[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




 
                  HEARING ON THE FINANCING CHALLENGES


        FACING THE SOCIAL SECURITY DISABILITY INSURANCE PROGRAM

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                               __________

                             FIRST SESSION

                               __________

                             March 14, 2013

                               __________

                             SERIAL 113-SS1

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
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                 COMMITTEE ON WAYS AND MEANS

                 DAVE CAMP, Michigan, Chairman

                       

                                      
SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                    SUBCOMMITTEE ON HUMAN RESOURCES

                      SAM JOHNSON, Texas, Chairman

                       

                                      
PATRICK J. TIBERI, Ohio              XAVIER BECERRA, California
TIM GRIFFIN, Arkansas                LLOYD DOGGETT, Texas
JIM RENACCI, Ohio                    MIKE THOMPSON, California
AARON SCHOCK, Illinois               ALLYSON SCHWARTZ, Pennsylvania
MIKE KELLY, Pennsylvania
KEVIN BRADY, Texas





                            C O N T E N T S

                               __________
                                                                   Page

Advisory of March 14, 2013 announcing the hearing................     2

                               WITNESSES

Joyce M. Manchester, Ph.D., Chief, Long-Term Analysis Unit, 
  Health, Retirement, and Long-Term Analysis Division 
  Congressional Budget Office, Testimony.........................     7
Stephen C. Goss, Chief Actuary, Social Security Administration, 
  Testimony......................................................    28
  
  
  
  
  


    HEARING ON THE FINANCING CHALLENGES FACING THE SOCIAL SECURITY 
                      DISABILITY INSURANCE PROGRAM

                              ----------                              


                        THURSDAY, MARCH 14, 2013

             U.S. House of Representatives,
                       Committee on Ways and Means,
                            Subcommittee on Human Resources
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:01 a.m., in 
Room B-318, Rayburn House Office Building, the Honorable Sam 
Johnson [chairman of the subcommittee] presiding
    [The advisory of the hearing follows:]

HEARING ADVISORY

Johnson Announces Hearing on the Financing Challenges Facing the Social 
                 Security Disability Insurance Program

Washington, Feb 28, 2013

    **HEARING POSTPONED**

    The hearing has been rescheduled for Thursday, March 14, 2013, at 
10:00 AM in B-318, Rayburn House Office Building.

    U.S. Congressman Sam Johnson (R-TX), Chairman of the House 
Committee on Ways and Means Subcommittee on Social Security, today 
announced a hearing on the financing challenges facing the Social 
Security Disability Insurance program. The hearing will take place on 
Thursday, March 7, 2013, in B-318 Rayburn House Office Building, 
beginning at 9:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Subcommittee and 
for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The Social Security Act Amendments of 1956 (P.L. 84-880) created 
the Social Security Disability Insurance (DI) program to provide 
protection against economic insecurity resulting from the loss of 
earnings due to a disability. The DI program pays benefits to those who 
have worked in the past but are determined unable to work because of a 
disability that is expected to last more than a year or result in 
death. In December 2012, the average DI benefit was $1,130 a month, or 
about $13,500 a year.
      
    According to the Congressional Budget Office (CBO), between 
calendar years (CY) 1970 and 2012, the number of people paying into the 
system has increased 72 percent, but those receiving disability 
benefits (both disabled workers and their dependent family members) has 
increased by over 300 percent from 2.7 million to over 10.9 million. 
Total DI benefit outlays are estimated to have reached $135.1 billion 
in FY 2012. By CY 2023, CBO projects that the number of beneficiaries 
will exceed 12.3 million and total annual benefits paid in FY 2023 will 
reach over $213 billion.
      
    In its Budget and Economic Outlook: Fiscal Years 2013 to 2023, CBO 
also projects that for the 10-year period ending FY 2023, DI cumulative 
cash flow deficits will reach $416 billion. Since 2005, in order to pay 
full benefits, the DI program has been redeeming the U.S. Treasury 
securities credited to the DI Trust Fund. CBO has projected that the 
U.S. Treasury securities credited to the DI Trust Fund will reach a 
zero balance by 2016. The Social Security trustees also project a 2016 
exhaustion date for the DI Trust Fund. At that time, DI program 
revenues will only be able to finance 79 percent of benefits, unless 
Congress acts.
      
    According to its July 2012 Policy Options for the Social Security 
Disability Program report, CBO attributes the significant growth in the 
number of beneficiaries to the predictable consequences of both 
demographic factors and policy decisions. The working age population 
has grown and more women have worked enough to be insured for benefits, 
boosting the number of people eligible for DI benefits. The aging of 
the baby boom generation into their most-disability-prone years has led 
to an increase in the number of people entering the DI program. The 
rise in the retirement age has also increased the number of individuals 
receiving disability benefits, as have economic recessions. Medical 
advances that have created better health outcomes have increased the 
amount of time that someone may receive benefits from the DI program. 
Finally, policymakers have also played a role by expanding the ways 
applicants can qualify for benefits which have affected the size of the 
program.
      
    In announcing the hearing, Social Security Subcommittee Chairman 
Sam Johnson (R-TX) said, ``Disabilities can have a devastating effect 
on workers and their families. Disability benefits provide vital income 
during times of uncertainty. We already know the disability program's 
broken process makes people wait too long and that decisions can depend 
more on who is making the decision than what is the right decision. 
Even worse, in just three years disability beneficiaries will face a 21 
percent benefit cut, if Congress doesn't act. We must get serious and 
fix this program.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the financing challenges facing the DI 
program, including why the number of program participants and benefit 
costs have grown so rapidly. The hearing will also examine future 
trends, as well as underlying assumptions about the DI program, 
including entry on and exit from the disability rolls, the capacity for 
work of people with disabilities, and how total government spending is 
impacted by DI beneficiaries.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word or 
WordPerfect document, in compliance with the formatting requirements 
listed below, by the close of business on Thursday, March 21, 2013. 
Finally, please note that due to the change in House mail policy, the 
U.S. Capitol Police will refuse sealed-package deliveries to all House 
Office Buildings. For questions, or if you encounter technical 
problems, please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item 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 submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies 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. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    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.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman JOHNSON. Good morning. Welcome to our first 
subcommittee hearing of the 113th Congress. And I want to first 
introduce our new subcommittee members. They are Mr. Renacci, 
Mr. Kelly, Mr. Griffin, Mr. Thompson, and Ms. Schwartz. I look 
forward to working with each of you.
    We begin our work during a time when the government is 
operating under a sequester proposed by the President and 
agreed to on a bipartisan basis as part of the Budget Control 
Act in August 2011. The House twice passed legislation to 
replace the President's plan with smarter and more responsible 
cuts. Unfortunately, the President and Senate ignored it.
    Right now, America is over $16 trillion in debt. That means 
every American owes more than $52,000. Now is the time to work 
together to stop spending money we do not have.
    Like every American family and business, Social Security is 
challenged to tighten its belt and live within its means. The 
fiscal facts are that, one, under sequester, Social Security 
needs to reduce its operating budget by 3.35 percent not the 5 
percent cut that all other domestic agencies have to sustain. 
There are a lot of families and businesses in my district who 
have had to cut more on their budget than that.
    Secondly, Social Security's operating budget has increased 
by 46 percent over the fiscal years 2003 to 2013.
    The stimulus provided an additional $1 billion to Social 
Security. And the President cut the Commissioner's proposed 
fiscal year 2013 operating budget by 6 percent before it was 
submitted to the Congress, the largest such cut made by 
President Obama during his 4 years. And let me be clear. Even 
with Social Security having to tighten its belt, benefits will 
continue to be paid.
    Today we will hear the latest information about the 
financing challenges facing the Social Security Disability 
Insurance Program. This hearing will build on the groundwork of 
this Subcommittee from the last congress, when we held a 
hearing series on securing the future of the Disability 
Insurance Program.
    Then we learned about the predictable yet striking and 
unrestrained growth of the program and the reasons for it. At a 
time when workers paying into the system have increased over 71 
percent between 1970 and 2012, the number of people collecting 
disability checks has increased by over 300 percent, from 2.7 
million to 10.9 million. By 2023 the number of beneficiaries 
will grow to 12.3 million, and total benefits will reach over 
$213 billion. That is a 57 percent increase over the 135 
billion paid in benefits in 2012.
    And unless Congress acts, in 2016, just 3 years from now, 
disabled workers who can least afford it will be at a risk of 
21 percent cut in their benefit checks. We don't have much 
time, and we need to act now.
    Some of that growth is predictable because of an increase 
in the size of the overall workforce, the entry of more women 
in the workforce, and the aging of baby boomers into their 
disability-prone years. And some of the growth is a consequence 
of Congress's decision decades ago to expand the ways in which 
people could qualify for disability. Our witnesses today will 
explain these numbers further, including the impact disability 
insurance has on other federal spending, along with how the 
makeup of those receiving benefits has changed.
    In this hearing series we also heard about the people who 
try to defraud the system by falsely claiming they are 
disabled. We heard that Social Security's efforts to conduct 
continuing eligibility reviews takes a backseat to handling the 
growing workloads. That choice keeps costs higher, resulting in 
wasted taxpayer dollars, and weakens public trust in the 
program.
    We heard how the last century's view of disability hasn't 
kept up with this century's advances in medicine, technology, 
and the workplace, resulting in a program that pays people not 
to work.
    GAO's High Risk Series Update, issued just last month, 
keeps the high risk designation on the DI program because the 
medical criteria and occupational information relied on to make 
benefit decisions are still out of date. The fact that the DI 
program has been on its High Risk list for 10 years is 
shameful.
    In the hearing series we also heard how important it is to 
make the right decision as early in the process as possible. We 
walked through the lengthy and open-ended initial determination 
and appeals process that enables claimant representatives to 
drag out appeals in hope of getting awards. We heard how 
outlier judges who award disability benefits in most of the 
cases they hear can't be managed or questioned about the 
decisions they are making on behalf of the Agency, encouraging 
a program where who makes the decision and where you live may 
mean more than the medical evidence in the file.
    We also heard how the courts have taken it up on themselves 
to reinterpret Congress's will, creating inequities and 
inconsistencies in this program. And we heard over and over 
that we must keep this program strong for those who truly 
cannot work. And I know that is important to everyone in this 
room.
    Recently Dr. Ben Carson, an individual who overcame serious 
obstacles to become an accomplished neurosurgeon, commented 
that Americans are so concerned with political correctness that 
we are losing our ability to speak and hear the truth.
    We all want to do the right thing for those who can no 
longer work because of a serious illness or injury. Yet, in 
2016, there won't be enough revenue to pay full benefits. 
Disabilities have a devastating effect on individuals and their 
families and every dollar of those disability checks matter.
    It is time to speak the truth, work together, stay on 
target, and fix the disability program once and for all. And I 
now recognize Ranking Member Mr. Becerra for his opening 
statement.
    Mr. BECERRA. Mr. Chairman, thank you very much. Let's 
remind everyone that workers earn their Social Security 
disability protection. Nearly 160 million Americans contribute 
to Social Security, earning protection for themselves and their 
families when they retire, or if they should die or become 
severely disabled. Over its 77-year lifetime, Americans have 
paid into Social Security $13.9 trillion in contributions. Add 
in the $1.6 trillion in interest earned on those contributions, 
and you total $15.5 trillion, all together, that Americans have 
invested into Social Security.
    At the same time, Social Security has paid out only $12.8 
trillion. Do the math. That leaves an overall trust fund 
surplus--not deficit, surplus--of $2.7 trillion in the Social 
Security trust fund. Let's remind people it is not easy to 
qualify for Social Security's disability benefits. Disability 
benefits are only available to those who have paid into the 
system and who have the most severe long-term impairments, 
Americans essentially who are dying or who genuinely can't earn 
even a poverty-level wage at any job in the national economy, 
not what they were trained in, not that they worked in forever, 
but any job. If they can't qualify for any job in the national 
economy because of their disability, then and only then would 
they qualify.
    Make note. About one in seven women and about one in every 
five men die within a few years of being awarded a disability 
insurance benefit. Let's remind people that the Social Security 
Disability Insurance Trust Fund's challenge is modest, stable, 
and it is less immediate than the dangers of the sequester, the 
mindless, senseless, meat axe approach to cutting our budget 
deficit.
    The disability insurance shortfall is relatively modest 
because over the next 75 years the financing shortfall is equal 
to about 1/10 of 1 percent of our GDP. To put that disability 
insurance shortfall in context, the annual shortage in the DI 
fund is equal to less than five percent of the Defense 
Department's annual budget.
    And let's make people are clear. The DI shortfall is not a 
surprise. When Congress last rebalanced the allocation of 
payroll taxes going into the two Social Security trust funds, 
it did so knowing that the amount allocated to the DI fund 
would result in a shortfall in 2016. The recent growth in 
disability insurance benefits also is not a surprise, since it 
is due primarily to the demographic changes and other 
predictable factors in combination with the recession.
    As we talk about the challenge facing the disability 
insurance program we should note that a threat even more 
immediate is if we do nothing about this mindless sequester and 
across-the-board cuts that are going to hit every American 
family and every American taxpayer. That budget sequester went 
into effect on Friday. And as a result of this sequester, 
disability--or disabled workers, excuse me, who are already 
waiting nearly four months for their benefit applications to be 
processed will wait an average of two weeks longer. Workers 
waiting for a judge to decide their cases who already wait, on 
average, about a year for a hearing, will see their waiting 
time grow by about a month.
    The Social Security Administration will have fewer workers, 
fewer staff to conduct reviews of whether individuals continue 
to be disabled, though taxpayers save $9 for every dollar we 
invest in this important program that leads to integrity in the 
use of the Disability Insurance Trust program.
    Our first goal in addressing the DI challenge should be to 
``do no harm''. The severely disabled worker who earned his 
benefits and receives Social Security already faces serious 
challenges. The benefits aren't especially generous. A typical 
worker receives about $13,500 a year, substantially less than 
he or she was making when that individual was able to work.
    Through the Social Security program millions of Americans 
with disabilities have earned hope, dignity, and, when it is 
possible, a chance to work.
    And, Mr. Chairman, I think the more we move forward, we 
will find that we can resolve this in a bipartisan fashion to 
make sure that all Americans who have earned the benefit, when 
they become disabled, have this opportunity to live a life in 
dignity.
    And I would like to close, finally, Mr. Chairman, if I may, 
with one final point. I wanted to make some personal comments 
about our chairman and my friend, Mr. Johnson. As many of you 
may know, Sam and his wife Shirley recently experienced the 
devastating loss of their son, Bob. Please, Mr. Chairman, know 
that our thoughts and prayers are with you and your family.
    And I know that this loss comes at an especially 
bittersweet time for you. It is your fortieth anniversary from 
freedom, from seven years of confinement as a prisoner of war 
in Hanoi, more than half of that time which you spent in 
solitary confinement. We know that you flew over 62 combat 
missions during the Korean War, 25 missions in Vietnam before 
you were shot down. And, Sam, I take this occasion to honor 
your service to our country. You are a tribute to the 
dedication of our men and women in uniform, and your courage 
and strength in the face of unimaginable adversity continues to 
inspire us all. And we consider you a leader of America.
    And with that, Mr. Chairman, I will yield back.
    Chairman JOHNSON. Thank you, Mr. Becerra. As is customary, 
any Member is welcome to submit a statement for the hearing 
record. Before we move on to our testimony today, I want to 
remind our witnesses to please limit your oral statement to 
five minutes, if you can. However, without objection, all the 
written testimony will be made part of the hearing record.
    We have one witness panel today. Seated at the table are 
Joyce Manchester, Ph.D., Chief, Long-Term Analysis Unit, 
Health, Retirement, and Long-Term Analysis Division, 
Congressional Budget Office.
    Chairman JOHNSON. And Stephen Goss, Chief Actuary, Social 
Security Administration.
    Welcome, and thank you for being here.
    Dr. Manchester, you are welcome to go ahead.

   STATEMENT OF JOYCE M. MANCHESTER, PH.D., CHIEF, LONG-TERM 
   ANALYSIS UNIT, HEALTH, RETIREMENT, AND LONG-TERM ANALYSIS 
             DIVISION, CONGRESSIONAL BUDGET OFFICE

    Ms. MANCHESTER. Thank you. Chairman Johnson, Ranking Member 
Becerra, and Members of the Subcommittee, thank you for 
inviting me to testify on the Social Security Disability 
Insurance, or DI, program. My statement is based on a report 
that CBO released last year, in which we examined the reasons 
that the program has experienced rapid growth in its 
beneficiaries and costs, and evaluated a range of options for 
changing the program.
    As you know, the DI program pays cash benefits to adults 
younger than age 66 who have worked in the past, but are judged 
to be unable to continue to perform substantial work. DI 
beneficiaries often receive additional benefits from other 
federal programs such as Medicare, generally after a 24-month 
waiting period, supplemental security income, or Medicaid.
    In 2012 the DI program provided benefits to 8.8 million 
disabled workers and 2.1 million dependent spouses and children 
of those workers. The average benefit received by disabled 
workers last year was about $1,130 per month. And for basic 
facts about the program you can see page one of the handout or 
page two of the testimony.
    Since 1970, the number of DI worker beneficiaries has 
increased nearly sixfold. That growth can be attributed to 
changes in multiple factors, including demographics, the labor 
force, federal policy, opportunities for work, and compensation 
levels.
    Part of the growth reflects the aging of the baby boom 
generation, because older workers are far more likely than 
younger workers to qualify for DI benefits. In addition, the 
share of women who have worked enough to be eligible for DI has 
increased substantially. And you can see the figure on page two 
of the handout, or page three of the testimony.
    Moreover, changes in federal policy, notably the 1984 
Disability Benefits Reform Act, expanded the ways in which 
people could qualify for the DI program. Those changes led to 
an increase in the share of DI beneficiaries with mental or 
musculoskeletal disorders, many of whom enter the program at 
younger ages, qualify based on more subjective criteria, and 
spend more years on the program than do people with other types 
of disabilities.
    Declining opportunities in the labor market for less-
educated workers have also contributed to the program's growth. 
The dividing line between people who can and cannot perform 
substantial work is not always clear. And in some 
circumstances, the program discourages work. For example, some 
people with health problems who have been out of work for long 
periods turn to the DI program for support.
    Since 1970, after adjusting for inflation, outlays for 
benefits from the DI program have grown by more than 9 times, 
while revenues dedicated to the program have increased nearly 5 
times. In 2012, spending on benefits in the DI program was $135 
billion, and the program's revenues, mostly from its share of 
the Social Security's payroll tax, totaled $102 billion. The 
imbalance between spending and revenues will persist in coming 
years, and the DI trust fund will be exhausted in 2016, CBO 
projects. At that time, the Social Security Administration will 
no longer have legal authority to pay full DI benefits.
    The DI program's rapid expansion and the continued gap 
between its spending and dedicated revenues have led some 
analysts and policy-makers to examine options for change. In 
last year's report, CBO, in conjunction with the staff of the 
Joint Committee on Taxation, estimated the budgetary effects of 
several potential modifications to the DI program. As with 
other federal programs, a reduction in the number of 
beneficiaries or in average benefit levels would reduce federal 
outlays, but also reduce the income of potential beneficiaries.
    CBO examined two options that would--the taxes that support 
the program. And again, you can see page three of the handout 
or page eight of the testimony. It also assessed seven options 
that would reduce spending on benefits. Ensuring the solvency 
of the DI program would require combinations of such policies 
or other changes to the program.
    CBO also examined two options that would increase spending 
for the program. Unless those policy changes were accompanied 
by some other reductions in benefits, or by additional program 
revenues, the finances of the program and of the Federal 
Government as a whole would be worsened.
    Policy-makers could also alter the program in more 
fundamental ways. Modifications might include promoting work, 
for example, by focusing on rehabilitation and re-employment 
prior to applying for DI benefits, as has been done in various 
European nations. In CBO's assessment, such changes would 
probably not yield significant short-term cost savings, but 
could provide long-term savings or achieve other goals, such as 
improving the well-being of people with disabilities.
    Thank you, and I will be happy to answer any questions you 
may have.
    [The prepared statement of Ms. Manchester follows:]
    
    
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    Chairman JOHNSON. Thank you for your testimony.
    Mr. Goss, welcome again. Please proceed.

 STATEMENT OF STEPHEN C. GOSS, CHIEF ACTUARY, SOCIAL SECURITY 
                         ADMINISTRATION

    Mr. GOSS. Thank you very much. Chairman Johnson, Ranking 
Member Becerra, thank you very much for the opportunity to come 
again to talk to you about the situation with the DI program.
    On this first little graph that we have up here you can see 
the trajectory of the trust fund status, the reserves that we 
have in the trust funds. And you will back in 1994 we were 
rapidly approaching a date that we are now once again 
approaching for the DI program, as Mr. Becerra indicated. When 
a tax rate re-allocation was enacted back in 1994, just one 
year before those reserves would have been depleted, we 
projected at the time in the following trustee's report in 1995 
that, in fact, they would become depleted again. That was fully 
expected as of 2016. And, lo and behold, our projections today 
are still that it will be 2016. Not a lot has changed.
    The OASI trust fund is in far better financial shape. This 
is really just a matter of the--of how the tax rates are 
allocated between the two funds. It was, in fact, a deliberate 
decision of the congress back in 1994 to re-allocate enough to 
carry the DI program for a while, but not to equalize the 
financial prospects of the two programs.
    Now, why has the disability insurance program really risen 
so much in cost over time? Fascinating story, some of us think. 
What we are used to seeing are the higher lines here for the 
retirement program for Social Security. We are all aware that 
the baby boomers are now in the process of moving into the 
higher ages. Over the next 20 years they will be moving into 
retirement, and they will be followed by smaller generations 
from lower birth rates.
    The real news is that, for the disability insurance 
program, that has already happened while we were paying 
attention, more or less. Over the last 20 years, the baby-boom 
generations have moved from 20 years, at ages 25 to 44, with 
relatively low disability rates, to ages 45 to 64, where 
disability rates are relatively high. So it is no surprise at 
all that we have had a big increase in disability costs over 
this period. And, of course, they have essentially met the 
projections that we had been making back 20 years ago.
    Okay. So let's break down a little bit what has happened. 
We tend to look at, say, 1980 to 2010, not going back as far as 
1970. Of course there were no disability beneficiaries back in 
1956, because there was no disability program then, it was just 
enacted. And it took a number of years, more than a decade, for 
the program to mature.
    So, looking at the increase in the number of disabled 
worker beneficiaries from 1980, where we were essentially 
mature, to 2010, we had a 187 percent increase. That is nearly 
a tripling in the number of beneficiaries.
    So, what are the factors that caused this increase? First 
one we would like to point to is just the sheer population at 
ages 20 to 64, the principal ages at which people are receiving 
disability benefits. Because once they reach the normal 
retirement age--now 66--they no longer receive disability 
benefits. They transfer over and receive retirement benefits. 
We have had a 41 percent increase in just the pure population 
at those ages.
    However, that is only part of the demographic story. The 
second part of it is that that population, age 20 to 64, has 
not stayed static in terms of its age distribution. The baby 
boomers, as mentioned earlier, have moved from 25 to 44 up to 
45 to 64, so that the age distribution of that population, 
which is increased in and of itself, has shifted towards much 
higher ages.
    So, we have not only had a 41 percent increase in the 
population at this overall age, we have had another 38 percent 
increase in the number of disability beneficiaries on top of 
that, because there has been so much of an increase of that 
increase occurring actually at the higher ages. We have had a 
38 percent increase in the numbers of beneficiaries just 
because of the shift in the age distribution. This is even 
assuming that the percentage of people at any given age 
receiving benefits had not even stayed--had stayed the same and 
had not changed at all over time.
    A third factor we would like to point to, which I think 
both the chairman and ranking member alluded to, is that we 
have had some very, very good things happen over the last 20 
years. Women are working much more and much more consistently. 
And, as a result, have become insured to receive our benefits 
to a much greater extent. After all, as we all know, benefits 
are available only to people who have insured, and they have 
worked sufficient to become insured. The percentage of women 
who are insured to receive benefits over the last 20 to 30 
years has about doubled from 35 to 70 percent to essential 
parity with men.
    And the fourth factor that I would like to point to which 
really sort of completes the story of what has really happened 
over the last 30 years, from 1980 to 2010, in terms of the 
increase, is a change in the age-adjusted prevalence rate. That 
is, even assuming that the population hadn't increased, 
assuming that the age distribution hadn't changed at all, and 
we even ignore the idea that the insured numbers had gone up, 
just look at the prevalence rate amongst insured people, 
assuming the age distribution hadn't changed. We still have a 
42 percent increase to explain. About half of that is because 
of increase in incidence rates, largely female incidence rates.
    The other story on incidence rates--that is the percentage 
of people who are insured who start to get disability 
benefits--back 30 years ago those rates were only about two-
thirds as high for women as for men on an age-by-age basis. And 
at this point now those rates have essentially equalized. Also, 
there is a somewhat younger distribution of people receiving 
benefits, which maybe we will get into more in discussion 
after. And also, the death rates have declined somewhat.
    Just to give you a little picture of what has happened in 
terms of the insured rates, you can see how back in 1970, 1980, 
the percentage of women who were insured received disability 
benefit was very low, compared to men. They have essentially 
equalized at this point, and that has put tremendous pressure 
on increasing. The incidence rates for women also, if you look 
back, the pink line used to be quite a bit lower than the line 
for males on an age-adjusted basis, and that has essentially 
equalized.
    In terms of the rates of people terminating or leaving the 
benefit rolls, well, the good news is the red line is death 
rates. And, of course, those have been going down, as death 
rates have been declining for the general population. The other 
news is, of course, that the rate of termination from 
disability for recovery from a medical point of view, or from 
returning to work, has stayed at about one percent, about half 
from each of these.
    We have this little graph that we might talk about more 
later, I hope, about some of the ups and downs that we have had 
in our economy, recessions: unemployment rate is shown in the 
red line; the blue line shows you what disability incidence 
rates are, and those have moved up and down relative to not 
only changes in the economy, but also some changes in policy, 
which, again, I hope we will have the time to talk about a 
little bit more as we go down.
    The final thing, if I may just take one more second, is to 
just talk a little bit about the nature of the distribution of 
impairments for people who start getting benefits.
    On this slide we are looking at what happens at relatively 
younger ages, 30 to 39. It has been rather stable. The 
percentage of people at 30 to 39 starting to get benefits who 
have gotten mental impairments, musculoskeletal, it stayed 
about the same over time. There really hasn't been any change 
on an age-by-age basis. Where there has been a change is at 
higher ages. We are showing it here for men, but for women it 
is very similar. There has been an increase in musculoskeletal 
and a decrease in cardiovascular, not a surprise, and all the 
rest have really reduced deaths. And disabling conditions from 
the circulatory and musculoskeletal, for a number of reasons, 
has risen.
    One thing we probably--I am over time, so I will not be 
able to talk about, but I hope we will talk about it a little 
bit more, is the situation with the CDRs and CDR funding, as 
shown in this figure, number 16. We, back in 1996 to 2002, the 
congress appropriated the money. Social Security did not even 
need all that had been allocated. The appropriations were less 
than had actually been allocated by law, and we were able to 
get the backlog of full medical continuing disability reviews 
done.
    We are now at a position where we do have a backlog of 
those. The Budget Control Act set forth enough money to be able 
to do that. Unfortunately, the appropriations over the last 
couple years have not met the BCA--also have not done that.
    So, the very final point is really just looking at the DI 
cost as percentage of GDP. It has risen over the last 20 to 30 
years for the reasons described. Going forward, we project that 
with some of the incidence rates staying essentially the same 
in the future--we see no reason why they would be going up--the 
cost, as a percentage of GDP, for Social Security will remain 
at about .8 percent of GDP. The real problem is that the 
dedicated revenue for the program is less than that. So we need 
to either find a way to pull down that cost level or pull up 
the revenue level to get those back in sync.
    Thank you very much, and sorry for running overtime, 
Chairman Johnson.
    [The prepared statement of Mr. Goss follows:]
    
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    Chairman JOHNSON. Thank you for your testimony. We will now 
turn to questions. And as is customary for each round of 
questions, I will limit my time to five minutes and ask my 
colleagues to also limit their time to five minutes as well.
    Dr. Manchester, each year CBO produces its own score of 
President's budget. We know the Disability Insurance program 
won't be able to pay full benefits beginning in 2016. That is 
only three years away. Has this President ever submitted a 
budget that included a fix so that full benefits could be paid 
in 2016 and beyond?
    Ms. MANCHESTER. Chairman Johnson, the answer is no. The 
President has not submitted such a budget.
    Chairman JOHNSON. Mr. Goss, unless Congress acts, in 2016 
people receiving disability insurance will face a 21 percent 
across-the-board cut. We are running out of time, unless we 
raise taxes on everyone, including those who can least afford 
it. In the past, when full disability benefits could not be 
paid, Congress enacted a reallocation of the payroll tax so 
that a higher percentage of payroll tax receipts would be 
credited to the Disability Insurance Trust Fund and a lower 
percentage would be credited to the Old-Age and Survivors 
Insurance Trust Fund.
    How often has Congress taken such action, and were these 
re-allocations temporary? And, if not, how long did that policy 
last, and was the retirement program ever made whole for its 
loss?
    Mr. GOSS. Chairman Johnson, thank you. You are exactly 
right, that we are facing a 2016 date, at which point, assuming 
we actually did deplete the reserves of the DI trust fund, we 
would only have $.79 coming in at that moment for every dollar 
of scheduled benefits, and we would have an issue.
    The good news is Congress has never allowed that to happen. 
And we would not be--even if we got to that brink, we would not 
be in a position of having to necessarily raise taxes, because 
a re-allocation, as you all described, could allow us to take 
some of the money that is going out of the OASI, Old-Age and 
Survivors Insurance Fund, put into the Disability Insurance 
Fund, and thereby not raise taxes in near term at all. It would 
just be a transference.
    As for re-allocations----
    Chairman JOHNSON. But the Old Age Fund is your money, isn't 
it?
    Mr. GOSS. Well, the Old Age Fund would, in fact, be 
reduced. We actually have worked out schedules, and have 
provided them and can provide them for the record, of 
relatively modest re-allocations that would equalize the 
prospects for the OASI and the DI trust fund. The DI trust fund 
is now projected to deplete its reserves in 2016. The OASI 
trust fund, we project, will deplete its reserves in 2035.
    So, with a modest re-allocation between the two, they could 
both be moving towards depletion in 2033, giving you good 
gentlemen and gentlewomen the opportunity to have well-reasoned 
and good changes to both of these programs----
    Chairman JOHNSON. The problem is we have got a cliff coming 
at us and we are going to fall off of it, I think.
    Mr. GOSS. We do. If I may, let me just mention on the re-
allocation of the historical, as you asked. I actually looked 
last night very carefully at all of the changes. And looking at 
all the different years since 1957 in which DI tax rates have 
changed and OASI tax rates have changed in the opposite 
direction, where there has been some movement between the two, 
we have had six times where the OASI tax rate has been lowered 
and the DI tax rate has been increased over all those years, 
for a total change of 1.63 percent.
    But we have also had 5 times in which the DI tax rate was 
lowered, and the OASI tax rate was increased, for about a 1.26 
percent total change. So there has been a net transference of 
the tax rates from OASI to DI over that time. But there have 
been changes in both directions, and none of them have been 
terribly long-lived, because the congress, in its good 
thinking, has made changes as necessary throughout this time 
period.
    Chairman JOHNSON. Which of the policies that we have made 
has had the greatest impact on expanding the rolls?
    Mr. GOSS. Well, certainly, the biggest was 1956, the 
enactment of the law. But beyond that, obviously, we have--and 
the little graph that we had up before that showed the 
incidence rates going up and down, but let me just point to 
sort of three changes in the law that have occurred that really 
had impacts. And they go in various directions.
    One is the 1980 amendments that were enacted that put into 
effect a pre-effectuation review, which meant that when 
disability claims are allowed, at the time it said that 65 
percent of those disability claims that were going to be 
allowed had to be reviewed an additional time before claimants 
were even made aware. And that had an effect.
    In addition, back in the 1980 amendments it was put forth 
that we should have continuing disability reviews, which, I 
admit, have not always been fully funded and done to the level 
that ought to be done. But they were put into effect. And both 
of those, obviously, tend to stem the growth in Social 
Security, even in the face of a very severe recession back in 
1982 to 1983.
    A second point that I would like to bring up was the 1984 
amendments which went in the other direction. The 1984 
amendments afforded the possibility in disability adjudications 
to look at multiple impairments instead of single impairments. 
And it also required, for people who were receiving benefits, 
if they were to be removed for medical reasons, that Social 
Security had to prove that there was medical improvement, not 
just that their current status didn't qualify, but there was 
actual medical improvement.
    Chairman JOHNSON. Yes, thank you. You can stop right there. 
My time has expired. Mr. Becerra, you are recognized for five 
minutes.
    Mr. BECERRA. Thank you, Mr. Chairman. Dr. Manchester, let's 
make sure we are clear. Eligibility for these benefits. If I am 
a doctor, a singer, a professional athlete, all of a sudden I 
can't be that basketball player or opera singer, something 
happens to my voice, or I--my sight goes a little poor and I 
can no longer do the surgery, as a physician. Just because of 
those incidents occurring for any one of those types of 
American workers, that doesn't mean they automatically will 
qualify for disability insurance.
    Ms. MANCHESTER. So the answer is a little bit complicated. 
It depends on your age. So, for example, if you are an age 42-
year-old surgeon, and all of a sudden you can't do surgery, 
then you would have to show that you cannot do any job in the 
economy in order----
    Mr. BECERRA. So that means that if I were a surgeon and I 
can no longer do surgery, I still have to prove that I can't 
do--could I be told, ``Well, there is a position open to be a 
janitor at your local school''?
    Ms. MANCHESTER. If you can do some work anywhere in the 
economy, you would not qualify for DI benefits.
    Mr. BECERRA. Okay. So I----
    Ms. MANCHESTER. Now, that is not true at ages 45, 50, 55, 
60. At those ages, there are more allowances made for your own 
career or your own specific kind of work.
    Mr. BECERRA. Right. So the older you get, the less able you 
are--do any number of things because of age. But simply because 
you can't do what you have always done or what you were trained 
to do doesn't mean you will qualify for disability insurance.
    Ms. MANCHESTER. At younger ages, that is true.
    Mr. BECERRA. Yes. And even at older ages. You still may not 
qualify, even if you can't do a number of things as you did as 
a surgeon, professional athlete, or a singer. You still may 
have to do other things. You may have to be a security checker 
at some local shopping mall, or you--so long as you can show 
that you can do a job that is available out there, Social 
Security is not going to grant you disability insurance 
benefits.
    Ms. MANCHESTER. So those regulations do change as you get 
older, so that----
    Mr. BECERRA. Right. Understood, understood.
    Ms. MANCHESTER. Correct----
    Mr. BECERRA. As you get older, your abilities do diminish. 
But no one should be deceived into believing that simply 
because you say, ``I can no longer be the singer performing at 
that opera house,'' that I all of a sudden get to qualify for 
disability insurance.
    Another question. You mentioned that the average monthly 
benefit from disability insurance is about $1,130 a month. Are 
you aware of what the poverty level is considered to be in this 
country.
    Ms. MANCHESTER. Oh, boy.
    Mr. BECERRA. I will tell you. I will tell you, don't worry.
    Ms. MANCHESTER. Okay.
    Mr. BECERRA. It is about $995 a month. And so, essentially, 
you would be earning--or you would be receiving a poverty wage 
which, by the way, you paid into, because when you were working 
you earned the right to receive these benefits, but it is not 
going to make you rich.
    Ms. MANCHESTER. Absolutely not.
    Mr. BECERRA. It may not even let you survive, even if you 
are able to receive these disability insurance benefits.
    Mr. GOSS, you showed some charts. Some people are trying to 
portray the disability insurance program as blowing out of 
proportion. It is going to take us into bankruptcy. I thought I 
saw some charts that showed that, actually, the disability 
insurance program stabilizes, both in terms of cost and the 
number of people who apply for benefits over the long run. Is 
that the case?
    Mr. GOSS. That is exactly the case. The primary driver is--
the vast majority of the changes are the aging of the 
population, and the equalization of insured rates and 
disability incidence rates between men and women. These are all 
factors that are not going to be repeated in the future. They 
have played out, and therefore, we see the cost as being 
essentially a stable percentage of GDP in the future.
    Mr. BECERRA. So, like any good math student who, so long as 
you can figure out the variables that go into that equation, 
you can come out with your answer, we know the variables that 
are driving the increasing numbers of disability insurance 
beneficiaries, and the increased cost of the program, and we 
can see how it stabilizes.
    So, if we are smart, we will all work together to try to, 
as we have done in the past, come up with a mix of fixes that 
ensure that over 75, 90, or whatever number you want to--of 
years you want to decide, calculate, we will make sure that, 
for Americans who become disabled through no fault of their 
own, that if they have paid into the system, they will be able 
to receive some benefits that help them continue to hopefully 
work. But if they can't work, at least to survive in America 
for having been good American workers before.
    Is--have I summed it up in a way that you could agree with?
    Mr. GOSS. I believe that is the intent of Congress in 
enacting this program. And so far it has been doing a very good 
job.
    Mr. BECERRA. Well, and I hope, then, what we do is, Mr. 
Chairman, I think we have time, because, as I think our 
witnesses have mentioned, between the mix of what we do for 
those who are retiring, the aged, those who become disabled, 
certainly more importantly as well, the folks who receive a 
benefit because they are the survivors of an American worker 
who paid into the system and has perished, that what we are 
doing is figuring out, while we have some two decades to figure 
this out, a great--the best way to fix the system to make sure 
it is there for the future generations, as it has been here for 
the rest of Americans.
    So, with that, Mr. Chairman, I yield back the balance of my 
time.
    Chairman JOHNSON. Thank you. Mr. Renacci, you are 
recognized for five minutes.
    Mr. RENACCI. Thank you, Mr. Chairman. I want to thank the 
witnesses for their testimony this morning.
    You know, it is important that those that qualify get these 
benefits, and then they continue to qualify for the benefits. 
And I want to go in that direction.
    But, Dr. Manchester, you said something in your testimony 
this morning that I just want to see if you would expand on. 
You said in some cases this program discourages work. Can you 
expand on that a little bit?
    Ms. MANCHESTER. Sure. So many researchers are concerned 
that, because the applicant has to be out of the workforce for 
five months prior to application, and then the application 
process itself can take a year, two years more, that the time 
out of the workforce leads to a depreciation of their skills as 
a worker. And so, just the fact that they have taken the time 
out of work to apply for a benefit means that they will be less 
able to go back into the workforce.
    Mr. RENACCI. And Mr. Goss, I wanted you to expand on the 
Continuing Disability Reviews. You know, we talk about 
qualifying and then continuing to qualify. I think that is 
important, that the reviews are there. I know it was part of 
the 1980 amendments.
    Can you talk a little bit about what the current backlogs 
are of the CDRs, expand on some of the complications of 
administering the CDR program and, explain what the financial 
impacts CDRs have on the DI program. So that is a lot, but I 
just want to get some more information on that.
    Mr. GOSS. Absolutely. Let me--whatever I can't get in here 
I will submit for the record, for sure. But let me just mention 
also about the idea of discouraging work, I think the very fact 
that there is a five-month waiting period during which you 
cannot get benefits if you become disabled should suggest that 
people would try to work as best they can. If benefits were 
made immediately available upon disability, then I could see an 
argument for saying that people are able to get benefits right 
away, and so they might give up on work. But given they can't 
get benefits right away, that would seem to suggest, actually, 
that they should do everything they possibly can to keep 
working, rather than having a five-month period in which they 
have no income.
    As far as the--what we call the full medical reviews for 
continuing disability reviews, this is really a huge story. The 
graph that we had up there--it is actually figure 16 in the 
written testimony--shows that we actually did, back in the 1996 
to 2002 period, have legislated into law sufficient monies to 
be able to work down our full medical review backlog. And 
luckily it turned out that Social Security was able, through 
efficiencies, to do it for even less. And the actual 
appropriations turned out to be less, but they were worked in 
conjunction--Social Security, the Appropriations Committee--to 
actually get those down.
    We are now at a position, since 2002, the appropriations 
have been very, very, very much below where they were in the 
2002 level by any measure. And our ``backlog'' has grown. For 
Social Security disability insurance full medical reviews, we 
estimate there are about 300,000 cases which we should have in 
process that are not currently in process. In order to get to a 
position where we would not have cases in effect waiting in the 
queue to get into process, we would have to have more revenues.
    The Budget Control Act actually put forth those revenues, 
it put them into law. Unfortunately, in 2012 and 2013, the 
actual appropriations have fallen very substantially short of 
the amount of money that was put forth in the Budget Control 
Act. And, therefore, Social Security has simply not been able 
to do the number of full medical reviews that have been 
scheduled. If we were to achieve the funding from the Budget 
Control Act, we estimate that within five years we would be 
able to get this backlog taken care of and be on track.
    As far as the cost of the program, the level of backlog 
that we have now, if--and this is a little bit hypothetical--if 
this means that the cases that we want to do full medical 
reviews for are about six months delayed from what they might 
otherwise be if we were really fully funded, since we have 
about half-a-percent of our beneficiaries being terminated for 
work reasons every year, if that is six months later than it 
might otherwise have been, that would be a one quarter of one 
percent less cost, if we were able to discover the ability of 
people that they have actually recovered medically, and have 
them depart the rolls by those six months earlier.
    One half percent leaving six months earlier would be a 
quarter percent less cost. On a $140 billion program, that 
would be $350 million annual of lower costs for the program, if 
we were fully funded. And, as I think Mr. Johnson indicated, 
with a $9-to-1--$9 of return for $1 of investment on these full 
medical reviews--this seems like a good investment. So we hope 
that you will talk to the folks over in the Appropriations 
Committee, as my boss is doing right now, and that you will 
help encourage them to give us full funding for that.
    Mr. RENACCI. Thank you, Mr. Goss. I yield back.
    Chairman JOHNSON. Thank you, sir. Mr. Kelly, you are 
recognized.
    Mr. KELLY. Thank you, Chairman. And, Mr. Becerra, I really 
appreciate what you said about the chairman. He truly is one of 
a rare breed of American heroes. And I can't tell you what a 
pleasure it is to serve with you. And those comments are right 
in line.
    The two of you, what I am really worried about is we see 
more people going on to the rolls and not coming off. And 
having been in the private sector all my life, the idea was if 
somebody got hurt on the job, you needed to get them back on 
the job again. So why aren't they coming back?
    I have seen great advances, from the time I first got 
started in business until now. Injuries and things that would 
happen to people before that you would say, ``My gosh, this is 
going to be really a difficult thing for them to recover.'' 
That is not the same any more. We have had great technology, we 
have had great innovations. We have had a great advance in 
that. And not with any disrespect. I mean, Mr. Becerra, not 
about the opera singer that can't hit the high note or the low 
note. I am talking about people who work on their feet and work 
with their hands, musculoskeletal problems. I have sat in on 
hearings to hear that.
    What is driving this? If we have such great advancement, 
why aren't we having them return to the payrolls? Why aren't 
they coming back into the workforce?
    Ms. MANCHESTER. This hearkens back to my earlier answer. I 
think that people have to prove that they are unable to work in 
order to qualify for the DI program. So once they have been out 
of the workforce and they have convinced themselves and the 
examiners that they cannot work, it is extremely difficult for 
them to get back in to the workforce.
    Now, in response to this program, many researchers have 
identified the idea of early intervention. So this means that 
firms, employers, would work hard to keep their employees on 
the job, even as they see that their skills are maybe not as 
used because they are experiencing health problems. But they 
will work very hard to use technology, to use perhaps 
retraining and other means, in order to support their efforts 
to stay on the job so that they are not removed from the 
workforce for a couple of years before they are told, ``Well, 
you should try to get back in to the workforce.''
    Mr. GOSS. If I might add, part of the reason, clearly, is 
that we have such an incredibly strict definition of 
disability. Mr. Becerra was referring earlier to what we 
sometimes refer to as sort of an occupational definition. If a 
great surgeon with great digital dexterity for some reason 
loses that, we do not allow that person for benefits. So they 
could become a medical consultant to help us making disability 
determinations, where they don't need the dexterity any more.
    Under an occupational definition, which most private 
disability insurance works on, there is a much greater 
opportunity to get people back to some job by working with 
them, maybe even the same job. But we have so much stricter 
definition.
    The other thing that I would really suggest is that what we 
really need is--and I am sure this is something that you all 
are more aware of than we are--is jobs. We really need the 
opportunities for people to get back to work. Dr. Manchester is 
exactly right, that once people have been out of the workforce 
for a while, it is harder to get back. But it is even harder if 
there aren't good jobs there for which they have been properly 
trained and skilled to take those jobs.
    Mr. KELLY. And those numbers are increasing, though, with 
the recession, the depth of the recession. I am just going 
back. This is my private life. Listen. We have technicians that 
we need on the shop floor. Each service bay has to turn so many 
hours a day. We need those people back to work.
    When you talk about strict definitions, I mean, if we make 
it hard for people to recover because we change the definition 
of recovery, or returning to your skills--I wonder about this, 
because I have seen great techs take a job at the service 
counter, becoming advisors, and losing their production on the 
floor, and going through this process of trying to get them 
back to work.
    Unfortunately, sometimes the incentives go the opposite way 
of what they are intended to do. And this economy certainly 
doesn't lead to the fact that, ``You know what, what would you 
rather do?'' This is almost like a Wendy's commercial. Should I 
stay on disability and make this amount of money? Or should I 
go back and find a job where I will make this? It doesn't take 
a genius to figure out what they are going to do.
    I think we had good intentions. But we have made it 
impossible for people to make the right decision, because the 
metrics just don't match.
    Mr. GOSS. Well, in your wonderful business, where it sounds 
as though you were doing everything possible to encourage 
people to get back to full production, which is great, I think 
the nature of the way that the benefits work under Social 
Security is that, by and large, people do not get more than--
and maybe generally not even as much as--half the level of 
income that they were receiving when they were actually 
working.
    My sense--and I presume everybody in the room shares this--
is that Americans have an incredibly strong work ethic.
    Mr. KELLY. I agree.
    Mr. GOSS. If they have an opportunity to get a job I hope 
at your firm or your former firm, and they can get that job and 
get twice what they would be receiving from disability 
benefits, that the vast majority of Americans will seize that 
opportunity in a heartbeat. So I would just hope that if--
hopefully the economy revives--we are still at eight percent 
unemployment, but we are eager and are projecting that we will 
get back there in just a very few years--that that will make a 
big difference.
    We have, though, nonetheless, with the disability insurance 
program, with everything that has been happening in the 
economy, we continue to have about one-half percent of the 
people receiving benefits every year return to work and leave 
our rolls. But keep in mind that is one-half percent every 
year. On average, people receive our benefits for about 12 
years. Half a percent a year, that means six percent.
    So, it is not as bad as half percent. People come on the 
rolls, there is an expectation that six percent of them should 
be expected to leave the rolls before they reach retirement age 
and return to work. And roughly another six percent are leaving 
the rolls because of medical improvement.
    Mr. KELLY. Thank you.
    Chairman JOHNSON. Thank you. Mr. Tiberi, you are 
recognized.
    Mr. TIBERI. Thank you, Mr. Chairman. Thank you for your 
leadership. Thank you for Mr. Becerra's leadership, as the 
ranking member.
    I am depressed. And let me tell you why. I don't know how 
we solve the problem, when we can't agree what the problems 
are. And let me tell you what I mean.
    Mr. Becerra says the shortfall is modest, that stability is 
coming. Now, I love Mr. Becerra. He and I could drink a bottle 
of wine together and have a really good time talking about 
sports--not politics--and then I read your testimony, both of 
your testimonies. You say there are incentives that discourage 
work. You say that we have 102 billion coming in, 135 billion 
going out. Is that right? You say that there are more younger 
recipients, which means that they will--at least 94 percent of 
them--will be on for a longer period of time, which I would 
think means it stresses the system.
    You say fewer death rates. That means people are living 
longer, right? They are not on the system less.
    In your conclusion you say ``Restoring sustainable solvency 
for the DI program requires about a 16 percent reduction in 
benefits''--that stinks for a beneficiary who is truly in need 
of them--``A 20 percent increase in revenue, or some 
combination of these changes.'' And then you go on to say, 
``Similar changes are needed for the OASI program.''
    Congressmen do pay into Social Security, by the way, for 
everybody in the audience and reporters who are here. I look at 
my Social Security benefits, and I see that when I retire, if 
we do nothing I am expected to get less than 75 percent of the 
benefits that are entitled to me.
    And yet, it is like we don't even do anything. It is not a 
big deal. It is going to be stable. The shortfall is modest. I 
am really concerned. I know you are concerned about the 
beneficiaries, as well.
    So, Dr. Manchester, what do we do?
    Ms. MANCHESTER. So, to straighten out some of the 
confusion, I think that Congressman Becerra was talking about 
the overall OASDI program.
    Mr. TIBERI. I think he was, too. To the chairman's point, 
we have got three years, right?
    Ms. MANCHESTER. For the DI program, that is correct.
    Mr. TIBERI. Yes.
    Ms. MANCHESTER. That is correct. And, of course, in our 
report from last year we laid out a number of options that the 
congress could choose to adapt or not that, in combination, 
could lead to improvement in the DI program finances.
    In addition, we talk about some fundamental reforms that, 
over time, could also lead to improvements in the DI program 
finances.
    I think it is important to realize that this is a program 
that does serve a number of people who really need the benefit.
    Mr. TIBERI. Absolutely.
    Ms. MANCHESTER. But that there may be ways to get to people 
sooner in the process, so that we can keep them on the job. And 
they may be better off themselves, if they can stay on the job.
    It is also important to realize that it is not just DI 
finances that we worry about when we think about how many 
applicants eventually go on to the program, because of course 
those folks also qualify for Medicare benefits after 24 months 
on the program. I said earlier that the----
    Mr. TIBERI. Whether they are 65 or not?
    Ms. MANCHESTER. Oh, no. If they are DI beneficiaries on the 
program----
    Mr. TIBERI. I just want to make sure you say that.
    Ms. MANCHESTER. Yes.
    Mr. TIBERI. So everyone is clear on that.
    Ms. MANCHESTER. Yes.
    Mr. TIBERI. Particularly the reporters in the room.
    Ms. MANCHESTER. Okay.
    Mr. TIBERI. Could you say it again?
    Ms. MANCHESTER. If they are DI beneficiaries on the program 
for two years, they then qualify for Medicare benefits.
    Mr. TIBERI. Whether they are 65 or not?
    Ms. MANCHESTER. Correct, whether they are 65 or not. And we 
figure that the average DI benefit on an annual basis is about 
$13,500. The annual Medicare benefit for folks who are on the 
DI program and receive Medicare is about $10,500 per year. So 
it is another substantial cost.
    Mr. TIBERI. So when you say reasons the program has grown 
so rapidly, changes in demographics--which you all talked 
about--growth in the labor force, changes in federal policy, 
and changes in opportunities for employment and compensation, 
on changes in federal policy, are there things that we can do 
to reverse that on federal policy?
    Ms. MANCHESTER. So that is a decision to be made by 
Congress. I think there are ideas out there that would better 
target people who have some remaining capacity to work. So 
those are the kinds of things that you might want to think 
about.
    Mr. TIBERI. Thank you so much. Comment?
    Mr. GOSS. Yes, please. First of all, there is no 
disconnect. I think, you know, both of these positions that you 
mention are correct. We are facing a substantial shortfall. But 
the characteristic of it that I think Mr. Becerra was referring 
to is it is not like the thing that we were all worried about 
before the Affordable Care Act--perhaps not a good thing to 
mention----
    Mr. TIBERI. Probably not.
    [Laughter.]
    Mr. GOSS. When the cost of Medicare, as a percent of GDP, 
was rising, it was going vertical on us. It is not projected to 
be doing that now. But the good news is, for Social Security, 
all components of Social Security are not going vertical. They 
are staying constant, as a share of GDP. Now, the percentage of 
GDP is higher than the dedicated resources. That is where the 
shortfall is. But the good news is that shortfall is not 
getting bigger over time.
    We also have done a lot of work on possible changes that 
could be done. We have a letter--it is up on our website--back 
in July of 2011 for Senator Coburn addressing a number of 
different changes. Many of the changes individually, and 
certainly collectively, would more than eliminate the shortfall 
that we see for Social Security in the long run.
    In fact, on the revenue side, the 20 percent increase in 
revenues would be equivalent to a 0.4 percent increase in the 
payroll tax rates, if you want to do it 100 percent, just on 
the basis of payroll tax rate.
    Mr. TIBERI. Well, my time has expired. But you also have to 
factor in the other issue that the payroll tax is not properly 
funding the program today. So it is not just in the context of 
this.
    Mr. GOSS. Exactly.
    Chairman JOHNSON. Thank you for your questions. Mr. 
Griffin, you are recognized.
    Mr. GRIFFIN. Thank you, Mr. Chairman. Thank you all for 
being here. And I was not here the last congress, so I do not 
have the benefit of a lot of what went on then. So this may be 
duplicative, but I want to focus on a story that was in our 
statewide paper in Arkansas, the Arkansas Democrat Gazette. And 
it was entitled, its recent article, ``Benefits Link Cited as 
Mire for Medicaid: Disability Cost Now 51 Percent of State's 
Medicaid Program Growth.''
    And the general point of this article was the fact that 
once people get on disability, they are eligible for Medicaid. 
And while the Federal Government may be paying for part of 
that, the state has to carry that Medicaid cost. And this is a 
huge problem for us in Arkansas, and it is a quite extensive 
article that explores some different options.
    And one of the things that struck me is there are a couple 
of quotes in here that reflect some of what has been discussed 
here, which is that, unfortunately, in some of the areas that 
have lost significant population, those are the areas of the 
state where disability has increased drastically. And this 
article explores the fact that some maybe are using disability 
as unemployment insurance.
    I am going to read a couple of quotes. This is from a state 
senator, a Democrat. He says, ``I know people who lost their 
job because it went away. There is not another one, so they go 
ahead and apply for disability.''
    And then there is a quote in here from Mary Daly, economist 
with the Federal Reserve Bank in San Francisco--I am sure you 
are familiar with her--she says, ``A really important question 
for the nation and for states is has this become our long-term 
unemployment insurance program?''
    That is bothersome, not because we don't want people to 
have a safety net with regard to Unemployment Insurance, but we 
want programs to be used for the intended purpose. There are a 
lot of people that rely on Social Security disability who are 
disabled. And when people who are not disabled use this program 
inappropriately, even if--I am not saying they don't need a 
safety net, but when they use this program, they are 
threatening the benefits to the people for whom the program was 
intended.
    So, my first question--I am sure you have gone over this ad 
infinitum in the past, but is it not doable to simply have a 
better screening process? I mean what is hard about that? We 
put people on the moon. I mean can we not do a better job of 
weeding out applicants who are inappropriately getting 
benefits, and putting the benefits of the disabled at risk?
    And I mean we have got a quote here by this same Democrat 
state senator, who says, ``Either we have got some folks with 
handicaps, or we have got some good folks who are filling out 
the paperwork.'' Now, I wouldn't have put it that way, but you 
see the point.
    So, could you comment on that?
    Ms. MANCHESTER. I would just say that it is extremely 
difficult to draw the line between a person who is actually 
able to work and a person who is not able to work. That is an 
extremely difficult, sometimes subjective, judgement call to 
make.
    It is true that many, many highly-qualified people are on 
the program. They absolutely cannot work. But in recent years 
there have been three academic papers coming at the problem 
from very different approaches identifying younger DI 
beneficiaries, and especially younger beneficiaries with 
musculoskeletal and mental impairments who apparently retain 
some ability to work. So it might be possible to look at those 
kinds of beneficiaries in particular, to see if we can help 
them get back to work. It is a very difficult problem.
    The other thing to mention is that, especially during 
recessions, if a disabled person has had a job that has worked 
well for them but they lose that particular job, it may be 
extremely difficult to find another job that suits their needs. 
And so they look at the opportunities available to them. Do I 
want to go on DI? Or you were talking about the SSI program, 
which is a separate program that has limits on income and 
assets. That SSI program also grants immediate access to 
Medicaid benefits. And part of those Medicaid benefits are 
funded by the states. But it has exactly the same medical 
requirements to get on to the SSI program.
    So you want to think about that young person, perhaps, who 
is looking at a job at very low wages, if they can find one, 
versus a DI benefit with Medicare benefits to come down the 
road, or an SSI benefit with immediate Medicaid benefits. And 
it turns out the way the benefit formula works, a very low-
income person gets a pretty good replacement rate. The DI 
benefit has been indexed to the average wage in the economy. 
Because of growing income inequality, the average wage has been 
growing faster than the low-wage jobs can pay. And, therefore, 
you get a better rate of return for that very low-wage worker.
    Now, this is not to say that people don't have a good work 
ethic. It is just to say that they make a choice based on what 
is available to them, and they take all those factors into 
account.
    Chairman JOHNSON. We have got the IG working on that. The 
IG is into that, big time. And we will talk more about that 
next week.
    You have one second.
    [Laughter.]
    Mr. GOSS. One second, okay. Well, three little points, so I 
will try to make this super quick.
    First of all, we all feel for areas such as some in 
Arkansas, where there has been population loss. And I would 
suggest that in areas that have actually had population loss, 
that is probably because of lack of job opportunity. The people 
who really can hold a good job, many of them have probably 
left, thereby leaving more people behind who perhaps are 
disabled. So we shouldn't be real surprised in such areas that 
you have seen more people getting disability.
    The other thing, too, about Medicaid, that Medicaid costs 
for disabled have been increasing faster, this is again just 
the demographics. Because disabled are--remember, that is the 
area where the baby boomers have been moving into disability 
ages. They haven't yet moved into the retirement age. That is 
coming. So we have this thing.
    And the fine little point is that, as Joyce mentioned, the 
determination of disability is very, very tricky. Remember, 
only one-third of people who apply for disability benefits are 
allowed a benefit at the initial stage of adjudication; about 
one-half are allowed of those who have--additional folks that 
we deem to be additional folks coming in during this most 
recent very severe recession. Less than that have actually been 
allowed benefits. It is a tough process, it is a strict 
definition. Not everybody gets on.
    And SSA is doing the best it can. And hopefully the funding 
will be there to be able to do a better job, especially in the 
medical reviews.
    Chairman JOHNSON. Part of it is the disability judges, too. 
We are getting after them. The IG is really working this hard. 
In fact, had to hire more people to do it. Thank you for your 
comments.
    Dr. Manchester, the Ticket to Work program has attempted to 
support those looking to leave the rolls. Do you think it has 
been successful? And has the reality matched the saving that 
was projected when it was put out?
    Ms. MANCHESTER. So, Chairman, CBO has not done independent 
analysis of the Ticket to Work, but it appears that there has 
been no change in the proportion of DI beneficiaries who leave 
the rolls to go back to work. So in that sense it does not 
appear at this time to have been successful.
    I think more and more people are thinking that we need 
something at an earlier stage of the process, so that we reach 
people before they make the decision to apply for benefits.
    Chairman JOHNSON. Mr. Goss, a recent proposal by Jeffrey 
Lehman--he was an advisor for Obama and Clinton--and Jack 
Smalligan, formerly a guest scholar at Brookings, estimated 10 
percent of those currently on the rolls could return to work, 
if they had the proper support. Do you agree with that?
    Mr. GOSS. I think we would all agree with that. Of course, 
the question is what is proper support?
    Chairman JOHNSON. Yes, I know, you all are trying to 
address it.
    Mr. GOSS. How expansive is proper support? Clearly, many 
people who have disabling impairments, with some level of 
support, could do some substantial gainful activity. But the 
extent of the support that is available in the private sector 
that employers can afford to provide for their employees in a 
very competitive work environment is limited. And the amount by 
which the Federal Government will provide the wherewithal to 
provide such supports is also limited.
    If I may, Chairman Johnson, you mentioned something about 
the administrative law judges. It just happens that we looked 
very recently for another purposes at something that I think 
you will find remarkable, as I did. We looked at disability 
applicants to our Social Security disability program back in 
1988, and looked at the share of those that end up getting 
allowed that are allowed at the initial versus the hearings 
level. And we found 63 percent are allowed at the initial 
level, 9 percent are allowed at the reconsideration level, 
which is sort of first appeal, and 27 percent are--were allowed 
of those who applied and got allowed back in 1988 at the 
hearings level.
    So, fast forward. We looked at the 2008 applications, just 
before the recession hit. We find, remarkably, 63 percent of 
those who got allowed at the initial level. Now 6 percent got 
allowed at the reconsideration level, and it is up to 31 
percent at the administrative law judge level. However, that is 
fully explainable and understandable. Between those two time 
periods we had the prototype model come in, and one-fourth of 
the country is operating without the reconsideration step.
    So, the first level of appeal in one-fourth of the country 
is no longer the reconsideration, it goes straight to the 
administrative law judge. So the change from 9 percent down to 
6 percent for allowances at reconsideration and the increase 
from 27 up to 31 percent at the hearings level would appear to 
be solely because of the elimination of the reconsideration 
step in one-fourth of the states, which are around----
    Chairman JOHNSON. Well, are you saying the ALJs are doing a 
good job or a bad job?
    Mr. GOSS. Well, I wouldn't say they are doing--well, I 
would say that they are----
    Chairman JOHNSON. Because we have had some problems with 
them.
    Mr. GOSS. They are probably doing a similar job. One of the 
things, if I may, that is also remarkable, something we have 
learned really quite recently, is that of the people who are 
denied an initial disability, they are denied at 
reconsideration, and then availed themselves of the opportunity 
to appeal to the administrative law judge, historically we have 
all tended to think of that as being about 60 percent get 
allowed.
    Recently, in about the last year, we have seen that 
percentage go down to about half, to actually a little bit less 
than 50 percent. We are struggling to understand exactly the 
reasons. We know two reasons----
    Chairman JOHNSON. Because we put pressure on them, that is 
why.
    Mr. GOSS. Well, there may be some of that. I would like to 
think it is cooperative, positive persuasion.
    There is another factor, though. The surge of people who 
did come in and file for disability back in 2009 and 2010, it 
takes a while before they find their way to the hearings level. 
And we saw the surge of that come in in 2011 and 2012. And we 
do believe that the allowance rates ultimately, for people who 
come in in times of recession, the extra folks, will be at 
lower allowance rates. And that appears to be the case.
    In addition, our appeals council, which is really a level 
of oversight over the administrative law judges, has been 
doing, really, a good job. Hopefully you will get to hear more 
about this, of going back and talking to our hearings offices 
about the nature of the way that they are making decisions, and 
getting mutually educated, and giving them good feedback. And 
that appears to be making a real impact.
    Chairman JOHNSON. Thank you. Mr. Becerra, you are 
recognized.
    Mr. BECERRA. Thank you, Mr. Chairman. And I think Mr. Kelly 
was trying to get to this point, as well. At least I think I 
heard him say this. Time is money, especially if you are in a 
business where you--the product you buy can go up in price at 
any moment in time. I know my father was in construction, and 
he would always tell me how they were always--he was a 
construction worker, you were always told, ``If we can get the 
job done, we will get it done now, because we don't want to 
worry about paying for cement next week, because it may go up 
in price, or timber may go up in price.''
    And I gather, from what, Dr. Manchester, you and Mr. Goss 
are saying, that even in this process, the disability 
insurance, time is money. And so, if we delay a determination, 
more chance that that person will age out and have skills no 
longer as a--prepared to move into the workforce again. It 
becomes more difficult for that person to get back in the 
workforce.
    And so, what we want to do, if we can, on our end, where 
the problems might be man-made with regard to the disability 
insurance problem, is flush out those manmade problems. And so, 
if one of them is time, delay, then one of the things that I 
would hope that we would look at doing--and you all give us 
counsel on--is getting rid of those delays, so we have quicker 
determinations, hopefully more crisp determinations.
    And my sense is that--as, Mr. Goss, I think you pointed 
out, as well just a little while ago--these determinations, 
that the integrity of the program to make correct 
determinations, so that whether it is the ALJ or whoever gets 
to make a determination whether this person is disabled or not, 
let's make it on solid evidence that this person is or is not 
disabled. And if we invest in making sure that there is 
integrity in the way those decisions are being made, we save 
ourselves, I think you said, $9 for every dollar we invest in 
that integrity review for those medical determinations and so 
forth.
    So, sounds like you are pointing out some ways that we 
could pretty quickly start to make some progress if we avoid 
the long delays that make people's skills more stale and less 
attractive to employers, and if we put a little money in to 
make sure we avoid the person who is trying to sneak into the 
system, isn't truly totally at a point of qualifying for 
disability insurance, and get them back to work as quickly as 
possible, and have them find that they could earn more money 
getting back to work than trying to collect on a disability 
benefit.
    Is your sense that if we were to really make the investment 
in program integrity, these medical determinations, Mr. Goss, 
that we could make progress in getting folks either back to 
work or off the disability insurance rolls?
    Mr. GOSS. There is no question but that if we made a 
greater investment, if we even just met the levels put forth 
that you all enacted in the Budget Control Act, we would be 
able to get up to speed, we would eliminate the backlog for 
full medical reviews.
    And the important point on that, I think, is that if we are 
delayed in allowing a person a benefit initially, Dr. 
Manchester is exactly right, that that is more time that the 
person is, in effect, required not to be working, because they 
are waiting to see if they will get a determination. But also, 
there is another factor to that. If they wait an extra six or 
eight months to receive their initial determination and they 
are allowed benefits, they get the back benefits.
    Whereas, if we are delayed in doing our full medical 
reviews to determine whether somebody is medically improved and 
would be leaving the rolls, it is only the point at which that 
determination is made that the benefits cease. In fact, we 
determine it appears as though they actually did improve six 
months ago, they keep the benefits from those six months and 
they only--so getting up to speed on those full medical reviews 
is really important, from the point of view of the accounting--
--
    Mr. BECERRA. Dr. Manchester, would you agree with that last 
point?
    Ms. MANCHESTER. I would, indeed. I would like to make an 
additional point, however.
    Mr. BECERRA. Sure.
    Ms. MANCHESTER. And that is that the first million dollars 
that you spend on CDRs may have that 9-to-1 return. So you are 
finding the cases that are easy to find in which the people are 
really going to go back to work. Then the ninth million dollars 
that you spend on CDRs is not going to have such a high rate of 
return, because it is much more difficult to find those 
marginal cases.
    Mr. BECERRA. Right. You are picking the low-hanging fruit 
at the very beginning.
    Ms. MANCHESTER. Exactly.
    Mr. BECERRA. But it is still good to pick that fruit.
    Ms. MANCHESTER. Oh, absolutely.
    Mr. BECERRA. Yes.
    Ms. MANCHESTER. No question.
    Mr. BECERRA. And you mention the case that, based on age, 
different tiers, that the standard for actually going back to 
work changes and it becomes more favorable to disability, the 
older you get.
    Ms. MANCHESTER. Yes.
    Mr. BECERRA. And so, the quicker we move on these cases 
that are just pending, the less likely we are going to let 
someone age into a category that would have now allowed them to 
not go back to work.
    And so, would you agree, then, that the more we can work to 
remove these delays, the better off everyone is, not just the 
person who gets to go back to work, but the taxpayer who is 
helping provide that service to the individual?
    Ms. MANCHESTER. Yes.
    Mr. BECERRA. To a disability benefit?
    Ms. MANCHESTER. That is definitely true, yes.
    Mr. BECERRA. I appreciate your testimony. Thank you very 
much for helping us with this. Thank you.
    Chairman JOHNSON. Thank you. Mr. Kelly, you are recognized.
    Mr. KELLY. Thank you, Mr. Chairman. And this is going to be 
very quick. Tell me about the revenue streams. So where does 
the money come from that goes into these funds?
    Mr. GOSS. Oh, well, the revenue for both the disability 
insurance program and the old age and survivors insurance 
program, and, for that matter, also the hospital insurance 
program for Medicare, work essentially--not exclusively, but 
essentially almost completely out of payroll taxes that are 
paid by the American workers.
    For the Social Security program, it is up to $113,700. 
People who earn more than that do not pay taxes on anything 
above that level. But the individual worker pays 6.2 percent, 
and their employer pays an additional 6.2 percent. Self-
employed individuals pay the whole 12.4 percent by themselves. 
Those monies go into the trust fund.
    And there are two sort of significant things about the 
money as they go into the trust funds. First of all, they are 
required--the monies that aren't spent right away are required 
to be invested in interest-bearing securities backed by the 
full faith and credit of the U.S. Government, which we all take 
to be the most secure investment anybody could consider making. 
And the other is that we have had legislation in the past--I 
think back in 1996--that suggested that any penny that goes 
into those trust funds can be used for one and only one 
purpose, and that is to pay benefits.
    Mr. KELLY. Okay. So the money going in is coming from 
employers and employees paychecks.
    Mr. GOSS. Exactly.
    Mr. KELLY. Okay. And it is a percentage of their income. 
So, in a dynamic and robust economy, we probably wouldn't be 
having this discussion, or it wouldn't be at the edge of the 
cliff, the way the chairman described it. And I would say that 
not only do we have a lot of disabled people, we have an 
economy that is very sick and very ailing.
    Now, having been part of the program as an employer, 6.2 
percent of everything I paid everybody every 2 weeks I put in. 
They put in and I put in. And in my own check I put the 12.4, 
it was all mine. I think sometimes we lose a fact that all of 
these things are fixable if we could get this country back on 
its feet again. And we continue to talk--and these are great 
conversations--but if we don't get this economy fixed, it is 
just talk. It is just idle conversation. ``Yeah, we could do 
this and we could do that.''
    But if a percentage of everything I make goes into that 
fund, the more I make--so a middle income family that was 
making $54,000 or $55,000 a year is now making $50,000 or 
$51,000. And if it was at 4.2 and not 6.2, the way it had been 
the last couple of years, you have less money coming in, more 
money going out. The metrics just don't make sense to me, from 
a purely business standpoint. And this is all fixable.
    And this is the thing that drives me crazy in the two years 
I have been here. We talk more about these programs, and how we 
have to sustain them, as opposed to how do we keep alive the 
goose that is laying the golden egg. That if you want to see 
these programs get fixed--and this is a fascinating 
conversation--we better get this country back to work. And we 
better take advantage of what the Lord has given us. We are 
twiddling our thumbs and not addressing the real problem, and 
that is getting America back to work.
    And I got to tell you, Mr. Chairman, I appreciate this. I 
fight with this every day in the private sector. I want 
everybody I work with to have the best benefits possible.
    Now, in addition to Social Security disability, we also 
have accident disability insurance in the dealership. So I 
would say to you that while the Social Security part may not be 
as much as they were making before, when we throw in ours on 
top of it, it is a little bit different picture.
    Now, I am not discrediting anybody and saying they don't 
have a great work ethic. I am just saying that somehow we have 
turned upside down the meaning of incentive. As an individual, 
I just would rather be in control of my future. I don't want 
somebody in Washington, D.C. who doesn't know me, doesn't know 
what I do, doesn't know what my dreams or aspirations are, to 
have a determination of what I am going to be able to do in my 
life. I think that is wrong.
    So, thank you for what you are doing, keep up the good 
work. We will keep watching. But you know what? The answer--we 
got to get back to work. We got to make decisions that get 
people back to work, allow their incomes to rise, allow 
businesses to prosper. Because the percentage of a larger 
number is much better than a percentage of a lower number. And 
everybody I know that is out of business is not contributing to 
this fund. So I thank you very much.
    Chairman JOHNSON. Thank you. Mr. Griffin, you are 
recognized.
    Mr. GRIFFIN. Thank you, Mr. Chairman. I ran out of time 
last time. I just wanted to thank you all for being here. I 
really do appreciate it. And I want to say I look forward to 
the upcoming hearings and the IG's investigation.
    I will tell you, as someone who has not been on this 
Subcommittee long, that I get so many anecdotal stories about 
abuse, waste, fraud, and abuse in this area. And I know that--I 
know for a fact--that a lot of them are true. And I know my 
constituents are on to something. I have learned in the last 
two-and-a-half years that when you start to get a lot of the 
same sort of stories from your constituents, that there is 
something there.
    So, while some things may be going well, my constituents 
tell me that there are a lot of people they know who are on 
disability who should not be on disability. And that is putting 
pressure on the funding for the people who need, who 
legitimately need, those benefits.
    And so, I don't believe everything is great. I look forward 
to learning more about where the problem is. But I am 
convinced, based on what I have seen and heard, that there is a 
major problem with the process of being--receiving--applying 
and receiving these benefits. I have not identified where all 
those problems are yet, but I know there is a problem.
    And I have also learned in my 10 years prior to coming to 
Congress and working in D.C., that there is not an agency up 
here that couldn't stand some significant reform, and that you 
just happen to be the one in front of us right now. But you 
could take any one of them in this city--and some of them I was 
a part of for years--and there is plenty of room for reform.
    So I look forward to learning as we go through this. But I 
am very, very suspect of what is going on. And we will continue 
to look at this. Thank you, Mr. Chairman.
    Chairman JOHNSON. Thank you. We welcome Ms. Black from 
another subcommittee, she is on the full committee--and thank 
you for being here today. Ms. Black, you are recognized for any 
question you might want to ask.
    Ms. BLACK. Mr. Chairman, thank you so much for allowing me 
to be here to hear the testimony, and to be able to ask 
questions. This is an issue, having been on Ways and Means for 
the last two years, that we have heard some testimony in some 
of the other committees, so I am very interested.
    And there is so much yet to learn. And I want to start out 
my remarks by saying thank you for being here. But I am going 
to ask if there is a way also to start understanding more about 
the process. Because it seems that when I do talk to my 
constituents who are either applying for or have qualified, the 
process is so onerous.
    I want to look at the six different areas that I have to 
learn more about. And that is, first of all, the application, 
the full medical review, whether there is a criteria that is 
used there that is consistent across the board for a 
determination to be made, and then the denials, because we hear 
that you are denied the first time. Very seldom do I hear 
somebody getting the qualification the first time, so the 
denials.
    What happens next from that, the appeals. What I hear is 
that they have to hire an attorney, they do have to get legal 
counsel. And then the other area is the administrative law 
judge, because in my reading I see that there is a real 
disparity from one end of this country to the other 
geographically. Some judges will approve 9 out of 10 cases, 
others are 2 out of 10. And so understanding where the 
consistency is there, if we need to do some work in that area.
    And then, finally, the review after they have qualified. 
How do we check up? Are we doing a good job to make sure that 
someone can't still work and perhaps even find a job to get 
them back into the workforce?
    So, those are things that I would like to learn more about, 
Mr. Chairman. Maybe that is something I just need to get 
somebody to come and talk to me. But I think that is, from my 
point of view, something that people really don't have a good 
grasp on. So maybe there is an opportunity for us to learn more 
about that.
    Chairman JOHNSON. Come back next week. We are going to talk 
about that next session.
    Ms. BLACK. I will be here. So let me ask you about the 
chart that is on page 11. Because, as a nurse, I am very 
interested when I see these large groups of qualifying areas.
    So, one of those that, obviously, is the largest, is mental 
disorders. And then the next one is musculoskeletal. I would 
like to know if you can give me an idea about the diagnosis 
that is the most prevalent diagnosis in these areas, because 
musculoskeletal obviously covers a broad range, as does the 
diagnosis of mental disorders. So, do you have that 
information? Is that available, so I can understand more about 
why these categories--particularly with people between the ages 
of 30 and 39 that are qualifying under this, because for 
females it is 55 percent and for males it looks like it is 58 
percent of those that qualify. Am I reading that correctly?
    Mr. GOSS. I don't think so. I am looking at figure number 
12----
    Ms. BLACK. Okay.
    Mr. GOSS [continuing]. Which are for women at age 30 to 39.
    Ms. BLACK. Yes, yes.
    Mr. GOSS. And the largest band is the blue band, which are 
for mental impairments at relatively young ages, which are at 
about 40 percent. I think one of the Members mentioned that 
earlier.
    The next most prevalent is, in fact, musculoskeletal, but 
that is more like in the, what, 10 to 15 percent?
    Ms. BLACK. I am sorry, I missed--what did you say the blue 
band was?
    Mr. GOSS. Well, the bottom blue band, which is for mental 
disorders----
    Ms. BLACK. Mental disorders, yes, sir.
    Mr. GOSS. The primary diagnosis.
    Ms. BLACK. Right.
    Mr. GOSS. And that is about 40 percent of the younger 
people who come on the rolls.
    Ms. BLACK. Yes, yes.
    Mr. GOSS. And perhaps the significant thing about that is 
if you go back to 1982 all the way through 2010, the percentage 
of those who get allowed a benefit at age 30 to 39 females has 
stayed constant at 40 percent. There has not been--one of the 
theories that has been put forth is that we have had a big 
expansion of the number of people getting disability benefits 
because there has been a surge of people coming on with mental 
impairments.
    Well, if you look at this age group, age 30 to 39, the 
young age, there has been an increase in the number of people 
getting benefits. But it has not been because of an increase in 
mental impairments. It has stayed at 40 percent. So, there has 
been an increase at all of the--for all the different kinds of 
impairment levels fairly equally. So there has just been simply 
an increase at those ages.
    The largest reason why we have had an increase of people 
coming on the rolls at younger ages, really, is because women 
have become so much more insured, and their incidence rates 
have risen very substantially.
    Ms. BLACK. But that would not hold on males. So you are 
saying because women have come in to the workforce, and I 
understand that, but it is pretty consistent with the male 
population, as well.
    Mr. GOSS. Exactly. For instance, the younger ages, the 
percentage that is--and I think we----
    Ms. BLACK. Is there a way that I can get information about 
what the diagnoses are that are the most prevalent in both of 
these areas? Because that is a wide range of diagnoses in those 
two categories.
    Mr. GOSS. Absolutely. We will get back to you with all----
    Ms. BLACK. Okay.
    Mr. Goss [continuing]. The detail we can pull together on 
that.
    Ms. BLACK. Let me ask you this question, too. How many 
quarters do you need to work to qualify for benefits?
    Mr. GOSS. Okay, well, that depends on age. For----
    Ms. BLACK. Yes. So if you are 20 years old and you apply--
--
    Mr. GOSS. If you are 20 years old, you would need to really 
have six quarters of coverage----
    Ms. BLACK. Six quarters, okay.
    Mr. GOSS [continuing]. At a very young age.
    Ms. BLACK. Okay.
    Mr. GOSS. As you get to be older, it requires more.
    Ms. BLACK. I see.
    Mr. GOSS. Basically, it requires that you have at least six 
quarters of coverage, but that you have worked at least half 
the time from age 22 to your current age, or at least half the 
time over the last 10 years.
    Ms. BLACK. Okay.
    Mr. GOSS. Five out of the last ten years.
    Ms. BLACK. And then my final question is let's say you were 
unemployed, and then you apply for disability. Does the time at 
which you were unemployed count for that five months?
    So, in other words, I lose my job, and I am at home, and 
then I apply for disability. Does that five months count?
    Mr. GOSS. It does, indeed.
    Ms. BLACK. It does.
    Mr. GOSS. For instance, you are 45 years old. We look at 
the most recent 10 years and see if you, out of those 10 years, 
40 quarters of coverage possible, have you earned at least 20 
quarters of coverage in that period.
    So, if a person leaves work for whatever reason----
    Ms. BLACK. Right, for whatever reason.
    Mr. GOSS [continuing]. For a period of more than five 
years, they lose their disability insurance status. And that, 
really, is the explainer, if you will, for why women have had 
such a big increase in the percentage of them that are insured, 
because women are so much more consistently in the workforce 
now.
    Ms. BLACK. So we heard one statistic that last year--and 
this may not--please correct me if this is wrong--that we had 
more people get on Social Security disability than actually got 
a job. We heard that folks that had lost their jobs were 
applying and going right from the end of their unemployment 
insurance right into a disability situation.
    Is that information that you would actually have to say 
whether that is, in fact, true or not?
    Mr. GOSS. Well, I know in 2012, for example, we had about 1 
million people beginning newly-awarded disable worker 
beneficiaries. I would have to think that in the year 2012 
there were more than 1 million people newly hired to jobs.
    Now, if people are simply looking at the net increase in 
the number of people employed, in a time of recession, even 
though a lot of people might get jobs, other people are losing 
jobs or are retiring.
    Ms. BLACK. Okay.
    Mr. GOSS. And so, the net--you have to look carefully about 
the net increase----
    Ms. BLACK. Sure.
    Mr. GOSS [continuing]. Versus the number of people newly 
getting a job.
    Ms. BLACK. Always have to be careful when you are reading 
anything.
    Mr. GOSS. Exactly, yes.
    Ms. BLACK. To make sure you know exactly what they are 
measuring. Thank you so much.
    And again, thank you, Mr. Chairman. I will be here next 
week.
    Chairman JOHNSON. Good for you. We will welcome you to the 
subcommittee, if you want to get on it.
    [Laughter.]
    Chairman JOHNSON. Mr. Becerra says you are okay.
    [Laughter.]
    Chairman JOHNSON. Thank you all for being here. I 
appreciate the testimony. You are good witnesses. I think this 
was a good hearing.
    Mr. BECERRA. Thank you.
    Chairman JOHNSON. We appreciate you all helping us. And 
with that, the committee stands adjourned.
    [Whereupon, at 11:34 a.m., the subcommittee was adjourned.]
    [Public Submissions for the Record follows:]

                                 

                        Center for Fiscal Equity


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                         EPS Settlements Group
                         
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                             Michael Kelley

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                   National Disability Rights Network

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