[Joint House and Senate Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 114-174

                ENSURING SUCCESS FOR THE SOCIAL SECURITY
           DISABILITY INSURANCE PROGRAM AND ITS BENEFICIARIES

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

                                HEARING

                               BEFORE THE

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 4, 2015

                               __________

          Printed for the use of the Joint Economic Committee
          
          
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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

SENATE                               HOUSE OF REPRESENTATIVES
Daniel Coats, Indiana, Chairman      Kevin Brady, Texas, Vice Chairman
Mike Lee, Utah                       Justin Amash, Michigan
Tom Cotton, Arkansas                 Erik Paulsen, Minnesota
Ben Sasse, Nebraska                  Richard L. Hanna, New York
Ted Cruz, Texas                      David Schweikert, Arizona
Bill Cassidy, M.D., Louisiana        Glenn Grothman, Wisconsin
Amy Klobuchar, Minnesota             Carolyn B. Maloney, New York, 
Robert P. Casey, Jr., Pennsylvania       Ranking
Martin Heinrich, New Mexico          John Delaney, Maryland
Gary C. Peters, Michigan             Alma S. Adams, Ph.D., North 
                                         Carolina
                                     Donald S. Beyer, Jr., Virginia

                  Viraj M. Mirani, Executive Director
                 Harry Gural, Democratic Staff Director
                            
                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Daniel Coats, Chairman, a U.S. Senator from Indiana.........     1
Hon. Carolyn B. Maloney, Ranking Member, a U.S. Representative 
  from New York..................................................    12

                               Witnesses

Mr. Patrick O'Carroll, Jr., Inspector General, Social Security 
  Administration, Washington, DC.................................     4
Dr. Mark Duggan, The Trione Director of the Stanford Institute 
  for Economic Policy Research and The Wayne and Jodi Cooperman 
  Professor of Economics, Stanford University, Stanford, CA......     6
Ms. Rebecca Vallas, Director of Policy, Poverty to Prosperity 
  Program, Center for American Progress, Washington, DC..........     8

                       Submissions for the Record

Prepared statement of Hon. Daniel Coats, Chairman, a U.S. Senator 
  from Indiana...................................................    36
Prepared statement of Hon. Carolyn B. Maloney, Ranking Member, a 
  U.S. Representative from New York..............................    36
    Report titled ``Chart Book: Social Security Disability 
      Insurance''................................................    39
    Report titled ``Understanding the Increase in Disability 
      Insurance Benefit Receipt in the United States''...........    63
Prepared statement of Mr. Patrick O'Carroll, Jr., Inspector 
  General, Social Security Administration, Washington, DC........    90
Prepared statement of Dr. Mark Duggan, The Trione Director of the 
  Stanford Institute for Economic Policy Research and The Wayne 
  and Jodi Cooperman Professor of Economics, Stanford University, 
  Stanford, CA...................................................    97
Prepared statement of Ms. Rebecca Vallas, Director of Policy, 
  Poverty to Prosperity Program, Center for American Progress, 
  Washington, DC.................................................   112
Questions for the record for Mr. Patrick O'Carroll, Jr., 
  submitted by Representative Maloney and responses..............   134
Questions for the record for Dr. Mark Duggan submitted by 
  Representative Maloney and responses...........................   137
Questions for the record for Ms. Rebecca Vallas submitted by 
  Representative Maloney and responses...........................   140
Questions for the record for Dr. Mark Duggan submitted by Senator 
  Amy Klobuchar and responses....................................   147

 
                    ENSURING SUCCESS FOR THE SOCIAL
      SECURITY DISABILITY INSURANCE PROGRAM AND ITS BENEFICIARIES

                              ----------                              


                      WEDNESDAY, NOVEMBER 4, 2015

             Congress of the United States,
                          Joint Economic Committee,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:31 p.m. in Room 
106 of the Dirksen Senate Office Building, the Honorable Daniel 
Coats, Chairman, presiding.
    Representatives present: Paulsen, Schweikert, Grothman, 
Maloney, Delaney, Adams, and Beyer.
    Senators present: Coats, Lee, Cotton, Cassidy, Klobuchar, 
and Heinrich.
    Staff present: Connie Foster, Harry Gural, Paige Hanson, 
Colleen Healy, Kristine Michalson, Viraj Mirani, Brian Neale, 
Thomas Nicholas, Brian Phillips, Stephanie Salomon, and Aaron 
Smith.

   OPENING STATEMENT OF HON. DANIEL COATS, CHAIRMAN, A U.S. 
                      SENATOR FROM INDIANA

    Chairman Coats. The Committee will come to order. We are 
delaying here just a bit. I'm just saying I feel like the 
referee at an NFL game waiting for the signal from my staffer 
who is on the phone with the House.
    We have to obviously set these meeting schedules with some 
advance notice in time and lock them in. It just unfortunately 
happens that the House seems to be teeing off its voting 
schedule at the same time we hold these meetings.
    So we are trying to see where they are. We know several 
Members will be coming over from the House and joining us, but 
I think we ought to get started. We can go through some of the 
opening statements.
    As I speak, Members are arriving.
    I would like to thank Senator Cotton here, first, for 
asking the Committee to take up and see how we can improve the 
Social Security Disability Program. Following the Ranking 
Member's opening statement, after mine, if she arrives, I am 
going to call on Senator Cotton to also deliver a brief opening 
statement. And then we will go back to Regular Order and 
recognize individuals on a bicameral bipartisan basis.
    The SSDI Program was originally created as a safety net for 
primarily older workers whose disabilities prevented them from 
working. In subsequent decades, we have witnessed an expansion 
of the program eligibility accompanied by a sharp increase in 
the number of claimants.
    As of today, nearly 9 million Americans receive Social 
Security Disability Insurance benefits, including almost 5 
percent of working age adults. In total, SSDI accounts for 
about 15 percent of benefits paid through the Social Security 
Administration.
    Interestingly enough, 1.3 million of those beneficiaries 
are under the age of 40--not the original intent I think of the 
program, but one example of how the program has been expanded.
    While the SSDI Program was originally crafted to maintain 
the principles of rehabilitation and return to work, statistics 
show that this rarely happens today; and the program's 
underlying structure disincentives provide disincentives for 
many from working.
    The Bipartisan Budget Act passed by Congress last week did 
take some steps toward improved SSDI Program operations. For 
instance, the SSDI Program will begin to test an alternative to 
the program's current disincentives to work. Let's hope that 
test program shows some positive results and can help us in 
putting permanent provisions in place that give us more 
efficiency and effectiveness of this program.
    The bill that we passed also includes program integrity 
reforms such as enhancing fraud enforcement and deterrence 
measures, as well as requiring regular case reviews to confirm 
claimant eligibility.
    So it is a start to correct a disturbing and ever-growing 
problem with SSDI. And while these actions are useful, they do 
not address the long-term solvency questions facing this 
program.
    As a result, last week's budget agreement only temporarily 
shored up the program by redirecting funds from the Old Age and 
Survivors' Trust Fund. Robbing Peter to pay Paul is hardly the 
way to address a fiscal issue, especially when the Old Age and 
Survivors' Trust Fund is also headed toward the very same 
financial insolvency problems as SSDI, even though that may be 
years down the road.
    Today we want to examine how we can achieve a more 
efficient and a more effective Social Security Disability 
Insurance Program. We hope to learn about measures to assist 
the successful transition of individuals to the workplace which 
impacts their personal well being as well as the fiscal 
sustainability of the program.
    We must also ask how current administrative processes can 
be reformed. The current SSDI program review and appeal system 
is burdened by a backlog of increases, risk of fraud, and slow 
awards of benefits to individuals who need them.
    The SSDI Program is also plagued with improper payments. 
Just last week, the Government Accountability Office revealed 
at least $11 billion in overpayments over the last 10 years.
    The Social Security Administration Inspector General, who 
is here with us today, found in June that 44.5 percent of 
sampled claimants received an overpayment.
    The waste, fraud, and abuse of SSDI is unacceptable. Yet 
another mismanaged and failing federal program. There is 
clearly much work to be done to improve the administration of 
this program and protect taxpayers' dollars from being wasted 
through fraud and abuse.
    I want to welcome our witnesses and thank them for being 
here today to discuss how we can address all these issues, and 
leave hopefully with a better understanding of steps we should 
consider to improve the SSDI program for both current and 
future claimants.
    I now would like to recognize Senator Cotton for his 
statement, and then we will resume with the introduction of the 
witnesses and allow you to go forward with your testimony.
    Senator Cotton. Thank you, Mr. Chairman, and thank you to 
our witnesses for your appearance today.
    The Social Security Disability Program is critical to 
Arkansas, as my State has some of the highest rates of 
disability in the Nation.
    I want to focus on how we can help improve this program by 
helping those who can recover return to work.
    Social Security Disability is open to applicants with 
temporary disabilities. Disability judges estimate between 15 
and 30 percent of beneficiaries should recover, but almost no 
one exits the program anymore.
    In the 1980s, up to 6 percent of beneficiaries returned to 
work every year. Now it is less than one-half of one percent. 
The odds of a disability recipient returning to work today are 
about the same as playing roulette and hitting black eight 
times in a row.
    There is nothing compassionate, in my opinion, about 
condemning someone who can recover to a lifetime of disability 
status and poverty-level income. I intend to introduce 
legislation to fix this problem.
    In my bill, those eligible for disability but expected to 
recover can receive rehabilitation training and can earn wages 
while on the disability program. After a few years, this group 
can exit the program and return to work, or reapply if still 
disabled.
    Increasing the return-to-work rate by even one percentage 
point will save hundreds of billions of dollars over time. 
Also, fewer people will receive benefits, more people will pay 
into the benefit program, and more people will benefit from the 
dignity of work.
    It is time to reform the Social Security Disability Program 
to help those who can recover, and to protect those who cannot.
    I am looking forward to discussing these issues with our 
panel today. Thank you all for joining us, and thank you again, 
Mr. Chairman.
    Chairman Coats. Thank you. I would like to introduce 
briefly our witnesses.
    Mr. Patrick O'Carroll, Jr., currently serves as the 
Inspector General for the Social Security Administration, 
having been appointed on November 24, 2004. Mr. O'Carroll 
received a Bachelor of Science from Mount St. Mary's College 
and a Master of Forensic Sciences from George Washington 
University. He also attended the National Cryptologic School 
and the Kennedy School at Harvard University.
    Dr. Mark Duggan is the Trione Director of the Stanford 
Institute for Economic Policy Research, and the Wayne and Jodi 
Cooperman Professor of Economics at Stanford University. He is 
a research associate at the National Bureau of Economic 
Research, and serves on the Editorial Board of the American 
Economic Journal. Dr. Duggan received his BS and MS degrees in 
Electrical Engineering at the Massachusetts Institute of 
Technology, and his Ph.D. in Economics from Harvard.
    Ms. Rebecca Vallas--is that correctly pronounced?
    Ms. Vallas. Val-las.
    Chairman Coats. Vallas--I'm one for three on this. I 
apologize.
    [Laughter.]
    Ms. Vallas is Director of Policy Research for the Poverty 
to Prosperity Program at the Center for American Progress. 
Before joining the Center for American Progress she served as 
Deputy Director of Government Affairs at the National 
Organization of Social Security Claimants' Representatives. Ms. 
Vallas received her Bachelor's Degree from Emory University and 
her Law Degree from the University of Virginia.
    I welcome our witnesses, and I think we will just go in the 
order of introduction. We look forward to hearing your 
testimony. If you can confine it roughly to the five-minute 
rule, it gives us, my colleagues here and I, a better 
opportunity to enter into a dialogue and address questions.
    Mr. O'Carroll.
    [The prepared statement of Chairman Coats appears in the 
Submissions for the Record on page 36.]

  STATEMENT OF MR. PATRICK O'CARROLL, JR., INSPECTOR GENERAL, 
         SOCIAL SECURITY ADMINISTRATION, WASHINGTON, DC

    Mr. O'Carroll. Good afternoon, Chairman Coats and Members 
of the Joint Committee.
    Thank you for the invitation to testify today. Last year 
SSA provided about $144 billion in Disability Insurance, or DI, 
to about 11 million people. However, there is much more to the 
story of the DI Program than just those numbers.
    Given the importance of the safety net for millions of 
people who depend on it, SSA must ensure the integrity of this 
critical program. The Agency can do this by continuing efforts 
to improve service to its beneficiaries and stewardship over 
taxpayer funds.
    My written statement includes many of our recommendations 
for how we believe SSA can best achieve these goals. These 
recommendations can be summed up in three main points, as I 
will explain.
    The first point: DI Program policy is complex and should be 
modernized to reflect medical advances and the current 
occupational environment. For example, some of SSA's listings 
of impairments which are used to ensure that disability 
decisions are medically sound have not been updated in many 
years.
    Without regular updates, the listings lose their 
effectiveness as a screening tool. The Dictionary of 
Occupational Titles is outdated and should be replaced. SSA 
needs occupational data tailored for its disability programs.
    When SSA learns a beneficiary has work activity, stopping 
benefits is difficult and time-consuming. Simplifying these 
policies could have a positive effect.
    And on return-to-work efforts, SSA should develop specific 
goals and analyze costs and benefits to assess these projects.
    The second point: SSA must continue efforts to make timely 
and accurate claims decisions. On average, disability claimants 
will wait more than 100 days for an initial decision on their 
claim. If they appeal, they will wait about 500 more days for a 
hearing.
    Additionally, SSA's level of pending initial claims stands 
at about 620,000, while more than 1 million claimants are 
awaiting a hearing. We have paid close attention to SSA's 
efforts to reduce wait times and pending levels.
    At the initial level, SSA should refine policies and 
procedures to improve efficiency through automation. It should 
reduce processing time and make accurate and consistent 
decisions.
    And at the hearing level, SSA should continue to expand the 
use of the video hearings, emphasize quality decision-making, 
and ensure timely decisions.
    The third and final point: SSA should regularly review 
beneficiary information to ensure that people remain eligible 
for DI payments. SSA does this through continuing disability 
reviews, or CDRs. For many years we've identified medical CDRs 
as a highly effective guard against paying benefits to people 
who no longer are disabled according to SSA's Guidelines.
    Medical CDRs provide a 9-to-1 return on investment, 
according to SSA. Although the Agency completed almost 800,000 
CDRs last year, a backlog of 726,000 remains.
    SSA also performs work CDRs to review beneficiary earnings 
and prevent overpayments. A change in federal wage reporting 
processes for employers from annual to quarterly would identify 
substantial gainful activity more quickly.
    Also, SSA can improve payment accuracy by verifying self-
reported information about wages or other benefits, such as 
Worker's Compensation or government pensions.
    We have recommended that SSA pursue data-matching 
agreements with other government agencies to obtain such 
claimant data.
    Finally, improving the DI program is a multi-faceted 
challenge for SSA. It is critical that Congress and SSA 
continue to focus on the program's management and long-term 
sustainability. My office has long held that SSA must strike 
that critical balance between service and stewardship.
    I appreciate your interest in improving the DI program. We 
look forward to collaborating with SSA and our oversight 
committees on the best ways to do this effectively.
    Thank you again for the invitation to testify, and I will 
be happy to answer any questions.
    [The prepared statement of Mr. O'Carroll appears in the 
Submissions for the Record on page 90.]
    Chairman Coats. Well thank you. Thank you for a succinct 
presentation here, and we will look forward to getting into the 
details of what you have described.
    Dr. Duggan.

   STATEMENT OF DR. MARK DUGGAN, THE TRIONE DIRECTOR OF THE 
STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH, AND THE WAYNE 
AND JODI COOPERMAN PROFESSOR OF ECONOMICS, STANFORD UNIVERSITY, 
                          STANFORD, CA

    Dr. Duggan. Chairman Coats and Members of the Committee, it 
is an honor to be here with you today.
    My name is Mark Duggan. I am the Wayne and Jodi Cooperman 
Professor of Economics at Stanford University, and the Trione 
Director of the Stanford Institute for Economic Policy 
Research.
    The SSDI Program represents an extremely important part of 
our Nation's safety net, as it protects workers and their 
families from the risk of disability that prevents or greatly 
inhibits a person's ability to work.
    I show in the first figure in my testimony enrollment in 
the SSDI Program grew steadily from the mid-1980s until the 
present day, with 2.2 percent of adults aged 25 to 64 receiving 
SSDI benefits in 1985, rising to 5.0 percent by 2014.
    In my testimony today I will briefly summarize the factors 
that are responsible for the growth in SSDI enrollments since 
the mid-1980s. I will then discuss some of the implications of 
this growth for the U.S. labor market. And finally, I will 
conclude by discussing the potential for changes to SSDI to 
increased employment and economic well being among individuals 
with disabilities.
    One contributor to the growth in SSDI enrollment since the 
mid-1980s has been the aging of the Baby Boom Generation. 
Individuals in their 50s and early 60s are significantly more 
likely to receive SSDI benefits than their counterparts in 
their 30s and 40s.
    However, as the first table in my testimony demonstrates, 
the percentage of adults receiving SSDI has risen sharply even 
within age groups. Consider adults in their 50s.
    In 1989 4.3 percent of adults in this age group were 
receiving SSDI benefits. By 2014, this had almost doubled to 
8.3 percent.
    A second contributor to the growth in SSDI has been an 
increase in the fraction of women who are insured for SSDI 
benefits. To be insured for SSDI, a person must have worked in 
at least 5 of the 10 most recent years. Because employment 
rates have increased among women since the 1980s, the fraction 
of women insured for the program has risen as well.
    This explains why SSDI has growth more rapidly among women 
than among men during this period.
    A third determinant, a third and more important determinant 
of the growth in SSDI since the mid-1980s has been an increase 
in the award rate caused by a liberalization of the program's 
medical eligibility criteria, resulting from 1984 legislation.
    I show in the second figure of my testimony there has been 
a substantial increase since that time in award rates for 
mental disorders and diseases of the musculoskeletal system. 
This rise is important because, as shown in recent research, 
the employment potential of SSDI recipients with these more 
subjective conditions can be substantial.
    I outline several additional factors in my written 
testimony that have contributed to enrollment growth in the 
SSDI program.
    While providing valuable insurance to tens of millions of 
Americans, SSDI reduces the incentive to work both for 
individuals on the program and for those applying for SSDI 
benefits.
    To receive an SSDI award, a beneficiary must be deemed 
unable to engage in substantial gainful activity defined by the 
Social Security Administration to be $1,090 per month. Once on 
the program, an SSDI recipient has little incentive to return 
to work as earnings above the SGA threshold will lead to a 
termination of benefits.
    The growth in SSDI enrollment since the 1980s has coincided 
with a substantial reduction in employment rates among 
individuals with disabilities. For example, from 1988 to 2008 
the employment rate of men in their 40s and 50s with a work-
limiting disability fell from 28 percent to 16 percent.
    The steady increase in SSDI enrollment in recent years has 
reduced labor force participation in the U.S. below what it 
otherwise would be. While there are of course many factors to 
influence labor force participation, previous research 
indicates that SSDI is an important factor as well.
    The disability determination process used by the SSDI 
program awards benefits to individuals deemed unable to engage 
in substantial gainful activity. This reduces the incentive to 
work among those who have filed an initial application for SSDI 
and among those appealing a rejection.
    In recent years, nearly 40 percent of SSDI awards were made 
on appeal, and the time between the initial application and the 
ultimate decision is substantial for those appealing initial 
rejections.
    This was problematic because those initially rejected are 
likely to be in better health on average than those receiving 
an initial award, and thus likely to have higher employment 
potential. And the longer that a person remains out of the work 
force, the more their earnings' potential declines.
    Therefore, even if an applicant never receives an SSDI 
award, the application process can permanently harm his or her 
employment prospects.
    One way to improve incentives in SSDI is to intervene 
sooner for individuals with work-limiting conditions so that 
they can continue working. The payoff to keeping an SSDI 
applicant in the work force is high. The average present value 
of an SSDI award is approximately $300,000.
    While many awarded SSDI benefits are completely unable to 
work, previous research makes clear that a substantial fraction 
could work.
    More generally, increasing employment among individuals 
with disabilities could improve their economic well being and 
increase their autonomy while reducing the fiscal strains on 
Social Security.
    Past efforts to achieve this goal within Social Security, 
within SSDI, have unfortunately had little impact. The lack of 
progress in improving work incentives in SSDI stands in marked 
contrast to the Temporary Assistance to Needy Families program. 
Reforms introduced in the mid-1990s, along with expansions in 
the Earned Income Tax Credit at that time, led to substantial 
gains in employment among past, current, and potential future 
TANF recipients, and to a steady drop in program enrollment and 
expenditures.
    Based on my own research and that of many others, I believe 
that similar progress is possible within the SSDI Program.
    I thank you again for the opportunity to testify today.
    [The prepared statement of Dr. Duggan appears in the 
Submissions for the Record on page 97.]
    Chairman Coats. Dr. Duggan, thank you very much for your 
testimony.
    Ms. Vallas.

STATEMENT OF MS. REBECCA VALLAS, DIRECTOR OF POLICY, POVERTY TO 
 PROSPERITY PROGRAM, CENTER FOR AMERICAN PROGRESS, WASHINGTON, 
                               DC

    Ms. Vallas. Thank you, Chairman, and thank you Members of 
the Committee, for the invitation to be here today.
    My name is Rebecca Vallas. I am the Director of Policy of 
the Poverty to Prosperity Program at the Center for American 
Progress.
    Imagine that tomorrow while you are cleaning out your 
gutters you fall off of a ladder. You suffer a traumatic brain 
injury and spinal cord damage, leaving you paralyzed and unable 
to speak. Unable to work for the foreseeable future, you have 
no idea how you are going to support your family.
    Now imagine your relief when you realize that an insurance 
policy that you have been paying into all your working life 
will help keep you and your family afloat. That insurance 
policy is Social Security.
    I have seen first hand more times than I can count what 
this program means in the lives of its beneficiaries because, 
prior to joining the Center for American Progress, I spent 
several years as a Legal Aid attorney, helping workers who had 
experienced a life-changing disability or illness access the 
benefits that they had earned.
    Social Security protects more than 9 in 10 American workers 
and their families. And all told, more than 160 million 
American workers are protected. Of those, about 8.9 million, 
including more than 1 million Military Veterans, receive DI, as 
do about 2 million of their spouses and dependent children.
    DI is coverage that workers earn. With every hard-earned 
paycheck, American workers pay into the system through payroll 
tax contributions which serve more or less as insurance 
premiums. DI benefits are incredibly modest, typically 
replacing less than half of prior earnings, and the average 
benefit in 2015 is less than $300 per week, just over the 
federal poverty line for an individual.
    But DI is vital to the economic security of disabled 
workers and their families. And for more than 8 in 10, DI is 
their main or only source of income. To qualify, as we've 
heard, a disabled worker must be unable to engage in 
substantial gainful activity due to a severe physical or mental 
impairment or combination of impairments expected to last at 
least 12 months, or to result in death.
    Now unpacking that, in practice what this means is that a 
worker must not only be unable to do his or her past jobs but 
also unable to do any other job that exists in the entire 
national economy in significant numbers at a level where he or 
she could earn even $270 per week.
    According to the OECD, the SSDI program and its disability 
standard is the strictest eligibility criteria for a full 
disability benefit in the entire OECD.
    As we have heard from Chief Actuary Goss repeatedly in 
testifying before Congress, this standard, this strict standard 
remains the same whether or not job openings are plentiful at 
the time.
    Now the vast majority of applicants are denied under the 
strict standard, and those who qualify often have multiple 
serious impairments. Many are terminally ill, and one in five 
beneficiaries die within five years of receiving benefits.
    For those whose conditions improve, Social Security's 
policies include an array of strong work incentives and 
protections to encourage beneficiaries to attempt to return to 
work. That is described more fully in my written testimony as 
well as the proposal included in the Senate--in the budget 
deal.
    However, most beneficiaries live with such debilitating 
impairments and health conditions that they are unable to work 
at all. And even denied applicants exhibit extremely low work 
capacity after being denied, reflecting the strictness of DI's 
eligibility criteria.
    The reasons for the program's period of rapid growth which 
has now come to an end are well understood, and they are 
chiefly demographic, as we heard from Dr. Duggan. The Baby 
Boomers entering the high-disability years of their 50s and 
60s, and the rise in women's labor force participation.
    In sum, this is a program for hard-working Americans who 
have worked all their lives but who by and large are no longer 
able to do substantial work.
    The typical beneficiary in fact worked 22 years before 
needing to turn to benefits. I will quickly note, in closing, 
that the recently passed bipartisan budget deal strengthens the 
Disability Insurance Program in several important ways.
    In addition to preventing sharp across-the-board benefit 
cuts that would have been devastating to beneficiaries' 
financial security, the budget deal also includes a number of 
important measures to enhance program integrity, putting 
cooperative disability investigation units, or CDIs, in all 50 
states, as well as cap adjustments to support more continuing 
disability reviews. We can discuss this more in the Q&A, I am 
sure.
    Additionally, the budget deal restores SSA's DI 
Demonstration Authority so that it can test ways to further 
strengthen the program, including its work incentives and 
supports.
    But supporting work for people with disabilities is more 
than about the Disability Insurance Program. As we continue to 
work together on a bipartisan basis to boost work among people 
with disabilities, we need to acknowledge the much broader 
policy landscape affecting those workers and enact public 
policies to give workers with disabilities a truly fair shot.
    And these policies must include insuring paid leave and 
paid sick days, as well as access to long-term supports and 
services, to name just a couple.
    In closing, when it comes to our Nation's Social Security 
System, the will of the American People is clear: They value it 
and support it highly and want to see it strengthened.
    DI is a core pillar of that system, and it offers critical 
protection against the hazards and vicissitudes that we 
encounter, including life-changing disability and illness.
    Thank you so much for the opportunity to testify today, and 
I am happy to answer any questions that you may have.
    [The prepared statement of Ms. Rebecca Vallas appears in 
the Submissions for the Record on page 112.]
    Chairman Coats. Thank you. I appreciate that. I am going to 
turn now to opening questions.
    Mr. O'Carroll, let me start with you, if I could. As you 
know, GAO last week sent out the information relative to the 
improper payments totaling, they said, nearly $11 billion over 
a 10-year period of time.
    Would you--then following up from that, as I noted in my 
opening statement, you did some sampling of that and came up 
with a statistic that 44\1/2\ percent of sampled claimants 
received over-payments. Could you give us some more details 
about this over-payment situation and what we need to do to try 
to avoid this and put this on a much better path?
    Mr. O'Carroll. Yes, Chairman. A couple of things on it. I 
guess the first one is that, as you had mentioned, in the GAO 
report where it was talking about the $11 billion.
    As we keep saying with SSA paying out billions of dollars, 
when you say $1 billion, in percentages it might not be a high 
percentage, but our concern is that when you are dealing with 
the billions of dollars that go out in payments, then the 
overpayments become a large dollar amount.
    And to the normal taxpayer and citizen, a billion dollars 
is a lot of money. We are very concerned about that, and we are 
concerned about the percentage of overpayments in SSA.
    And so we did a study on it, and we looked at people that 
were on benefits for 10 years. And in that 10-year period, they 
came on benefits. They went off benefits. They went back to 
benefits. And in that time period, we found that 45 percent had 
overpayments, and underpayments, there were improper payments.
    And we brought those to SSA's attention, and we asked them 
to focus on those areas in terms of identifying the improper 
payments and fixing them in the future.
    So we have been trying to give information through our 
audit work to SSA on different ways to prevent overpayments and 
improper payments in general.
    Chairman Coats. And what are some of those ways that you 
are going to attack this? I mean, what needs to be changed? And 
do you need legislative authority to do it?
    Mr. O'Carroll. Well, a lot of what can be changed is in 
terms of the information that SSA is being given by people that 
are applying for benefits.
    A lot of times that information is not being checked. So 
amongst other things we are telling SSA is to be using other 
databases that are out there, and to be taking a look to see if 
people have resources that they are not reporting; to be also 
checking, with other government agencies.
    The biggest one really is comparison of information between 
government agencies. One government agency has information 
about a person and does not share it with the other one because 
of concerns over the Computer Matching Act. But there is a lot 
of data analysis and information out there that can be used 
that would be very effective in preventing improper payments.
    Chairman Coats. It was not that long ago that I was 
speaking on the Floor about some waste that occurred between 
the Unemployment Insurance Agency and the Social Security 
Disability. There was a significant number of people who were 
drawing checks from both entities.
    I mean, either you can work, or you cannot work. Either you 
are disabled, or you are not disabled. And yet people were 
applying for and receiving checks from both agencies. It is one 
thing--you would think you could pick up a phone, or send a 
note, but today all we have to do is push a computer button 
basically to establish some type of link between the two before 
a decision is made as to the integrity of the applicant and the 
claim and being paid by one of the agencies, but not both of 
the agencies.
    And so there appears to be a lot of dysfunction. Of course 
you were talking about the ability to facilitate these checks 
before the decisions are made, and these claimants before the 
decisions are made. So I appreciate what you have said in that 
regard.
    You also talked about facilitator fraud--in your opening 
statement which I read--facilitator fraud investigations. Can 
you describe what they are and to what extent they impact the 
program, and what steps possibly could be taken to address 
that?
    Mr. O'Carroll. Yes, Chairman. That is one that is very 
important to me, because there are people out there in 
positions of trust that the agency relies on for information. 
And if those people decide to defraud the government, they 
already have an edge on being trusted and their information 
being taken.
    So as an example we have found that in some cases former 
Social Security employees that understand the way the system 
works then conspire with unscrupulous medical providers and 
attorneys, where they will use improper information and 
facilitate getting a person on benefits.
    And then the word goes out that this is the way to do it, 
and it becomes almost like an underground conspiracy where by 
word of mouth you are being told if you want to get on 
disability when you are not disabled, go see this person. They 
will introduce you to a doctor. That doctor will then introduce 
you to an attorney that will then represent you.
    And so we have made that a priority of ours. We have, in 
about 10 different locations now, a pilot where we are going 
out just trying to work cases on facilitators that are doing 
this. We have asked for increased penalties against these 
people that the government trusts, so that the word will get 
out there: Don't break that trust and try to defraud the 
government.
    Chairman Coats. Well I commend you on that work, and we 
thank you. I am awfully glad that we have inspector generals 
that are looking into these kinds of things. You may need some 
legislative authority relative to the penalties, or relative to 
having the resources available for these investigations, but it 
undermines the confidence and trust of the American Taxpayer, 
the American Public, when they see this kind of fraud taking 
place, this kind of facilitation for this, when we hear 
examples of people gaming the system.
    They are not disabled, yet they are drawing checks. They 
are unemployed and they are drawing checks from the 
Unemployment Insurance at the same time, saying they are able 
to work but they cannot find jobs. And so it continues to 
really undermine the integrity of these programs.
    As Ms. Vallas said, there are legitimate claimants out 
there that need these payments and claims to provide for 
themselves. They qualify under the standards and criteria of 
the Disability Insurance fund. And yet the public becomes very 
skeptical in terms of the inability of the government to run an 
efficient, effective program and weed out the billions of 
dollars of fraud.
    So we thank you for your work for that. I am a little over 
my time. Our Ranking Member has arrived. I know the House has a 
way now of scheduling votes every time they see there is a 
Joint Economic Committee hearing, but we welcome you and I will 
turn to you for your opening statement.
    Representative Maloney. I am going to put my opening 
statement in the record and read it into the record at the end 
of the hearing, because I feel that we do not know when votes 
are going to be called again and we need to just keep going.
    I certainly want to be associated with all the statements, 
being against any type of waste, fraud, or abuse that games the 
system or hurts the credibility of the system. And if we can 
put a man on the Moon, we have got to have some computer system 
where we could check whether or not there are duplicate 
applicants and some of the problems that the IG raised.
    But I want to know how hard it is, or how easy it is, to 
get SSDI. And I would like to hear your thoughts on it, Ms. 
Vallas. But first could you tell us briefly why you are 
familiar with the process, and then tell us the process and any 
ideas of how to make it more fair and more fair to people who 
need it, and also to stop any type of abuse. Because any abuse 
undermines the credibility and the ability of people who really 
need the service to get the service.
    [The prepared statement of Representative Maloney appears 
in the Submissions for the Record on page 36.]
    Ms. Vallas. Thank you so much for the question.
    So you asked why I am familiar with the process. Well I 
mentioned in my opening statement that I was a Legal Aid 
attorney for a number of years, and I worked directly with 
individuals with significant disabilities who needed help 
accessing the benefits that they had earned through this 
system.
    So that was how I learned how the program works. And it was 
my first exposure over a number of years to the various layers 
of the process.
    So the way that the process works is that an individual 
applies for benefits. They must go through an initial 
determination stage. And this is done by the state agencies 
called Disability Determination Services.
    They are funded by SSA. They are governed by national 
policies and procedures. The vast majority of people at this 
stage are denied. And just about one-third, or even a little 
bit less than one-third, are actually awarded benefits at this 
level.
    And in order to mount a claim for disability benefits, it 
is not about just signing up. It is not about getting a 
doctor's note, as it might be made to sound sometimes in the 
media. It requires mounting every piece of medical evidence 
that you possibly can. And sometimes the files that I would 
help my clients to accumulate could be almost as tall as I am--
I am not a tall person, but tall files.
    And the reason for this is that it is incredibly, 
incredibly hard to demonstrate that you meet that really strict 
definition of disability that we have been talking about today.
    If you are denied at that initial level, what you then have 
to do is file an appeal. In some states there is a level called 
reconsideration, which is a paper review of that case. In some 
states there is no reconsideration level and you need to go to 
a hearing before an administrative law judge.
    And unfortunately, as the Inspector General mentioned, we 
are seeing catastrophic backlogs right now with more than a 
million people waiting to see an administrative law judge. And 
people can wait as long as two years. And unfortunately, as a 
result, thousands of American workers are dying each year 
waiting for the benefits that they earned. Not something that 
we tolerated in the VA system, and I would hope something that 
we would not tolerate in the Social Security system. And purely 
the result of under funding that system.
    Representative Maloney. And how would you respond to the 
IG's statement that there are doctors out there waiting to fill 
out the forms, that there are basically mills out there that 
are processing them. And basically how likely is it that a 
person will have their application accepted?
    You are saying it is very difficult to get accepted. But 
say out of 10 people how many would have their applications 
accepted?
    Ms. Vallas. So fewer than 4 in 10 applicants are approved 
even after all levels of appeal. And I did not even mention 
going past the ALJ stage. There's the Appeals Council, and then 
even federal court. After all of those layers, fewer than 4 in 
10 people are approved.
    Representative Maloney. And how do our disability benefits 
compare with other countries?
    Ms. Vallas. So in addition to having the strictest 
definition of disability in the world, we also have incredibly 
meager benefits. I mentioned that the benefits average less 
than $300 per week, and replace less than half of prior 
earnings for the typical beneficiary.
    So it can be incredibly difficult to make ends meet. Even 
though these benefits are very vital, they are incredibly 
modest and they barely keep people out of poverty. And that 
compares internationally to many nations have replacement rates 
as high as 80 percent of your prior earnings.
    Representative Maloney. Okay, is my time expired?
    Chairman Coats. Six seconds.
    [Laughter.]
    Representative Maloney. I've got six seconds left. So 
basically how much will he or she earn in the system? 
Basically, how much a month would you say?
    Ms. Vallas. On average, it's $1,165 per month, which is 
just over the federal poverty line for one person.
    Representative Maloney. My six seconds are up.
    Chairman Coats. Thank you.
    Senator Cotton.
    Senator Cotton. Thank you, Mr. Chairman.
    Mr. O'Carroll, I want to go back to a point you made about 
the facilitators of disability applications. I remember as a 
kid growing up in Arkansas, billboards, the back pages of 
yellow pages, cable TV ads, lawyers would advertise for big-rig 
accidents, or medical malpractice, and so forth. Now it seems 
like all those ads are about disability. You know, ``Call this 
number, I'll get your disability check for you.''
    What is your perspective on why that legal advertising 
shift has happened, at least anecdotally to me in Arkansas, 
over the last 20 years?
    Mr. O'Carroll. Well I'd say anecdotally, the word is out 
there that your odds of getting onto benefits are higher if you 
are represented by someone. And that's more than just anecdotal 
information. The record is out there, if you are represented, 
you're going to probably have somebody assisting you in getting 
your records together and everything else.
    So the word is out there that you've got a better chance. 
The ones that we are concerned with are the ones that the word 
is out there, if you go to this person, he or she knows how to 
scam the system and get this doctor that would exaggerate what 
your injuries are.
    For example, we had a case in one of our districts where we 
sent an undercover agent in. The agent went in, and was 
introduced by a facilitator to a doctor. The doctor said to our 
agent: Hey, are you having trouble with your back? And the 
agent said, well, not really. Why? And he said, well, let me 
send you over to a specialist and we'll have him take a look at 
your back. And we took an X-ray of the agent's back before she 
went to the specialist.
    She goes to the specialist. We get an X-ray back from the 
specialist that has like an S-curve in the back, which had been 
normal according to government doctors. And that X-ray was what 
was used for her disability claim.
    And then when she went back to the doctor, he said to her, 
don't you feel depressed now that you know your back is so bad? 
And, he said, let me send you to another doctor to attest to 
the fact that you have mental problems over it.
    And so, that is the type of word that gets out there that 
facilitators will help you.
    Senator Cotton. Let's shift to the statistical evidence 
here, Dr. Duggan. You presented some fairly rigorous evidence 
here that shows that only about 40 percent of the rise in 
disability insurance is due to things like population growth, 
or the Baby Boom, or women entering the work force in the last 
three or four decades, all of which are healthy and 
predictable.
    Could you explain a little bit more about those findings, 
and the import of the findings for us?
    Dr. Duggan. I'll be happy to. I think it is helpful to just 
look at some of the numbers that I have summarized in the first 
table of my testimony on the second page.
    You can see there, it is true that SSDI enrollment has 
growth as more people have reached their 50s and 60s, where 
enrollment rates are higher, and as more women have entered the 
work force.
    But a bigger factor is that, sort of looking at a specific 
individual with specific characteristics over time, their 
likelihood of being on SSDI has gone up quite significantly. So 
let's take men, for example, men in their 50s.
    So from that table, and this is pretty simple. This is just 
the number of SSDI recipients in the numerator, and the number 
of men 50 to 59 in the denominator. And you can see that in 
1989 that fraction was 5.8 percent. So, and we don't--and there 
has not been an increase in the fraction insured for the 
program among men in their 50s. And so for 25 years later, that 
has growth by 50 percent, from 5.8 percent to 8.7 percent. That 
is a pretty large increase.
    Similarly, if you look for women the increase has been from 
2.9 percent to 7.9 percent. It is true that the fraction of 
women insured for the program has grown, but that cannot begin 
to explain the magnitude of that increase.
    So a much bigger contributor to the growth in SSDI 
enrollment has been, that if you look within a specific 
category, look at men in their 50s, look at women in their 40s, 
and so forth, controlling for those things, so it is not 
vulnerable to that sort of compositional change, there has been 
this quite significant increase. And that is sort of taking a 
snapshot of things from the mid-1980s to today.
    Senator Cotton. In Arkansas we have looked at disability 
enrollment rates vs. population growth. Our State has 75 
counties, and there is almost an exact inverse relationship. As 
the county's population declines, disability insurance 
enrollment goes up.
    Do you have any thoughts on why that might be the case?
    Dr. Duggan. I think it is the case, so it is--previous 
research that I have done and that others have done have sort 
of demonstrated a link between economic conditions and 
applications for, and ultimately awards for the program.
    So, for example, if you look at the third figure of my 
testimony you can see that the unemployment rate and the SSDI 
application rate moved together quite closely. And so in 
general it tends to be the case that places where the 
population is declining, those tend to be places where the 
local economic conditions aren't so great. And in general when 
local economic conditions are declining, you see a big, a 
pretty significant uptick in applications to the program.
    And it is pretty clear from Figure 3 that--the connection 
between economic conditions and applications for the program.
    Senator Cotton. Thank you. My time has expired.
    Chairman Coats. Senator Klobuchar.
    Senator Klobuchar. Thank you very much, Mr. Chairman.
    Inspector General, those who are seeking disability 
insurance already are experiencing a level of hardship most 
Americans do not. And then there is an average wait time of 114 
days before an initial decision on a claim.
    You talked about increased funding to help with that. How 
much of a decrease in wait times can we expect from this 
increase in disability determination services staff?
    Mr. O'Carroll. Well unfortunately I didn't talk about the 
extra funding for SSA on that. One of our dealings with SSA is 
that I am monitoring what SSA does with the appropriation that 
they get, and the decisions that they make. And one of the 
things that we are always trying to do is get a balance between 
service and stewardship.
    We are trying to get SSA, one, to keep the wait times down. 
But, two, to make sure, while keeping the wait times down, that 
they are also doing as much due diligence as they can to make 
sure that the right person is getting the right benefit.
    Senator Klobuchar. And has there been a trend of increasing 
wait times over the years? And has that changed at all? Or do 
you see it changing?
    Mr. O'Carroll. Well there are a couple of things. Yes, the 
wait times are changing. Two, what we're telling SSA to do, and 
what we do, is look at the different steps in the process and 
we rate them, and we try to make sure that all of them are 
doing the same delivery to the public.
    What we are finding is that in some states, the wait times 
are lower. And we are trying to address what they are doing in 
those states to try to bring it down in those states, that we 
are identifying as being longer.
    We try to keep that balance not only on the initial, but 
also on the hearing, level.
    Senator Klobuchar. Okay, thank you.
    Dr. Duggan, just quickly, in your testimony you noted that 
the recently passed Bipartisan Budget Act that I supported 
would establish demonstration projects to look at improving 
work incentives in the SSDI program.
    How do you think those should be designed? Because I know 
there's been some problems with them in the past.
    Dr. Duggan. Well as an economist, I think a great way to 
design a project and to really isolate its effect would be to 
have some kind of a randomization in the allocation of the--in 
the incentives.
    So if it is the case that we have demonstration projects in 
which everyone in an area, or just nationally has the 
opportunity to sign up for changed incentives, let's say a 
lower SGA threshold and different phase-out rate, or what have 
you, if everyone has that option, it is very, very, very 
difficult to reliably disentangle the effect of the incentive 
change from the very factors that are correlated with the 
decision to opt in.
    So it would be nice if--you know, I am not the one making 
these decisions--but as someone who will probably want to 
evaluate it one day, it would be great if there was a way to 
randomly--and that one can sort of mimic randomization in other 
ways, but that would give more hope. And we really do have a 
scarcity of evidence on the effects of these kinds of reforms. 
Whereas, in other countries----
    Senator Klobuchar. We have----
    Dr. Duggan. Yeah, Norway, for example, has done some stuff 
recently.
    Senator Klobuchar. Are you going to bring up Denmark? That 
was a Bernie Sanders one.
    [Laughter.]
    Dr. Duggan. Okay.
    Senator Klobuchar. I will follow up with you in writing, 
because I wanted to ask one question--it wasn't sarcastic, it 
was a little joke--one question of Ms. Vallas over there.
    And that is, thank you for talking about Veterans in your 
testimony. As we know, Veterans Day is upon us, and I believe 
that we have an obligation to these women and men who have 
signed up to serve us. And can you discuss what the Social 
Security Disability Insurance Program means to our Veterans?
    Ms. Vallas. Absolutely. Thank you for the question.
    The Disability Insurance Program is absolutely vital for 
Veterans, and more than one million of its beneficiaries are 
Military Veterans.
    I will share a story of someone that I'll call ``Mr. G'' to 
protect his confidentiality. He is a Military Veteran. He was a 
tunnel rat in Vietnam. And long after his service, he ended up 
being in a car crash, a terrible, debilitating car crash that 
left him severely injured both cognitively and physically.
    And because it was not a service-connected injury, he was 
not able to access Veterans benefits. But Social Security 
Disability Insurance was there for him. And because of his DI, 
he is able to keep a roof over his head and food on the table 
and live independently.
    That is what DI means to Vets.
    Senator Klobuchar. That is a great example. Thank you. And 
thank all of you. And I will follow up as the State with the 
most Scandinavians of any State. I will follow up with you, Dr. 
Duggan, about your analogy with Norway. Thank you.
    [Questions for the record from Senator Klobuchar to Dr. 
Duggan appear in the Submissions for the Record on page 147.]
    Chairman Coats. Thank you, Senator.
    Senator Cassidy.
    [No response.]
    Chairman Coats. Senator Heinrich.
    [No response.]
    Chairman Coats. He's gone. Let me see if I can catch 
somebody here.
    Congressman Grothman.
    Representative Grothman. I guess I will just ask some 
general questions of Dr. Duggan. We just did pass some things, 
as you know, in the Budget bill, but overall, you know, over 
time we've seen this growing, Social Security Disability 
caseload, and you certainly hear a lot of anecdotal evidence of 
people on disability who you would not think were on 
disability, or who you do not expect are disabled.
    Could you list, if you had your dream bill to kind of get 
things back to where they should be, maybe three top 
recommendations that we could do to get some people back to 
work, or to get some people off the program that probably 
should not be on the program?
    Dr. Duggan. Sure. I am delighted to answer a question about 
my dreamwork. So I think it is, just to--thanks very much for 
the question.
    I think it is important to recognize that SSDI is a 
complicated program, and it serves many, many very vulnerable 
individuals with severe disabilities.
    I do think that intervening sooner with people before they 
are on the program, so that they do not end up applying for, or 
do not end up enrolled in the program, is--has a lot of promise 
for the program.
    So David Autor and I in a 2010 proposal put together some 
ways to try to stem the flow of people applying for and 
ultimately receiving the program. My sense is that intervening 
sooner with people before they apply has even bigger bang for 
the buck than trying to give incentives for people already on 
the program to return.
    So that is step one. Step one is intervening sooner and 
designing innovative ways to keep people who may consider 
applying for SSDI engaged in the work force and keep them 
working. Because the payoff for that is extremely, extremely 
high.
    A second one is regarding the Continuing Disability 
Reviews. It is the case that they have been pretty infrequent 
in recent years. There has been an uptick as the Inspector 
General was mentioning, but they have been at a much lower 
level in recent years than in previous years.
    And I think it is important for the program, for the 
integrity of the program, for us to sort of perform CDRs on 
people, especially those whom we think--where their health is 
likely to improve. And I am not a lawyer, so I do not 
understand the exact details of CDR's work, but I do think 
there is a sense that there needs to be evidence of 
improvement, as opposed to the question of is the person 
disabled today or not.
    There is--I mean I think one thing about the process, about 
the disability application process, it seems plausible that 
with 2\1/2\ million applications per year, sometimes mistakes 
are made. Clearly people who are applying think mistakes are 
made because they appeal the decisions.
    If a mistake, though, is made and an award is made when a 
person checks in with a CDR, it is more difficult to reverse 
that initial decision given the way the legislation is 
currently written.
    So in any case, I just think improvements in the number and 
sort of functioning of CDRs would have a big payoff to the 
program as well.
    And then I think on the ALJ front, as I mentioned almost 40 
percent of SSDI awards were made on appeal, if you look at 
applications in 2010 for which we have relatively complete 
data.
    And one of the things about the hearings before ALJs is 
that typically a person is there with their representative but 
there is not--SSA is not necessarily--SSA is there in the form 
of the judge, but there is not a person there making the SSA's 
case for why the decision was made in the first place.
    So I think sort of putting on a level playing field those 
hearings would be useful. That is a third.
    And then I mean just generally I think reforms to increase 
the incentive to work among current SSDI recipients, we can 
learn a lot from I think welfare to--what happened with the 
TANF program in the 1990s about incentivizing people to return 
to work.
    And I think there is a way. It is a delicate balance, and 
it is important to be careful that we do not unwittingly harm 
people. But I think improving the incentives for people on the 
program, and hopefully these demonstration projects through 
this recent Budget Control, this recent budget that was passed, 
will lead to improved financial incentives for those on the 
program.
    Because right now with the cash cliff, you have a number of 
people who basically may be able to work but have a strong 
incentive not to because they risk going over the precipice and 
permanently losing their benefits.
    So I think it is--that combination of intervening sooner, 
CDRs, and incentives would be great.
    Representative Grothman. You are a really good witness. You 
gave me exactly a five-minute speech.
    Dr. Duggan. Oh, I'm sorry, I didn't mean----
    Representative Grothman. You practiced that last night.
    [Laughter.]
    Dr. Duggan. Thanks.
    Chairman Coats. You will be called back. We keep a list of 
people who go right at five minutes.
    Congressman Beyer.
    Representative Beyer. Thank you, Mr. Chairman.
    Inspector General O'Carroll, you noted that the Cooperative 
Disability Investigations have saved a lot of money, over $3 
billion since--$3--$2.2 billion since 1998, $400 million alone 
in FY 2015. So the latest budget deal gives us a CDI in every 
state. Will there be enough money in these caps to fund them 
adequately? And how much difference will that make in the 
fraud?
    Mr. O'Carroll. Thank you, Congressman. For two reasons. One 
is, that's something we're very proud of in terms of a program 
that we have. With the CDI program, it's a pre-fact situation. 
So before people start getting benefits, as we had mentioned 
before, as Dr. Duggan had mentioned, once you're on it, it's 
very difficult to take a person off it, especially if they 
scammed in getting it.
    So by having the CDI program before you get on, if there's 
a suspicion, we can, investigate to see whether or not, what 
the person is attesting to is correct.
    Oftentimes we'll validate the claim, if it is correct. But 
we find that CDI works very well. We think it is very good in 
all the states that we have it.
    Expanding it, I've got to admit, is going to be difficult 
for two reasons. One is, in the 37 that we have now, we've 
picked the states where we have the most cooperation with local 
law enforcement and the state DDSs. We have a presence of my 
agents there. We are able to roll them out.
    As we start looking at the other states we are going to be 
running into funding issues. It also becomes an issue in terms 
of securing cooperation with the states.
    To give you an example, in some states where we use state 
troopers to assist us, if we take those state troopers off of 
whatever is their regular daily assignment, they can't replace 
them. So they don't want to send state troopers for these 
programs, even though it saves a lot of money for the state.
    So we are running into a lot of different resource issues.
    Representative Beyer. Thank you. Thank you, Inspector 
General.
    And, Ms. Vallas, in your testimony you talked about from 
2013 to 2014 SSDI enrollment declined, and that the share that 
actually qualified is the lowest ever. Does this suggest that 
we have turned the corner on SSDI growth? Or is it closely 
aligned with either demographic factors or the economy?
    Ms. Vallas. Thank you so much for the question. You are 
exactly right, and another data point that I will mention is 
that the growth in this program right now is the slowest that 
we have seen in 25 years.
    So we knew that because of the rise of Baby Boomers into 
their high disability years of their 50s and their 60s, of 
women entering the work force in greater numbers, that we were 
going to see growth in this program. And in fact the actuaries 
projected back in the mid-1990s that 2016 would be the year 
when we would need--when Congress would need to act in order to 
prevent reserve depletion. And they predicted it right on the 
nose.
    What they could not have predicted, and what they did not 
predict, was the Recession. It was mentioned earlier that the 
Recession was alleged to have played a significant role in the 
growth in this program. The fact is, the Recession actually 
caused only 5 percent of long-term growth in the program.
    And that is largely not because of additional people 
receiving benefits, but actually a reduction in covered workers 
because of unemployment rates.
    So I just wanted to mention that I think it is important to 
note that while recessions are associated with application 
increases, what they are not necessarily associated with, and 
what we did not see in this past recession, was a rise in 
awards. We saw a decline in awards, as people were properly 
screened out who didn't meet the strict definition of 
disability.
    Representative Beyer. Dr. Duggan cited some of his work to 
show that from 1989 to 2014 only a third of the growth of SSDI 
was due to demographic changes. But your written testimony has 
very different conclusions. Can you explain the difference?
    Ms. Vallas. So the paper that I will point you to that I 
think clears up a lot of the confusion about what the drivers 
of the growth have been is by Harvard Economist Jeffrey Liebman 
and a colleague of Dr. Duggan's. And he took a look at the 
reasons for the program's growth, and he looked back all the 
way to 1977.
    He looked using 1980, which was an unusual troth and a 
historic low point in the program because people were being 
thrown off the roles left and right for reasons we can go into 
if there are more questions about this. And he also looked at 
1993. And what he found is that, whether you look at 1977, 
1993, the lion's share of the growth is explained by those 
demographic factors.
    Representative Beyer. Great. Thank you very much.
    Mr. Chair, I yield back.
    Chairman Coats. Well I'm going to--since you had a little 
bit of time left, I am going to let Dr. Duggan respond to that. 
I think it is important that we hear both sides on that.
    Dr. Duggan. Right. No, I know Jeff Liebman well, and I know 
the study to which Ms. Vallas is referring. And I think it is 
important, when you think about what is happening with the 
growth of the program, it is really important to think about 
when do you start--when is time zero?
    So if you look from the first figure of my testimony, in 
1977, if you looked at where SSDI enrollment was, it was 
growing quite rapidly. So basically it was on track to rise to 
much more than 2.7 percent, which is where it was then.
    So if basically those award rates had persisted, the 
program would have grown to be much bigger, perhaps as large as 
it is today. But the thing is that in 1977, partly because the 
award rates were so high, there was a sense that the program 
needed to be reformed, and some reforms were undertaken during 
the Carter Administration to tighten up the eligibility 
standards.
    And you can see that actually the program enrollment 
started to decline in 1978 and 1979 and 1980, and then declined 
somewhat a bit more in the early 1980s.
    Then there was a change in policy in 1984 which increased 
the award rate. So it basically made it easier for people with 
more subjective conditions, things like back pain, things like 
mental disorders, to get on the program.
    That 1984 policy change led to an increase in the award 
rates. That increase in award rates had largely played out by 
let's say the early 1990s, but you had then--the program was 
out of equilibrium. More people were coming on than were 
exiting it, so it grew.
    And then, so if you take, if you start looking at the 
program in 1977 when it was growing really rapidly, or in 1993 
when that policy change had taken effect, you can say, oh, the 
award rate, if we just hold the award rate at that level we're 
right where we would expect to be. But if instead you look in 
1985, right after that policy change, and you can see this from 
the figure from the first table of my testimony, that really 
what is driving it is this uptick in the award rates.
    And you can see that as well in Figure 2. If you look at 
sort of awards for musculoskeletal conditions. So the most 
common condition in musculoskeletal is back pain, and you can 
see there that the award rate for musculoskeletal is six times 
higher. So that's musculoskeletal awards divided by people 
insured for the program, six times higher today than in 1983, 
and also substantially higher now than it was even in the late 
1990s. Whereas things like heart conditions, circulatory 
neoplasms, cancer, have been pretty flat.
    So I think it is really important. I am very familiar with 
the Liebman study. If you start in 1977 and if you start in 
1993, then what Ms. Vallas said, the award rates were high in 
those years, in one case before a big policy change to tighten 
it. In another case, after this policy change that had 
liberalized the criteria. But if you start instead in 1985, 
then it is the case that the majority is driven by the growth 
in the award rates.
    So I apologize for the long-winded, but hopefully that 
sheds some light on it.
    Chairman Coats. Thank you. I just think it is important for 
the record as we look at it after we are done with all this and 
have to make decisions about going forward.
    Congressman Paulsen.
    Representative Paulsen. Thank you, Mr. Chairman. It has 
been referenced that SSDI is a critical and very important 
safety net for millions of Americans with disabilities. 
Unfortunately because of years of inaction, we came right up 
against the brink of having it be the first trust fund that 
essentially was set to run out of money.
    Now the recent budget deal, which has been referenced 
several times corrects that, it, had some really common sense 
reforms that were included to make sure we strengthen 
oversight. And integrity of SSDI, and a lot of those changes 
are actually aimed at simplifying the complex web of 
regulations that currently plague the program.
    Because for a lot of these beneficiaries, it is the 
confusion and the fear of having their benefits cut off that 
have prevented them from even testing out going back into the 
work force.
    That is despite 40 percent of these beneficiaries 
indicating they would like to return to work. So my question 
is, Dr. Duggan we took corrective action recently, but we have 
just prolonged--now we extended the trust fund until 2022. What 
happens if we wait another six years before we decide to fix 
SSDI again, versus trying to keep the momentum going and adopt 
some other reforms, preparing for the future?
    Dr. Duggan. Thanks so much for the question.
    So I think that it is, you know, SSDI reform is inevitably 
somewhat complicated and one needs to be careful about the 
possibility of unintended consequences.
    I do think the budget deal clearly pushes out the 
expiration of the trust fund several years. And that is 
something that I think is agreed is a good thing that that 
trust fund doesn't hit zero and we see this automatic benefit 
cut across the board.
    But I do think the program has to a large extent been on 
auto pilot for decades. There have been some changes here and 
there, but I view them as kind of tweaks to the fundamental 
system.
    And so I think really there are opportunities to 
significantly reform the program so as to stem the flow of 
people enrolling initially, and to expedite the flow off of the 
program among those initially enrolling.
    And I don't pretend to have all the--you know, a sense of 
what is the absolute perfect way to do that, but I think 
doing--trying hard to improve the work incentives both on the 
front end and on the back end could dramatically improve not 
just the fiscal health of the program but also the economic 
well being of people with disabilities.
    I mean to me it is really unfortunate that we look from 
let's say 1988 to 2008 employment rates among individuals with 
disabilities fell relative to those without disabilities. And 
along with that, their economic well being declined. And I 
think there is really a lot of scope for improving the 
incentives to return to work. And I think, you know, the 
welfare reform there were mistakes made, and it's not like 
every reform that was made was perfect, but I think we learned 
a lot about how to get people engaged in the work force.
    And there are gains not just--I mean, I think it is really 
important when thinking about the effects on work to think not 
just what's it going to do next year, or the year after that. 
It can have really big lifetime effects on people's 
aspirations, on their psychological health to be working, and 
also on, you know, their family members and so forth.
    So I think there's really a lot that we can do, and I sort 
of take heart in looking at what happened in the 1990s. And by 
no means was it perfect, but I think incentivizing work--and I 
think that's especially important when I look--I mean, I sort 
of feel each month, you know, to me the fact that we've got a 
labor force participation rate of 62.4 percent, and we have a 
demographic change that is just going to--it's like the wind at 
the back of that thing continuing to fall. I think it is really 
important as a Nation for us to do more to get us incentivizing 
work.
    Representative Paulsen. All the more reason to have it be 
comprehensively looked at sooner rather than later.
    So, Inspector General O'Carroll, real quick, you know I 
think it was referenced earlier, but this GAO Study or report 
found that the Social Security Administration had overpaid 
beneficiaries who returned to work by like $11 billion over 9 
years. And the SSA wasn't able to recover like $1.4 billion of 
it because it was the agency's fault.
    What can be done to make sure that the SSA is managing this 
program effectively? Do you think some of the changes in the 
recent budget deal, like allowing the SSA to use payroll 
provider data, is going to help?
    Mr. O'Carroll. Yes, Congressman. One of the things, as I 
had mentioned earlier, is that there's a lot of available 
information that SSA should start using, from other government 
agencies.
    An easy example would be that one government agency is 
sending out a tax refund because a person is working, and at 
the same time SSA is sending out a check because they are 
indigent.
    That is the type of information government agencies have to 
be comparing. So that's one of the concerns.
    The other part is, again, is just the due diligence and to 
be very cautious in terms of the benefits that are going out. 
What SSA says, and we applaud, is making sure that the right 
benefits go to the right person.
    And that's the type of due diligence that we're looking for 
to make sure that there are enough checks and balances, and 
that they are all being used.
    And that is in this bill that you just talked about. There 
are different due diligence requirements that we applaud and we 
like. It's a step in the right direction, to start finding ways 
to identify where taking advantage of the system, and to block 
it. And then also to try to prosecute those who are taking 
advantage.
    Representative Paulsen. Thank you.
    Chairman Coats. Thank you, Congressman.
    Dr. Adams.
    Dr. Adams. Thank you, Mr. Chairman. Thank you, Ranking 
Member as well, and thank you to all of you for your testimony.
    Mr. O'Carroll, even with the excellent work your office is 
doing, some people still cheat the system. How does the fraud 
in SSDI compare to IRS fraud, or improper payments in other 
programs, government programs?
    Mr. O'Carroll. Wow, Dr. Adams, a very good question. The 
reason it sets me back is that I had mentioned this earlier 
when we had talked about looking at improper payments with 
Social Security.
    One of the things we've been trying to do is identify what 
is the amount of fraud in SSA's disability programs. I applaud 
SSA's anti-fraud initiatives that are very important to them. 
They are making a lot of effort to identify and avoid fraud in 
the programs.
    But what we would like to do is to be able to estimate the 
fraud rate, so we can tell when we start doing different things 
and putting more money and more attention into the programs, 
which ones are effective at avoiding fraud.
    And as a result of that, we have looked at other government 
agencies. And unfortunately I can't give you an answer as to 
how SSA compares to, for example, IRS, in that none of the 
other government agencies want to go on record saying that this 
is the amount of fraud in our agency.
    We can attest to the amount of improper payments in 
comparison to some of the other government agencies. SSA's 
improper payment level is low, lower than a couple of the 
higher improper payment agencies. But I can't give you an 
answer in terms of saying which program has more fraud, one 
amongst the others.
    Dr. Adams. Okay.
    Mr. O'Carroll. We would like to, and in a year I would like 
to come back and be able to tell you. So we are working with 
SSA and our oversight committees to do that.
    Dr. Adams. Okay. But with diligence and proper oversight 
and sufficient resources, are we making good progress in 
ensuring that this vital program is serving those who need it, 
and identifying those who don't need it, Mr. O'Carroll?
    Mr. O'Carroll. In most cases, yes. I think those that need 
it are getting the benefits. I think that the system could be 
perfected so that it would be speedier for people to get it, so 
that there would not be a need for as much due diligence and as 
much attention that is being paid.
    As we said before, it is important to make sure that if a 
person is not entitled to the benefits, they don't get them. 
And because of that, there are a lot of steps in the process. 
And I applaud them because it is keeping the system as good as 
it can be. But it can be better.
    Dr. Adams. Thank you. Dr. Duggan, in keeping on this topic 
of eligibility standards, many critics of the SSDI program say 
that an increase in SSDI cases contributed to a reduction in 
the labor force participation rate.
    So what are your predictions for the labor market and the 
SSDI program in the near term, given the improvements in the 
economy and the changes in the program's entry and exit rates?
    Dr. Duggan. Thanks so much for the question, Dr. Adams, 
Congresswoman. So the program has, as Ms. Vallas mentioned 
earlier, has actually flattened out in growth in the program. 
In fact, in 2013 to 2014, the percentage of adults 25 to 64 
actually declined somewhat.
    I talk a bit in my written testimony about the reasons for 
that. One that I think I want to draw your attention to is that 
there's a recent report from the Technical Panel on Assumptions 
and Methods to the Social Security Advisory Board.
    What they are finding is that it appears that the medical--
the decision making within SSA is becoming somewhat stricter, 
which is to say a smaller fraction of awards are being made 
today than two years ago, than four years ago, than six years 
ago.
    And so as Ms. Vallas also mentioned, a fraction of 
applications resulting in an award in 2014 was at its lowest 
level actually in the history of the program. So it is I 
think--and I don't know exactly what is driving that, but there 
has been a decline in the award rates for the program.
    And I think that is causing the program to flatten out, 
along with the fact that aging has sort of run its course 
somewhat. I do think that--so I look to that Technical Panel. 
They tried to project where SSDI enrollment was headed, and the 
actuaries do this as well.
    I don't think, based on current trends, it is set to 
explode over the next 25 years the way that it did over the 
last 25 years. I think that, absent some sort of policy change, 
it seems plausible that it will remain in the neighborhood of 5 
percentage points plus or minus half a percentage point for 
some time.
    That is not to say that that necessarily is the right 
fraction to have, but that is I think where it will stay.
    As for the economy, I really hope that the labor force 
participation rate starts moving in the opposite direction. We 
have seen--you know, I sort of keep hoping for that thing to 
stop trending down. It's down 3.7 percentage points from 
several years ago. And that is a big deal. So I hope--you know, 
we have seen steady, consistent job growth but not sufficient 
job growth to break this trend of a declining labor force 
participation rate.
    So I am hopeful, but I am troubled by the trends that we 
see in that measure.
    Dr. Adams. Thank you. I yield back.
    Chairman Coats. Dr. Adams, thank you.
    The Ranking Member has a UC request here.
    Representative Maloney. I ask unanimous consent to place in 
the record a Policy Futures Report from the Center on Budget 
and Policy Priorities. And also Understanding the Increase in 
Disability Insurance Benefit Receipt in the United States by 
Jeffrey Liebman.
    And the Policy Futures shows that the disability insurance 
rules largely reflect democratic--demographic factors, and that 
it is highest among older workers, which is understandable. So 
both of these are important reports for the record.
    Chairman Coats. We will make sure both of those are 
admitted into the record.
    Representative Maloney. Thank you.
    [The report titled ``Chart Book: Social Security Disability 
Insurance'' submitted by Representative Maloney appears in the 
Submissions for the Record on page 39.]
    [The report titled ``Understanding the Increase in 
Disability Insurance Benefit Receipt in the United States'' 
submitted by Representative Maloney appears in the Submissions 
for the Record on page 63.]
    Chairman Coats. Congressman Schweikert.
    Representative Schweikert. Thank you, Mr. Chairman.
    Inspector General, you have commented that SSA's data sets 
are thin, or their ability to compare to other sets of data. 
Have you actually had the opportunity to do some geographic 
testing for why there may be a concentration in some areas with 
much higher acceptance, participation, claim rates than other 
areas? Have you seen that?
    Because there used to be a Member who retired last year 
named Spencer Bachus, and he used to claim that in his State he 
had two counties that had more people on SSDI than actually 
were holding jobs.
    First off, do you use those geographic concentrations to 
understand outliers and problems within the program?
    Mr. O'Carroll. Yes. The easy answer is, yes, we try to use 
that information. What we're always looking for is the outlier. 
We're looking at the bell curves. We're trying to find which 
outliers on the bell curves are the ones that need attention.
    And that is one of the tasks of an audit staff, looking for 
those irregularities.
    Representative Schweikert. But for you to be able to do 
your job better, you actually need much more communication of 
data sets?
    Mr. O'Carroll. Absolutely.
    Representative Schweikert. Whether they be IRS data sets, 
or much of the private sector data sets that may be used to 
create credit scores, or other things where they are collecting 
tremendous amounts of consumer data down to the individual. If 
you had the ability to match up against those, would that 
actually give you tools?
    Mr. O'Carroll. Yes. It would give us tools. We are trying 
to use it, but we're not using as much as we could. There's a 
lot of information out there; that type of mapping that would 
help us a lot, and we haven't used it as much as we should.
    Representative Schweikert. Okay, Doctor, I was earlier 
hearing a little back and forth that was sort of questioning 
your math. But, let's see. Your Masters is from MIT, and your 
Doctorate is from where?
    Dr. Duggan. From Harvard.
    Representative Schweikert. Okay. So I assume somewhere 
around here you qualify as the freaky smart category of our 
population. Just because earlier in the year we had one of your 
kind in my office working with us, looking at some of these 
original data sets, and if I remember we were actually looking, 
saying why is the population within the program seems to be 
flattening out?
    And all of you who remember your quant classes, on the 
downside of a spike is a mean or a normalization. So from your 
demographics, okay, you have a demographic trend moving to 
actually benefits, Social Security, Medicaid, but you also had 
the downside spike. And now you've just shared with us that 
there may have been some policy set changes.
    Dr. Duggan. Yes.
    Representative Schweikert. Would those, if I lined those 
up, be pretty explanatory that we're actually not in the 
downside, we're just sort of moving back to the mean?
    Dr. Duggan. Yes, thanks very much for the question, 
Congressman. I think given the current environment, the program 
is to some extent close to being in equilibrium, which is to 
say given the current award rates, the current demographics, 
what's coming down the pike on the demographic front, I think 
we are somewhat in equilibrium.
    I think that equilibrium rate would be higher if award 
rates did not seem to have gotten tougher.
    Representative Schweikert. But theoretically with our 
demographics getting older, we should be actually moving in the 
other direction. If I have a substantial portion of my 
population that's actually moving into earned benefits right 
now, shouldn't actually my participation in SSDI actually be 
falling?
    Dr. Duggan. Yeah, I think if we sort of look ahead and see 
what the proportion, let's say, of people 25 to 34, 10 years 
out will be relative to the people 55 to 64, I think there may 
be a bit of that, but I don't think it will--so I think I agree 
that this could push it down somewhat.
    But to some extent the age distribution is somewhat flatter 
now. We've got sort of 4 million people at many of these ages, 
so 61-year-olds, 51-year-olds.
    Representative Schweikert. Hasn't some of the authorship 
said, though, the change in the way we work also should have 
also flattened out or reduced these numbers, you know, the 
number of folks who are out there actually doing truly hard 
labor, with the automatization, something is just not lining 
up?
    Dr. Duggan. So, yeah, so if you look at how physically 
demanding jobs are, I think they have become less physically 
demanding over time. And that is reflected, if you look let's 
say at Workers Comp as a share of payroll. That has actually 
come down somewhat.
    Representative Schweikert. I have like 15 seconds, and I 
wanted to throw two questions. The Liebman, that report was out 
last year?
    Dr. Duggan. Yep, or this year.
    Representative Schweikert. I think it was in our office 
earlier, and I think wasn't the problem with that was it was 
doing smoothing, even though there had been policy changes, and 
obviously some fairly substantial economic cycles within that--
--
    Dr. Duggan. Right.
    Representative Schweikert [continuing]. And you cannot do 
that without doing adjustments to see your trend line?
    Dr. Duggan. Right.
    Representative Schweikert. I mean that was just basically, 
the term ``garbage in/garbage out'' fits that?
    Dr. Duggan. Yeah. I think very highly of Jeff Liebman. For 
the reasons I mentioned and some others, I think it is 
important to sort of look at the whole study. And I think if 
you look at it from 1985, you get a very different story.
    Representative Schweikert. The last thing, and forgive me, 
Mr. Chairman, if a policymaker truly wanted to do the right 
thing here, and a powerful belief that work is incredibly 
honorable both for the human spirit but for just life in 
general, where do I reach and see where there's been policy 
adopted where folks who were on disability actually had an on-
ramp back to what you and I might refer to as sort of 
normality? And what do we have to do policy wise to make that 
practical, both from the rational actor thinking themselves 
economically to even society, and our labor force 
participation. What would be the approach we should take? Where 
can I find that history?
    Dr. Duggan. So on the front end, I would say improving--so 
right now we have this cash cliff. If you go above $1,090 a 
month in earnings, you risk being terminated from the program 
permanently. So I think sliding out the benefits somewhat 
beyond that point so that there isn't this sort of sense of I 
don't want to go over the precipice, I just want to park below 
$1,090 and not earn above that amount. I think that would be 
one piece of low-hanging fruit that would incentivize work.
    On the front end, though----
    Representative Schweikert. So it is----
    Dr. Duggan. Oh, go ahead.
    Representative Schweikert. No, please.
    Dr. Duggan. So on the front end, though, I think there are 
a number of things. So, one, we talk a lot about lag times. So 
there is research, when a person is applying and they are 
waiting to hear back, they are staying out of the labor force 
because you need to not be working if your application is going 
to be considered unless you're doing--you know, we talked about 
some program integrity type stuff. Those long wait times, 
especially for the people on appeal, those are problematic 
because they're reducing the employment potential even on 
people who never get on the SSDI program.
    Representative Schweikert. So from both ends.
    Dr. Duggan. Right.
    Representative Schweikert. We seem around here quite 
willing to do pension smoothing, and we all know how, let's 
face it, a fraud that is. Maybe we could do something that is 
actually useful, and some pension smoothing on that cliff.
    Dr. Duggan. Right.
    Representative Schweikert. And be--I think benefit 
smoothing.
    Dr. Duggan. And we can learn something. You know, the 
population served by welfare, temporary assistance to needy 
families and the SSDI population are somewhat different, so 
it's not like--but I think learning somewhat from that 
experience, and trying to translate some of that knowledge to 
this program so that we can improve our work incentives both 
for people--there's people on the program, and then there's 
people who might go on the program in the future.
    And those are two different groups. And the interventions, 
moving away from this kind one-size-fits-all approach to 
approach that is somewhat more flexible and nimble I think 
could, you know, really substantially increase employment 
among, of this group.
    Representative Schweikert. Thank you for your patience, Mr. 
Chairman.
    Chairman Coats. Thank you. I am told Senator Lee is on his 
way back. While he's not here yet, the Ranking Member would 
like to I think----
    Representative Maloney. I would like to make some points 
that are in my opening statement. But first, if I could, ask 
Ms. Vallas if she would like to respond to Duggan's points 
about work incentives.
    There has been a lot of talk about it today. How many can 
we expect to return to work? Personally, I love to work. I've 
got to think most people want to work. This is just a problem 
that is a life raft to many people that are out of work.
    But I would like you to respond to his points--and really, 
realistically in the work that you have done, how many can we 
expect to return to work?
    Ms. Vallas. Thank you so much for the question. I really 
appreciate it.
    You mentioned that SSDI can be a life raft for people. I 
think what we need to be careful not to do is to blame the life 
raft for the floods.
    So it is important on the one hand to be aware of the work 
incentives that already exist, and to understand how they work. 
I think it is also important to understand what other types of 
policies we need that do not necessarily lie within the Social 
Security Disability Insurance Program, and which could help 
stem that flow of people onto the program.
    So just to quickly explain the work incentives that do 
exist. Individuals receiving these benefits are allowed to earn 
up to $1,090 per month and keep every one of those dollars, and 
not lose a single dollar in their benefits. They are allowed to 
do that. And about one in six beneficiaries do do some work at 
any given point during the year.
    However, fewer than one in six have earnings of even $1,000 
during the entire year. And just 3.9 percent earn more than 
$10,000 during the year. Hardly enough to support themselves.
    So extremely limited work capacity of the vast majority of 
people who are on this program. I would agree wholeheartedly 
with Dr. Duggan that what we need to be doing is looking at 
earlier in the process before people get to the doors of the 
Social Security Administration.
    And I will read you a quote from the National Council on 
Disability that I think sums this up really well:
    ``Receipt of Social Security Disability Benefits is merely 
the last stop on a long journey that many people with 
disabilities make from the point of disability onset to the 
moment at which disability is so severe that work is no longer 
possible. All along this journey, individuals encounter the 
policies and practices of other systems involved in disability 
and employment issues.''
    So I welcome this bipartisan conversation about how we can 
support employment among people with disabilities, but we will 
be incredibly myopic if we limit our focus only to the DI 
program. We need to be thinking about policies that are 
critical for workers with disabilities such as paid leave, and 
paid sick days, and ensuring access to long-term supports and 
services.
    These are the kinds of policies that will make it possible 
for people to stay at work longer and not need to access DI 
benefits. And I would hope that they will be part of the mix as 
we continue to look at this important program and issue.
    Representative Maloney. Okay. I want to thank you for all 
of your perspectives, and particularly Chairman Coats for 
calling today's hearing. The Social Security Disability 
Insurance Program is a critical part of our safety net that 
protects each of us in the event of a life-changing injury or 
illness prevents us from working to earn a living.
    We all have an interest in making this program as strong 
and successful as possible. And the recent Budget Agreement 
extended solvency of the Disability Insurance Trust Fund 
through 2022, and took important steps to bolster anti-fraud 
programs and to strengthen program integrity.
    But today we did hear concerns about the SSDI. We did hear 
that SSDI is plagued by fraud and abuse; that the program is 
growing at out-of-control rates, that it is easy to get on SSDI 
and that it discourages work.
    These assertions are largely not supported by the facts. 
SSDI is an insurance program. Workers earn benefits by paying a 
small tax, less than one percent of their taxable income, over 
years of work. The typical disabled worker worked for 22 years 
before becoming disabled, and none of us knows if he or she 
will need disability benefits at some time in our lives.
    But a young person starting her career or his career today 
has a one in four chance of needing SSDI before reaching 
retirement.
    Today there are nearly 11 million SSDI beneficiaries, 
including nearly 9 million disabled workers, and almost 2 
million spouses and children of disabled workers. Those who 
receive benefits face severe and long-lasting impairments, 
including Alzheimer's, cancer, blindness, lupus, multiple 
sclerosis, and many other diseases.
    SSDI benefits are modest, but critical. The average monthly 
benefit, as Ms. Vallas has said, is $1,165, slightly over the 
poverty line. SSDI is the only source of income for one in 
three beneficiaries, and it is the main source of income for 
more than four in five.
    There are several misconceptions about SSDI. I hope that 
today's hearing has cleared up some of these misconceptions. I 
would say the number one is that it is rift and filled with 
fraud, and we have seen vivid cases of fraud in the media, for 
example, a man doing yard work while collecting disability.
    And let's be clear that any fraud or misuse of the system 
is a waste of taxpayer money. It is unacceptable and really 
needs to stop. However, SSDI fraud is rare, according to the 
Social Security Administration, the improper payments rate was 
less than one percent in fiscal year 2013.
    The IG of the Social Security Administration is here today 
to tell us about successful fraud fighting initiatives like the 
Cooperative Disability Investigations, and Continuing 
Disability Reviews.
    Every dollar spent on CDI efforts to investigate initial 
claims, for example, saves as much as $17. So these are 
powerful programs, and I am pleased that the Budget Agreement 
doubles CDI capacity to track down people who are trying to 
claim disability unfairly.
    And it is a credit to Mr. O'Carroll and to the IG's office 
that this work is tracked carefully so as policymakers we are 
not forced to make decisions on the basis of anecdotal 
evidence.
    So let us use hard data to make sure that SSDI serves the 
people who really need it.
    The number two misconception, I believe, is SSDI is growing 
at out-of-control rates, driven by people who did not really 
need the benefits. The overwhelming body of evidence shows that 
the growth in SSDI beneficiaries and program costs is largely 
due to demographic changes like the aging of the Baby Boomers 
and the huge increases in the number of working women.
    As the Baby Boomers have aged, they have moved into age 
brackets that are more prone to disability. A worker is twice 
as likely to be disabled at 50 as 40, and twice as likely at 60 
as 50. This alone drives a large part of the increase in the 
number of people who receive disability benefits.
    Likewise, as women have entered the work force in greater 
numbers, they became eligible for SSDI. While women accounted 
for less than 40 percent of those insured for SSDI in 1980, 
they make up close to half of those insured for benefits today.
    The Center on Budget and Policy Priorities finds that 
nearly 70 percent of growth in SSDI beneficiaries since 1980 is 
explained by demographic factors. New peer-reviewed research 
from Harvard Economist Jeffrey Liebman confirms the key role 
demographic factors have played. But these trends have 
generally played themselves out. As Baby Boomers continue to 
age and move from disability to retirement, the increase in 
beneficiaries has reached its lowest level in more than 30 
years.
    The third misconception is that SSDI is easy to get. Not 
so, as Ms. Vallas pointed out. The United States has among the 
most stringent eligibility criteria. Applicants must provide 
extensive medical documentation of the disability, and show 
that they are unable to do their prior job, and any job in the 
national economy. And that is a high bar.
    In fact, about two-thirds of disability insurance 
applications are denied. And as Dr. Duggan notes in his 
testimony, in 2014 the share of applicants approved for SSDI 
was at the lowest level in history.
    Another large misconception, number four, once on 
disability beneficiaries have no incentive to return to work. 
In fact, SSDI allows beneficiaries to earn $1,090 a month with 
no impact on benefits. In other words, beneficiaries who 
receive disability have a very high incentive to work.
    The Budget Deal calls for more initiatives to test whether 
smoothing out the so-called ``cash cliff'' and replacing it 
with a gradual offset would help more people to increase their 
work and earnings. And the Obama Administration has advocated 
for early intervention strategies to help keep disabled workers 
employed and off the DI rolls in the first place.
    And both ideas are worth exploring. But we must recognize 
that most SSDI recipients simply cannot work. They struggle 
with injuries and illnesses. They have earned those benefits, 
and any one of us could be in that situation. And that is why 
we need and must protect Social Security Disability Insurance.
    And I thank the Chairman for allowing me to put my comments 
in the record. And I see the Senator has returned.
    Chairman Coats. We welcome Senator Lee, because we would 
have closed out thinking that perhaps you weren't going to 
come, but we are glad you did. And the timing is perfect.
    Senator Lee. Thank you very much, Mr. Chairman. And thank 
you, Representative Maloney, for accommodating my schedule.
    Chairman Coats. Let me just state this, also, for the 
benefit of the Ranking Member. The hearing record will as usual 
remain open for five business days for questions to be put in 
the record.
    Senator Lee.
    Senator Lee. Thank you very much. Thanks to all of you for 
being here.
    Dr. Duggan, I would like to talk to you for a minute. You, 
along with David Autor, talked about the role that private 
disability insurance might be able to play in alleviating some 
of the pressure that is currently brought to bear on the SSDI 
program.
    While I personally don't think that mandatory private 
disability insurance is an appropriate, feasible path forward, 
I have been working on a proposal that would provide an 
incentive by a payroll tax reduction for employers and self-
employed individuals to purchase private disability insurance, 
creating something of an incentive for them to buy it.
    Relative to your proposal of universal private disability 
insurance, I would like to get your perspective on an 
incentivized employer option to provide private disability 
insurance for two years of insurance coverage at 50 percent, at 
a rate of 50 percent of a covered individual's income.
    The incentive would be a reduction in payroll tax liability 
by 0.25 percentage points of the employer's side payroll taxes, 
would last no longer than two years, and may require medical 
treatments for plan participants if such treatments may provide 
the--may improve the individual's ability to work.
    Can I just get your thoughts on that, whether you think 
that would help?
    Dr. Duggan. So I think--so, yes, David Autor, Professor 
Autor and I put together a proposal that involved private 
disability insurers, partly because private disability insurers 
are able to move away from a sort of one-size-fits-all 
approach, and instead tailor somewhat whatever interventions 
they make with individuals to the specifics of the person.
    So to give you a sense of what we had in mind, just to give 
you a quick recap and then to connect to yours, was the idea 
that private disability insurer would have a vast amount of 
experience with getting people back to work, covering people 
let's say for disabilities that they incur, but helping them 
get back to work and working with the employer because both 
then the private disability insurer and the employer have skin 
in the game to some extent to get this person, to help this 
person's health improve and to keep them engaged in the work 
force.
    And the Netherlands has had some experience with this, and 
Richard Burkhauser at Cornell has written some on this, and the 
evidence from the Netherlands indicates that this has led to 
reduction in enrollment, ultimately, in their public disability 
programs because the private disability insurers can sort of 
help individuals address whatever disabilities they have, 
improve their health somewhat, and stay engaged in the work 
force
    So there are lots of examples of things that an insurer can 
do. But to some extent that kind of rapid early intervention 
that insurers are good at, that the private insurers can be 
good at, can be a way to keep people from going into public 
disability insurance for a long time.
    Senator Lee. Okay, so you think there is a possibility that 
this kind of thing could work, if you provide some incentive 
for the employer, or for self-employed individuals that might 
help?
    Dr. Duggan. Yes. You know, with something like this the 
devil is in the details, but I think part of the reason that 
Autor and I looked into that was based on our own research and 
reading of the research out there, was that this would be a 
good way to stem flows to the program by moving away from 
somewhat of a one-size-fits-all approach.
    Senator Lee. Right, right. And incentivizing the kind of 
behavior that will lead to fewer risks for the system.
    Dr. Duggan. Yes, exactly. I mean I think that's part of the 
reason that Worker's Comp, for example--Worker's Comp isn't 
always working perfectly, but it is the way that it's designed. 
And I know it's mandatory and this wouldn't be mandatory, but 
basically the insurers and the employers are on the same page 
with respect to wanting to keep people off the program in the 
first place. And if they get on it, get them back to work as 
quickly as possible.
    Senator Lee. Right, right. I thank you for your response to 
that and for your input. And I would love to continue to get 
your input as this idea is developed.
    Dr. Duggan. Yeah, if I can help in any way, it is an area--
disability is an area I have been working on for a long time, 
and if I can help with my own research on anything I am happy 
to help anyone on improving the program.
    Senator Lee. That is very helpful. I think it is important 
to talk about other reforms to SSDI, but I do want to highlight 
the fact that the private group long-term disability insurance, 
according to one study, already saves federal programs $2 
billion a year.
    And so I think this is an area that is very much ripe for 
exploration and am glad to have had this discussion with you. 
And I thank you for your input.
    Dr. Duggan. And just one last thing on that. One-third of 
workers do have private disability insurers through their 
employers. So right off the bat there is a set of people who 
already have a private disability coverage. So it's just worth 
nothing.
    Senator Lee. Great. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Coats. Thank you, Senator. I want to thank my 
colleagues. As the witnesses and those who are here have seen, 
there is a significant interest in this subject. I particularly 
want to thank our witnesses. I thought it was a very 
constructive discussion. All three of you participated and gave 
us a lot of information I think that will be helpful in dealing 
with reforming a program that is a necessary program for 
obviously those who qualify, and something we want to show that 
we have taken the efficiencies and the effectiveness to make 
this a program we can all be proud of.
    So thank you very much for this. And with that, this 
hearing is closed.
    (Whereupon, at 4:12 p.m., Wednesday, November 4, 2015, the 
hearing was adjourned.)

                       SUBMISSIONS FOR THE RECORD

    Prepared Statement of Hon. Dan Coats, Chairman, Joint Economic 
                               Committee
    The committee will come to order.
    First, I want to thank Senator Cotton for asking the Committee to 
examine how we can improve the Social Security Disability Insurance 
program.
    The SSDI program was originally created as a safety net for 
primarily older workers whose disabilities prevented them from working. 
In the subsequent decades we have witnessed an expansion of program 
eligibility, accompanied by a sharp increase in the number of 
claimants.
    As of today, nearly nine million Americans receive Social Security 
Disability Insurance benefits, including almost five percent of working 
age adults. In total, SSDI accounts for about 15 percent of benefits 
paid through the Social Security Administration.
    While the SSDI program was originally crafted to maintain the 
principles of rehabilitation and return to work, statistics show that 
this rarely happens today and the program's underlying structure 
disincentivizes many from working.
    The Bipartisan Budget Act, passed by Congress last week, did take 
some steps toward improved SSDI program operation. For instance, the 
SSDI program will begin to test an alternative to the current ``cash 
cliff'' in an effort to address disincentives for claimants to return 
to work. The bill also includes important program integrity reforms, 
such as enhancing fraud enforcement and deterrence measures as well as 
requiring regular case reviews to confirm claimant eligibility.
    While these actions are useful, they do not address the long-term 
solvency questions facing the SSDI program. As a result, last week's 
budget agreement temporarily shored up the program by transferring 
funds from the Old Age and Survivors Trust Fund.
    Today, we want to examine how we can ensure success for the Social 
Security Disability Insurance Program and its beneficiaries over the 
long term. This includes measures to assist the successful transition 
of individuals to the workplace, which impacts their personal well-
being as well as the fiscal sustainability of the program.
    We must also ask how current administrative processes can be 
reformed. The current SSDI program review and appeal system is burdened 
by a backlog that increases risk of fraud and slows awards of benefits 
to individuals who need them.
    The SSDI program is also plagued with improper payments. Just last 
week, the Government Accountability Office outlined billions of dollars 
in overpayments. The Social Security Administration Inspector General, 
here with us today, has also studied this issue, finding overpayments 
to 44.5 percent of sampled claimants.
    There is clearly much work to be done to improve the administration 
of the SSDI program.
    I would like to welcome our witnesses and thank them for being here 
today to discuss how we can address all these issues and leave with a 
better understanding of steps we should consider to improve the SSDI 
program for both current and future claimants.
    I now recognize Ranking Member Maloney for her opening statement.
                               __________
Prepared Statement of Hon. Carolyn B. Maloney, Ranking Democrat, Joint 
                           Economic Committee
    Chairman Coats, thank you for calling today's hearing. The Social 
Security Disability Insurance (SSDI) program is a critical part of our 
safety net that protects each of us in the event of a life-changing 
injury or illness that prevents us from working and earning a living. 
We all have an interest in making this program as strong and successful 
as possible.
    The recent budget agreement extended the solvency of the Disability 
Insurance Trust Fund through 2022 and took important steps to bolster 
anti-fraud programs, strengthening program integrity.
    Nevertheless, it's likely that some concerns about SSDI will be 
raised this afternoon. We may hear that SSDI is plagued by fraud and 
abuse; the program is growing at an out-of-control rate; it's easy to 
get SSDI; and the program discourages work.
    These assertions are largely not supported by the facts.
    SSDI is an insurance program. Workers earn benefits by paying a 
small tax--less than 1 percent of their taxable income--over years of 
work. The average beneficiary worked for 22 years before becoming 
disabled.
    None of us knows if we will need disability benefits sometime in 
our lives. But a young person starting her career today has a one in 
four chance of needing SSDI before reaching retirement.
                    who receives disability benefits
    Today, there are nearly 11 million SSDI beneficiaries, including 
nearly 9 million disabled workers and almost 2 million spouses and 
dependent children of disabled workers.
    Those who receive benefits face severe and long-lasting impairments 
including Alzheimer's, amputations, cancer, congestive heart failure, 
blindness, lupus, gastrointestinal hemorrhaging, cerebral palsy, 
multiple sclerosis, traumatic brain injury, intellectual disability, 
schizophrenia and severe depression.
    SSDI benefits are modest, but critical. The average monthly benefit 
is $1,165--slightly over the poverty line. SSDI is the only source of 
income for one in three beneficiaries. It is the main source of income 
for more than four in five.
    There are several misconceptions about SSDI. I hope that today's 
hearing can help to clear up some of the more common ones.
               misconception #1: ssdi is rife with fraud
    We have seen vivid cases of fraud in the media--for example, a man 
doing yard work while collecting disability payments. Let's be clear--
any fraud or misuse of the system is a waste of taxpayer money and is 
unacceptable.
    However, SSDI fraud is rare. According to the Social Security 
Administration, the improper payment rate was less than one percent in 
FY 2013.
    The Inspector General of the Social Security Administration is here 
today to tell us about successful fraud-fighting initiatives like 
Cooperative Disability Investigations (CDI) and Continuing Disability 
Reviews.
    Every dollar spent on CDI efforts to investigate initial claims, 
for example, saves as much as $17. These are powerful programs and I'm 
pleased that the budget agreement doubles CDI capacity to track down 
people who are trying to claim disability benefits unfairly.
    It is a credit to the Inspector General that this work is tracked 
carefully, so as policy makers we aren't forced to make decisions on 
the basis of anecdotal evidence. Let's use hard data to make sure that 
SSDI serves the people who really need it.
 misconception #2: ssdi is growing at an out-of-control rate driven by 
            people who don't really need disability benefits
    The overwhelming body of evidence shows that the growth in SSDI 
beneficiaries and program costs is largely due to demographic changes 
like the aging of the baby boomers and the huge increases in the number 
of working women.
    As the baby boomers have aged, they have moved into age brackets 
that are more prone to disability. A worker is twice as likely to be 
disabled at age 50 as at 40, and twice as likely at age 60 as at 50. 
This alone drives a large part of the increase in the number of people 
who receive disability benefits.
    Similarly, as women have entered the workforce in greater numbers, 
they became eligible for SSDI. While women accounted for less than 40 
percent of those insured for SSDI in 1980, they make up close to nearly 
half of those insured for benefits today.
    The Center on Budget and Policy Priorities finds that nearly 70 
percent of growth in SSDI beneficiaries since 1980 is explained by 
demographic factors. New peer-reviewed research from Harvard economist 
Jeffrey Liebman confirms the key role demographic factors have played.
    But these trends have generally played themselves out. As baby 
boomers continue to age and move from disability to retirement, the 
increase in beneficiaries has reached its lowest level in more than 30 
years.
                misconception #3: it's easy to get ssdi
    This is not so. The United States has among the most stringent 
eligibility criteria in the OECD.
    Applicants must provide extensive medical documentation of their 
disability and show that they are unable to do their prior job and any 
job in the national economy. That's a high bar.
    In fact, about two-thirds of disability insurance applications are 
denied. And as Dr. Duggan notes in his testimony, in 2014 the share of 
applicants approved for SSDI was at its lowest level in history.
 misconception #4: once on disability, beneficiaries have no incentive 
                           to return to work
    In fact, SSDI allows beneficiaries to earn $1,090 a month with no 
impact on benefits. In other words, beneficiaries receiving disability 
have a very high incentive to work.
    The budget deal calls for more initiatives to test whether 
smoothing out the so-called ``cash cliff'' and replacing it with a 
gradual offset would help more people to increase their work and 
earnings.
    And the Obama Administration has advocated for early intervention 
strategies to help keep disabled workers employed and off the SSDI 
rolls in the first place.
    Both ideas are worth exploring.
    But we must recognize that most SSDI recipients simply cannot 
work--they struggle with debilitating injuries and illnesses. They have 
earned these benefits. Any one of us could be in that situation. And 
that is why we need and must protect Social Security Disability 
Insurance.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

 Questions for the record for Dr. Mark Duggan submitted by Senator Amy 
                        Klobuchar and responses
       disability demonstration programs and lessons from norway
    Dr. Duggan, in your testimony you noted that the recently passed 
Bipartisan Budget Act of 2015 would establish demonstration projects to 
look at improving work incentives in the Social Security Disability 
Insurance (SSDI) Program. Yet, past work programs have not had strong 
results. You also discussed the evidence from other countries, 
specifically Norway, which may be helpful in designing the 
demonstration projects called for under the Bipartisan Budget Act of 
2015.
    As we design these work incentive demonstration projects, what 
recommendations do you have for project design? What are the lessons 
learned from past efforts?

    It would be important to work with an organization that has a 
demonstrated track record of successfully implementing large-scale 
interventions. Additionally academic researchers with relevant 
expertise should be involved, as they can bring additional insights 
from other disciplines and are focused on producing research that is of 
sufficiently high quality for eventual publication in peer-reviewed 
outlets (with this peer review serving as a useful discipline device to 
improve the ultimate product). It also would be important to have a 
large sample size in the study and to randomize individuals to a 
control group and to one or more treatment groups. Multiple treatment 
groups could be used to test the effects of alternative changes. For 
example, to investigate the effect of changes in work incentives for 
current SSDI recipients, there could be multiple treatment groups with 
different benefit offset rates.
    As documented in a recent report by the Congressional Research 
Service, there has been limited success to date in implementing SSDI 
demonstration projects:
    http://greenbook.waysandmeans.house.gov/sites/
greenbook.waysandmeans.house.gov/files/RL33585.pdf
    For example, the Benefit Offset National Demonstration (BOND) had 
several implementation problems, with the Social Security Advisory 
Board even calling for the termination of this demonstration.

    What are the lessons learned from other countries, specifically 
Norway?

    Recent evidence from Norway demonstrates that improving work 
incentives for individuals receiving disability benefits can increase 
employment and the exit rate from the program (Kostol and Mogstad, 
2014). While the effects are substantial, the fraction that exits the 
program remains relatively small. This suggests there is limited scope 
for work incentives for SSDI recipients alone to improve labor market 
outcomes for individuals with disabilities. My 2010 paper with David 
Autor proposed additional efforts on the ``front end'' of the program 
to reduce the flow of individuals onto SSDI in the first place.
    Thank you for these questions and I hope that my responses are 
helpful to you. Please feel free to contact me in the future if I can 
ever be of assistance.
  

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