent of the SSI, social services, and Medicaid 
benefits that the individuals would have in the absence of 
earnings. For these individuals, the loss of the social service 
and Medicaid benefits would seriously inhibit their ability to 
continue working.
    According to SSA's Office of Research, Evaluation and 
Statistics, there were approximately 340,000 SSI disability 
beneficiaries (or 6.4 percent) who were working in December 
1999. About 70,000 of these individuals were receiving benefits 
under section 1619(b). These beneficiaries do not receive an 
SSI payment but retain their Medicaid coverage. Almost three-
fourths of those who received this type of SSI benefit had 
amounts of earned income below the substantial gainful activity 
level.

Ticket to Work and Work Incentives Improvement Act of 1999

    Last December the President signed the TWWIIA into law. I 
want to express again my thanks to the Chairman and the members 
of the Subcommittee for your support in getting the ``Ticket'' 
passed. This legislation will help individuals with 
disabilities who want to work by lessening their fears about 
losing health care coverage and income during attempts to work.
    It improves and expands their VR choices, providing 
enhanced work incentives, outreach activities and new service 
structures. Ever since the TWWIIA was enacted, we have been 
actively engaged in the hard work of implementing its various 
provisions. We again look forward to working with you as the 
different provisions take shape and begin to show the results 
we anticipate--more people with disabilities entering or 
reentering the workforce.
    We will be reporting to Congress regularly about the 
progress of the TWWIIA program. By December 2002, we must 
report to Congress on the adequacy of our payment rates to 
employment networks. Over the next six years we must make three 
separate reports to the House Committee on Ways and Means and 
Senate Committee on Finance evaluating the progress of program 
activities, as well as conclusions on whether or how the 
program should be modified.
    Currently, we are preparing an NPRM package to implement 
these provisions. We plan to begin implementing the ticket 
provisions in some States in January 2001, distributing tickets 
in a staged process through May 2001, with the remaining States 
phased-in by January 2004. We are currently accepting 
applications from those who want to serve as employment 
networks.
    The new law requires SSA to conduct demonstration projects 
to evaluate the effects of reducing benefits $1 for every $2 of 
earnings over a certain limit. Beginning in December 2001, 
annual reports to Congress are required on the projects, with a 
final report due no later than one year after the project is 
complete. Currently, we are in the process of designing the 
parameters of the $1 for $2 demonstration projects. Additional 
legislation would be required before implementation of these 
projects may begin.

    Additionally, Congress extended SSA demonstration authority 
until December 2004 to allow SSA to explore various projects 
that will enable more individuals to return to work. We are 
assessing which experiments and projects we shall pursue.

Private Insurance vs. Social Security Administration's 
Disability Programs

    The SSA disability programs differ from other insurance 
programs offered through the private sector in a number of ways 
ranging from the definition of disability to beneficiary 
characteristics and timing of benefits. However, SSA can still 
benefit from lessons learned by these alternate insurance 
providers in determining how to further improve its programs.
    Private systems often use a less restrictive definition of 
disability. Generally, the first definition for disability in 
private insurance is the inability to do the person's own 
occupation; this makes for a quicker and easier determination. 
After six months to two years, the definition extends to any 
occupation. SSA must make a long-term, broad-ranging 
entitlement determination. Favorable SSDI determinations 
normally cannot be changed without demonstrating medical 
improvement, while a private insurance determination can be 
reversed or discontinued without determining that the 
individual's disabling condition has medically improved. 
Furthermore, SSA must meet strict requirements for providing 
claimants legal due process and for ensuring uniformity across 
its national program.
    SSA's beneficiaries are on average more severely and 
permanently disabled than workers in those other systems and 
have significantly lower expected return to work rates. Private 
insurers often target policies and services to relatively low-
risk clients such as professional or technical employees. Some 
insurers may not offer individual disability insurance to 
people in higher risk jobs, or may offer it at a cost to the 
employee that is prohibitive. SSA provides benefits to any 
eligible disabled worker or low income disabled person and must 
accept disabled individuals with high-risk as well as low-risk 
profiles for high lifetime disability costs.
    SSA tends to serve on average a less affluent and less 
educated population than private disability insurance providers 
do. As such, applicants under the SSA-administered disability 
programs often require greater assistance with the disability 
application and adjudication process than do applicants for 
private insurance disability benefits especially since the 
latter may receive employer assistance in pursuing their 
claims. The SSDI and SSI programs must cover individuals with 
all types of impairments (pre-existing conditions, mental 
impairments, etc.) while private insurers can choose what 
conditions they will cover.
    One-half of SSDI claimants have been out of work for over a 
year before applying for benefits. This is due to a combination 
of reasons, such as the availability of short-term insurance 
from the employer, the claimant's decision to wait for the 
termination of sick leave and Worker's Compensation benefits, 
or the claimant's reliance on COBRA coverage. The current 
connection with the employer is often broken and sometimes 
health insurance lapses. Therefore, some SSDI applicants do not 
have complete and current medical documentation of their 
disability. Private insurance is frequently associated with an 
employer-based benefit program, and documentation of the 
medical condition is often available through the employee's 
employer-provided health insurer. In some cases, the employer 
will assist the claimant in obtaining evidence under the terms 
of their insurance coverage. Additionally, there is typically 
not an extended period during which the applicant does not have 
health insurance coverage.
    SSA agrees that earlier intervention, and earlier 
identification and provision of necessary return-to-work 
assistance for applicants and beneficiaries should be 
researched and considered as part of an overall return-to-work 
strategy. However, applications for SSDI and SSI are often 
months after the onset of the episode. Other than through our 
new demonstration project authority, SSA cannot refer 
disability claimants for reimbursable VR services until they 
are awarded benefits. We agree that earlier intervention to 
assist presumably disabled applicants with securing appropriate 
return to work services should be researched and considered as 
part of an overall return-to-work strategy. How best to 
coordinate this with State unemployment insurance, State 
temporary disability benefits, and State workers compensation 
programs are just some the details that will need to be worked 
out.

Conclusion

    We want to build on the momentum provided by the enactment 
of the TWWIIA and to increase incentives to work for all people 
with disabilities. Our commitment is to make every effort to 
enrich the lives of all people with disabilities and to help 
all those who want to work do so. One of the best ways for SSA 
to do this is to continue its active implementation of the 
TWWIIA program, including the evaluation of its progress and 
our reports to Congress.
    We know that return to work efforts must include 
coordination with other Federal departments and agencies as 
well as the private sector to find new and innovative ways to 
encourage work. Solutions to the redesign of the Federal 
disability programs require the active involvement of several 
Federal agencies, including the Departments of Education, 
Labor, the Treasury, and Health and Human Services. On March 
13, 1998, President Clinton signed Executive Order 13078, 
establishing the Presidential Task Force on Employment of 
Adults with Disabilities. The mandate of the Task Force is to 
evaluate existing Federal programs to determine what changes, 
modifications, and innovations may be needed to remove barriers 
to employment opportunities faced by adults with disabilities. 
The work of the Task Force will help ensure that national 
initiatives identified will receive high priority within 
respective departments and agencies.
    The private rehabilitation community, private insurers, 
consumers, employers and advocates for people with disabilities 
can greatly assist SSA in implementing the TWWIIA. We will 
continue to look for ways to further enhance the productive 
capabilities of disabled beneficiaries with our private sector 
business partners.
    We look forward to working with the Subcommittee and 
Congress to achieve our mutual goal: removing as many barriers 
to work as possible and providing as many incentives and 
supports as possible to enable people with disabilities to 
participate in the workforce.
      

                                


Statement of American Occupational Therapy Association, Inc., Bethesda, 
Maryland

    The American Occupational Therapy Association (AOTA) 
submits this statement for the record for the hearing on July 
13, 2000. AOTA commends the Subcommittee for holding this 
hearing in its ongoing efforts to address the challenges facing 
the social security disability programs and its recipients.
    AOTA supports the notion put forth by the Consortium of 
Citizens with Disabilities (CCD) that the original assumption 
of federal disability programs was that people who become 
disabled would remain so throughout the remainder of their 
lives, and that little thought was given to what would happen 
if these individuals returned to work after becoming eligible 
for benefits. We agree with CCD that disability is a dynamic 
condition, evolving in response to advances in technology and 
medical intervention, improvements in services and the 
expectations of persons with disabilities. Many individual and 
policy barriers continue to prevent persons with disabilities 
from achieving economic independence through work and work-
related rehabilitation services (such as occupational therapy).

What is Occupational Therapy?

    Occupational therapy is a health and rehabilitation service 
reimbursed under Medicare, Medicaid, health insurance policies, 
the Rehabilitation Act, worker's compensation, and other 
programs. Occupational therapy services can help individuals 
with disabilities desiring to enter or return to the workforce 
to assess their capabilities, to learn skills, and to achieve 
success in the work place. Using purposeful activity (or 
``occupations''), such as work simulation and conditioning 
activities, occupational therapists assess and intervene with 
individuals whose ability to function in a competitive work 
environment is affected due to physical or emotional illness, 
injury or condition. Occupational therapy intervention includes 
assessment of functional limitations and capabilities needed to 
perform meaningful, productive work.
    Occupational therapy practitioners are licensed or 
otherwise regulated in every state and territory. They use 
their knowledge of the structure and function of the human 
body, the effects of illness and injury, and the components of 
activity to achieve recovery, to improve functioning and to 
increase clients' involvement in productive and other 
activities.
    Performance areas, performance components, and performance 
contexts are the parameters of occupational therapy's domain of 
concern.
     Performance areas are broad categories of human 
activity that are typically part of daily life. For 
occupational therapy, these are activities of daily living 
(ADLs), including instrumental activities of daily living 
(IADLs), work and other productive activities, and play or 
leisure activities.
     Performance components are fundamental human 
abilities that, to varying degrees and in differing 
combinations, are required for successful engagement in desired 
performance areas. These components are sensorimotor, 
cognitive, psychological, and psychosocial.
     Performance contexts are situations or factors 
that influence an individual's engagement in desired and/or 
required performance areas.
    Occupational therapy assessment involves examining 
abilities in and the relationship between performance areas, 
components and contexts. Intervention may be directed toward 
elements of performance areas (e.g. dressing, vocational 
options), performance components (e.g. strength, endurance, 
problem solving) or the environment.

Occupational Therapy and Work Rehabilitation

    Occupational therapy contributes to the promotion and 
management of productive occupation as well as the prevention 
and treatment of work-related disability. Through skilled 
observation and evaluation of a person's performance, 
occupational therapists can identify a person's interests, 
abilities, and needs as they related to general work 
performance and to specific job and workplace design. 
Appropriate intervention strategies are developed based on the 
evaluation results, and are designed to explore and expand work 
options, to enhance or develop work-related capacities, and to 
obtain or retain employment.
    In providing work-related services, including workplace 
redesign, work disability prevention, and management programs, 
occupational therapy performs several tasks including:
     Evaluating the client's work roles and work 
performance and the impact of their abilities on performance
     Analyze work tasks and the work environment
     Collaborate with other team members in 
coordinating occupational therapy services
     Provide recommendations about adapting work tasks 
or environments for the worker and/or employer
    When developing interventions, occupational therapists 
consider the client's age, interests, values, culture, skills 
and abilities, motivation, and psychological and psychosocial 
status as well as work role, task demands, work environment, 
and available resources. Intervention strategies may include 
direct services or consultation to individuals and groups.
    Successful return to work can be dependent on many issues 
that an occupational therapist is qualified to address, 
including looking at the individual's physical and 
psychological tolerances essential to appropriate fulfillment 
of the vocational planning process, and development of 
appropriate work behaviors that will improve retention and 
reduce recidivism. For example:

Conclusion

    Occupational therapy can be an important component of a 
program to enable individuals to return to work, tailoring 
rehabilitation, work training, and job modifications and 
placement. AOTA stands ready to assist the Subcommittee in its 
efforts to improvement federal disability programs to enable 
persons with disabilities to have the opportunity to work. 
Congress has begun this work by passing the Ticket to Work and 
Work Incentives Improvement Act (TWWIIA) last year (P.L. 106-
17). TWWIIA is a major step toward eliminating many of the 
existing barriers to work in federal disability programs. We 
applaud the Subcommittee for taking the next step and looking 
at other barriers to work for persons with disabilities.
      

                                


Statement of Terri Spurgeon, President, National Association of 
Disability Examiners, Lansing, Michigan

    Mr. Chairman and Members of the Subcommittee, on behalf of 
the members of the National Association of Disability Examiners 
(NADE) I want to take this opportunity to thank you for holding 
this series of hearings on the problems and challenges facing 
the Social Security and Supplemental Security Income (SSI) 
disability programs today. Our membership is committed to the 
preservation of the disability program and deeply concerned 
about the problems we encounter in the administration of these 
programs. Those concerns have been described in earlier 
testimonies before this Subcommittee and will not be reiterated 
here. We would, however, like to address those issues involving 
the solvency of the disability trust fund and return to work 
barriers and incentives.
    The Social Security and SSI disability programs play a 
vital role in the lives of millions of Americans. Disability 
benefits provide an important safety net for disabled 
individuals and their families. However, we believe that the 
majority of those who apply for these benefits would prefer to 
remain in the workforce. We welcomed the recent efforts of the 
Congress and of the Social Security Administration (SSA) to 
facilitate and encourage a beneficiary's efforts to return to 
work by removing barriers such as loss of medical coverage and 
by authorizing and establishing return--to-work demonstration 
projects.
    Individuals who understand that their claims will be 
reviewed at the appropriate time are much more likely to take 
advantage of return to work initiatives. We strongly support 
SSA's focus on continuing disability reviews (CDRs) and we 
appreciate the Congressional initiatives to provide the 
necessary funding to conduct these reviews. The public should 
be able to expect that the Social Security Administration (SSA) 
will administer the disability program in a cost-effective 
manner. We believe it is vital that sufficient resources 
continue to be made available to permit to become-and remain-
current on these reviews. These reviews are vital because of 
the importance they have on the economic security of the 
disability trust fund and on the public's confidence in the 
disability program. However, while we support the present CDR 
initiative, we believe this process would be more effective if 
the current Medical Improvement Review Standard (MIRS) were 
revised. (A copy of NADE's analysis of this subject is attached 
for your review.).
    Although time-limited benefits are common in many private 
disability programs, and have been proposed as one means to 
encourage claimants to obtain appropriate treatment and 
rehabilitation to re-enter the work force, we do not advocate 
such a proposal for the Social Security or SSI disability 
programs at this time. Unlike private insurers and other 
disability programs, the programs administered by Social 
Security do not award benefits for partial or short-term 
disability. By definition, individuals who are awarded Social 
Security or SSI disability benefits are unable to engage in any 
substantial gainful activity for a period of not less than 12 
months. These individuals should be able to expect that SSA 
will not terminate those benefits unless there is a change in 
their condition that would warrant termination. At the same 
time, however, we believe that disability benefits should be 
paid only to those who meet the statutory definition of 
disability and that individuals who are capable of returning to 
the workforce do so. This requires an efficient and effective 
CDR process.
    The CDR process has not been utilized in the way it was 
envisioned. SSA's need to utilize limited funds for more 
pressing needs have made it impossible to pursue the CDR 
process without the recent special appropriations from the 
Congress. NADE firmly believes that if CDRs can be conducted 
timely, if genuine errors in decision-making can be corrected 
at the CDR level by changes in the MIRS, and if additional 
disincentives to return to work can be eliminated, then a 
medical review standard can serve both the disabled population 
and the general public better than the wholesale changes that 
time-limited benefits would entail.
    The General Accounting Office, in their July 13, 2000 
testimony, noted that, ``In recent years, SSA has piloted 
numerous incentives to redesign and thereby improve its 
disability determination process.'' NADE has supported these 
efforts and many of our members are, or have been, involved in 
piloting and prototyping this new process. We would hope that 
simplifying and streamlining the process would enhance and 
support the current return to work initiatives.
    While NADE supports efforts to make the decision making 
process more efficient, we do not support change for the sake 
of change. It appears that SSA is planning to go forward with 
national roll-out of the new disability claims process before 
data--including the impact this new claims process has had on 
both administrative costs and program costs--has been fully 
assessed. Earlier we contacted Commissioner Apfel expressing 
both our concerns with and suggestions for national roll-out. A 
copy of that correspondence accompanies this testimony.
    We would also like to take this opportunity to express our 
concern that several of the states involved in the prototype of 
the new disability claims process are reporting that hundreds 
of claims have been received for which they have yet to 
initiate any case development. These claims are sitting 
untouched, filed away, until such time that the DDS has 
sufficient staff to initiate the required development. This 
backlog of cases was created as the DDS's made the required 
adjustments to begin processing claims in the new manner 
prescribed by the prototype. The DDS's were not given 
sufficient lead time or training to prepare for the new 
process. These backlogs do not serve the public interest, 
improve a claimants potential for return to work, or enhance 
the public's confidence in the disability program.
    NADE is concerned about the viability and stability of the 
Social Security and SSI disability programs and the integrity 
of the disability trust fund. We appreciate your willingness to 
solicit a wide range of viewpoints and suggestions for 
improving these programs. NADE feels honored to be invited to 
submit our views and we offer the expertise of our members, 
working with the Subcommittee, as a means to achieve that goal.
    [Attachments are being retained in the Committee files.]