SSA Disability: Return-to-Work Strategies From Other Systems May Improve
Federal Programs (Chapter Report, 07/11/96, GAO/HEHS-96-133).

Pursuant to a congressional request, GAO identified: (1) key
private-sector practices to return disabled workers to the workplace;
and (2) other countries' return-to-work strategies for disabled workers.

GAO found that: (1) U.S. private-sector and foreign return-to-work
programs emphasize early intervention to increase workers' motivation to
work, setting work goals soon after the disabling event, providing
timely rehabilitation services, and having the employer communicate
early and often with disabled employees to encourage them to return to
work; (2) for individuals who might return to work, disability managers
identify and provide specific return-to-work assistance, use case
management techniques where appropriate, and ensure that medical
personnel are aware of the disabled worker's job functions and the
employer's work accommodations; (3) limiting cash benefits and linking
retention of medical benefits to employment provides an incentive for
disabled persons to return to work; (4) disability managers believe that
these return-to-work strategies work most effectively when integrated
into a comprehensive program, and reduce disability-related costs; (5)
in contrast, the Social Security Administration (SSA) emphasizes
establishing applicants' eligibility for benefits rather than their
potential for returning to work and structures cash and medical benefits
as disincentives to returning to work; (6) the return-to-work strategies
reviewed can be applied to a broad and diverse population with widely
varying work histories, job skills, and disabilities; and (7)
return-to-work successes could generate significant program savings.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-96-133
     TITLE:  SSA Disability: Return-to-Work Strategies From Other 
             Systems May Improve Federal Programs
      DATE:  07/11/96
   SUBJECT:  Disability benefits
             Disability insurance
             Handicapped persons
             Rehabilitation programs
             Vocational rehabilitation
             Non-government enterprises
             Foreign governments
             Federal social security programs
             Income maintenance programs
IDENTIFIER:  Social Security Disability Insurance Program
             Supplemental Security Income Program
             Medicare Program
             Medicaid Program
             Germany
             Sweden
             
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Cover
================================================================ COVER


Report to the Chairman, Special Committee on Aging, U.S.  Senate

July 1996

SSA DISABILITY - RETURN-TO-WORK
STRATEGIES FROM OTHER SYSTEMS MAY
IMPROVE FEDERAL PROGRAMS

GAO/HEHS-96-133

Return-to-Work Strategies

(106502)


Abbreviations
=============================================================== ABBREV

  ADA - Americans With Disabilities Act
  CDR - continuing disability review
  DDS - Disability Determination Service
  DI - Disability Insurance
  HHS - Department of Health and Human Services
  RFC - residual functional capacity
  SGA - substantial gainful activity
  SSA - Social Security Administration
  SSI - Supplemental Security Income
  WBGH - Washington Business Group on Health

Letter
=============================================================== LETTER


B-261785

July 11, 1996

The Honorable William S.  Cohen
Chairman
Special Committee on Aging
United States Senate

Dear Mr.  Chairman: 

This report responds to your request that we identify (1) key
practices used in the private sector to return disabled workers to
the workplace and (2) examples of how other countries implement
return-to-work strategies for people with disabilities.  Such
information could assist the Congress and the Social Security
Administration as they explore ways to improve the success of federal
disability programs in returning people with disabilities to the
workplace. 

We will send copies of this report to the Commissioner of Social
Security, the Secretary of Education, the Secretary of Health and
Human Services, and other interested parties.  We will also make
copies available to others upon request. 

Please contact me on (202) 512-7215 if you or your staff have any
questions concerning this report.  Other GAO contacts and
contributors to this report are listed in appendix VI. 

Sincerely yours,

Jane L.  Ross
Director, Income Security Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0

The Social Security Administration (SSA) operates the Disability
Insurance (DI) and Supplemental Security Income (SSI) programs--the
nation's two largest federal programs providing cash benefits to
people with disabilities.  SSA data show that between 1985 and 1994,
the number of working-age people in these disability programs
increased 59 percent, from 4 million to 6.3 million.  Such growth has
raised concerns that are compounded by the fact that less than half
of 1 percent of DI beneficiaries ever leave the disability rolls by
returning to work.  In a recent report, GAO recommended that SSA
place more emphasis on return-to-work efforts.\1 If an additional 1
percent of the 6.3 million beneficiaries were to leave SSA's
disability rolls by returning to work, lifetime cash benefits would
be reduced by an estimated $2.9 billion.\2

The magnitude of disability costs in the workplace has caused growing
concern in the private sector as well.  As a result, businesses have
begun developing strategies to control costs by intervening early and
emphasizing measures to return people to work.  By helping disabled
workers return to the workplace, businesses are able to reduce costs
such as disability benefit payments and disability insurance
premiums.  Also, social insurance programs in other countries focus
on return to work and have implemented practices similar to those in
the U.S.  private sector. 

The Chairman of the Senate Special Committee on Aging asked GAO to
report on ways to improve SSA's return-to-work efforts.  To develop
this information, GAO identified (1) key practices used in the U.S. 
private sector to return disabled workers to the workplace and (2)
examples of how other countries implement return-to-work strategies
for people with disabilities (see chs.  2, 3, and 4).  GAO surveyed
individuals in the private sector generally recognized as leaders in
developing disability management programs that focus on
return-to-work efforts.  GAO also did an extensive review of the
literature on disability management in the private sector and on
disability programs in other countries.  To develop further
information from other countries, GAO interviewed officials in
Germany and Sweden because the disability programs in these countries
have return-to-work policies and practices that have been identified
by the U.S.  private sector and other experts as being key to
disability management. 


--------------------
\1 See SSA Disability:  Program Redesign Necessary to Encourage
Return to Work (GAO/HEHS-96-62, Apr.  24, 1996).  See also Disability
Insurance:  Broader Management Focus Needed to Better Control
Caseload (GAO/T-HEHS-95-164, May 23, 1995). 

\2 GAO estimate based upon SSA actuarial estimates. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

Working-age adults with disabilities may obtain cash benefits and
return-to-work services from a number of public and private programs. 
After the onset of a disabling condition, a worker with a temporary
work incapacity may receive short-term cash benefits from an
employer, private insurer, or workers' compensation program.  When
individuals cannot return to work, their last resort is long-term
cash benefits provided by workers' compensation, private disability
insurance, and/or DI.  For people with disabilities who have low
income and limited assets, long-term cash benefits are available
through SSI, regardless of their participation in the labor force. 

DI provides cash benefits to people with disabilities if they are
covered under Social Security and SSA determines they are unable to
work at gainful levels.  After receiving DI benefits for 24 months,
they become eligible for Medicare.  According to SSA data, in 1994,
about 3.96 million working-age people (aged 18 to 64) received DI
benefits, which totaled about $33.7 billion.  Included in the 3.96
million DI beneficiaries are 671,000 people who also received SSI
disability benefits because of their low income and resources.  SSI
provides cash benefits for disabled, blind, and aged individuals
whose income and resources are below a specified amount, and in most
cases, SSI beneficiaries are eligible for Medicaid coverage.  In
1994, about 2.36 million blind and disabled working-age people
received SSI benefits only (and no DI benefits).  Federal SSI
benefits paid to blind and disabled people in 1994 totaled $18.9
billion.\3

To be considered disabled by either program, a person must be unable
to engage in substantial gainful activity because of any medically
determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last 12
months or longer.  Once a person is on the disability rolls, the
individual continues to receive benefits until he or she dies,
converts to Social Security retirement benefits at age 65, or is
determined by SSA to no longer meet the earnings or medical
eligibility requirements. 

GAO's April report documented weaknesses in the design and
implementation of DI and SSI program components that have limited
SSA's ability to identify and expand beneficiaries' productive
capacities to enable them to return to work.  Eligibility
requirements and the disability determination process give applicants
the incentive to focus on their inabilities, not their abilities;
beneficiaries receive little encouragement to use rehabilitation
services; and work incentives offered by the programs are difficult
to understand and do not overcome the financial risk of returning to
work for many beneficiaries. 


--------------------
\3 The $18.9 billion consists of SSI payments to blind and disabled
individuals, regardless of age, and to people eligible for both SSI
and DI payments. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:2

Return-to-work strategies and practices may hold the potential for
improving federal disability programs by helping people with
disabilities return to productive activity in the workplace and at
the same time reduce program costs.  GAO's analysis of practices
advocated and implemented by the private sector in the United States
and by social insurance programs in Germany and Sweden revealed three
common strategies in the design of their return-to-work programs: 

  -- Intervene as soon as possible after an actual or potentially
     disabling event to promote and facilitate return to work. 

  -- Identify and provide necessary return-to-work assistance and
     manage cases to achieve return-to-work goals. 

  -- Structure cash and medical benefits to encourage people with
     disabilities to return to work. 

Disability managers emphasize that these return-to-work strategies
are not independent of each other but work most effectively when
integrated into a comprehensive return-to-work program.  They spend
money on return-to-work efforts because they believe these efforts
are sound investments that reduce disability-related costs. 

In comparison with the workers served by private sector programs,
many people with disabilities served by SSA have little or no work
history or current job skills.  SSA also serves a population with a
wide range of disabilities that often may be more severe than the
disabilities of the average person served by private sector programs. 
Thus, SSA may face greater difficulty in returning some of its
clients to the workplace.  However, the experiences of Germany and
Sweden show that return-to-work strategies are applicable to a broad
and diverse population with a wide range of work histories, job
skills, and disabilities.  Although SSA faces constraints in applying
these strategies, there are opportunities to better identify and
provide the assistance that could enable more of SSA's clients to
return to work.  Even relatively small gains in return-to-work
successes offer the potential for significant savings in program
outlays. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:3


      INTERVENE EARLY TO
      FACILITATE RETURN TO WORK
-------------------------------------------------------- Chapter 0:3.1

Advocates of early intervention believe that the longer an individual
stays away from work, the less likely the individual is to return to
work.  Whether a person returns to work depends greatly on his or her
personal motivation.  Long absences from the workplace are believed
to lead to a disability mindset--a condition of discouragement in
which disabled workers, believing they will not be able to return to
work, lose the motivation to try.  Studies show that only one in two
newly disabled workers who remain out on disability 5 months or more
will ever return to work. 

GAO's work shows that to encourage disabled workers and help them
maintain motivation to work, return-to-work goals must be addressed
from the onset of an emerging disability; return-to-work services,
including medical and vocational rehabilitation services, should be
provided at the earliest appropriate time; and employers should
maintain communication with workers who are hospitalized or
recovering at home. 

Setting return-to-work goals soon after the onset of disability and
providing timely rehabilitation services are believed to be critical
in encouraging disabled workers to return to the workplace as soon as
possible.  Contacting a hospitalized worker soon after an injury or
illness and then continuing to communicate with the worker recovering
at home, for instance, helps reassure the worker there is a job to
return to and that the employer is concerned about his or her
recovery. 

Rather than intervening early to facilitate return to work, the
priority in the DI and SSI programs is to determine the eligibility
of applicants to receive cash benefits, not to assess their
return-to-work potential.  Furthermore, return-to-work potential
generally is addressed, if at all, only after benefits are awarded at
the end of an often lengthy application process. 


      IDENTIFY AND PROVIDE
      NECESSARY RETURN- TO-WORK
      SERVICES AND MANAGE CASES
-------------------------------------------------------- Chapter 0:3.2

By definition, disability management embodies a proactive approach to
controlling disability costs while helping disabled employees return
to work.  This approach seeks to avoid unnecessary expenditures while
investing in services tailored to individual circumstances that help
achieve return-to-work goals for disabled workers.  To do this,
disability managers strive to provide appropriate return-to-work
services, closely manage cases when appropriate, provide transitional
work opportunities, and coordinate with medical service providers. 

In an effort to provide appropriate services, disability managers GAO
interviewed strive to identify the individuals who are likely to be
able to return to work and then identify the specific services that
are needed to prepare each of those individuals.  These disability
managers believe that each person should be functionally evaluated
after his or her medical condition stabilizes to assess potential for
returning to work. 

When appropriate, the disability managers GAO surveyed use case
management techniques to coordinate the identification, evaluation,
and delivery of disability-related services to individuals deemed to
need such services to return to work.  Transitional work allows
workers with disabilities to ease back into the workplace in jobs
that are less physically or mentally demanding than their regular
jobs. 

Disability experts also stress the need to ensure that physicians and
other medical service providers understand the essential job
functions of the disabled worker.  Without this understanding, the
worker's return to work could be delayed unnecessarily.  Also, if an
employer is willing to provide transitional work opportunities or
other job accommodations, the treating physician must be aware of and
understand these accommodations. 

SSA, however, does not focus on identifying services that could
enable individuals to return to the workplace.  It does not
functionally evaluate most beneficiaries; instead, SSA relies
predominantly on matching an individual's medical symptoms, signs,
and diagnostic results to a listing of impairments presumed to
prevent work.  Moreover, SSA's contacts with physicians are aimed at
gathering medical evidence to determine work incapacity, not
functional ability and return-to-work potential. 


      PROVIDE INCENTIVES TO ENGAGE
      IN RETURN-TO-WORK EFFORTS
-------------------------------------------------------- Chapter 0:3.3

Disability managers believe that a program's incentive structure can
affect a disabled worker's decision on whether to attempt to return
to work.  The level of cash benefits paid to disabled workers can
affect their attitude toward returning to work because, if disability
benefits are too generous, they can create a disincentive for
participating in return-to-work efforts.  Disability managers also
believe that retention of employer-sponsored medical benefits
provides an incentive to return to work.  Returning to work is the
way that disabled workers in the private sector can best ensure that
they retain employer-sponsored medical benefits. 

Although the structure of benefits plays a role in return-to-work
decisions, disability managers emphasized that well-structured
incentives are not sufficient in themselves to ensure a successful
return-to-work program.  Incentives must be integrated with other
return-to-work practices.  Disability managers also generally
advocated including a contractual requirement for cooperation with a
return-to-work plan as a condition of eligibility for benefits.  They
believe such a requirement helps motivate an individual with a
disability to try to return to work. 

In contrast, the current design of cash and medical benefits in the
DI and SSI programs often presents more hindrances than incentives
when beneficiaries consider returning to work.  The structure of cash
benefits can make it financially advantageous to remain on the
disability rolls, and studies report that DI and SSI beneficiaries
fear losing their premium-free Medicare or Medicaid benefits if they
return to work. 


   RECOMMENDATION TO THE
   COMMISSIONER OF SSA
---------------------------------------------------------- Chapter 0:4

In line with placing greater emphasis on return to work, GAO
recommends that the Commissioner develop a comprehensive
return-to-work strategy that integrates, as appropriate, earlier
intervention, earlier identification and provision of necessary
return-to-work assistance for applicants and beneficiaries, and
changes in the structure of cash and medical benefits.  The
Commissioner should also identify legislative changes needed to
implement such a program. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:5

In commenting on a draft of this report, SSA agreed much can be
learned from the return-to-work practices of the U.S.  private sector
and disability programs in Germany and Sweden.  SSA cited several
initiatives, such as expanding the pool of vocational rehabilitation
service providers, as evidence that it places a high priority on
return to work.  However, GAO believes these steps, while in the
right direction, do not constitute the fundamental redirection of
goals and practices necessary to move the disability programs to a
much greater emphasis on return to work.  For example, increasing the
number of vocational rehabilitation providers does not address the
concern of earlier intervention. 

SSA affirmed its interest in determining whether return-to-work
strategies from other systems could be useful in the agency's
attempts to improve return-to-work outcomes.  SSA emphasized that for
such efforts to be fruitful, all players in the complex network of
federal disability policy development and program execution would
need to be involved.  GAO agrees but believes SSA, as primary manager
of the federal disability programs and as the entity with fiduciary
responsibility for the trust funds, must take the lead in forging the
partnerships and cooperation that will be needed in these redesign
efforts. 


INTRODUCTION
============================================================ Chapter 1

The Social Security Administration (SSA) operates the Disability
Insurance (DI) and Supplemental Security Income (SSI) programs--the
nation's two largest federal programs providing cash benefits to
people with disabilities.  From 1985 through 1994, the number of
working-age DI and SSI beneficiaries (aged 18 to 64) increased 59
percent, from 4.0 million to 6.3 million, and cash benefits (adjusted
for inflation) increased 66 percent.\4 This magnitude of growth has
caused concerns that are compounded by the fact that less than half
of 1 percent of DI beneficiaries ever leave the rolls by returning to
work. 

In our recent study of SSA's disability programs, we reported that
despite the magnitude of program growth, SSA has not improved its
emphasis and efforts in returning disability beneficiaries to the
workplace.\5 By contrast, the private sector, in response to growth
in disability, has begun developing and implementing strategies to
improve return-to-work programs for disabled workers.  Moreover, the
emphasis on return to work is not limited to the private sector in
the United States--disability programs financed by social insurance
systems in other countries also focus on return to work and have
implemented practices similar to those in the U.S.  private sector. 

This report focuses on identifying return-to-work practices in the
private sector and other countries that may hold lessons for
improving SSA's return-to-work efforts.  Improving SSA's
return-to-work efforts has important implications not only for the
individuals who can return to productive activity in the workplace,
but also for controlling the costs of federal disability programs. 
SSA estimates that lifetime cash benefit payments are reduced by
about $60,000 when a DI beneficiary leaves the rolls by returning to
work and by about $30,000 when an SSI disability beneficiary leaves
the rolls by returning to work.\6

In comparison with the workers served by private sector programs,
many people with disabilities served by SSA have little or no work
history or current job skills.  SSA also serves a population with a
wide range of disabilities that often may be more severe than the
disabilities of the average person served by private sector programs. 
For example, many workers served by private sector programs have
short-term disabilities, which SSA's programs do not cover.  SSA
serves people with long-term disabilities, many of whom have not been
successful in returning to work through private sector programs. 
Thus, SSA may face greater difficulty in returning some of its
clients to the workplace. 

However, the experiences of Germany and Sweden show that
return-to-work strategies are applicable to a population with a wide
range of work histories, job skills, and disabilities.  Moreover,
even relatively small gains in return-to-work successes offer the
potential for significant savings in program outlays.  For example,
if an additional 1 percent of the 6.3 million beneficiaries were to
leave SSA's disability rolls by returning to work, lifetime cash
benefits would be reduced by an estimated $2.9 billion.\7


--------------------
\4 According to SSA data, from 1985 through 1994, the number of
working-age disabled beneficiaries grew from 2.7 million to almost
4.0 million in the DI program and from 1.3 million to almost 2.4
million in the SSI program.  Furthermore, DI beneficiaries who also
qualified for SSI benefits increased from 324,000 to 671,000.  To
avoid duplicative counting, such people are included in the DI data
but not in the SSI data.  In 1994, working-age DI beneficiaries
received $33.7 billion in DI payments; blind and disabled
beneficiaries (including those of all ages and those dually eligible
for SSI and DI) received $18.9 billion in federal SSI payments. 

\5 See SSA Disability:  Program Redesign Necessary to Encourage
Return to Work (GAO/HEHS-96-62, Apr.  24, 1996).  See also Disability
Insurance:  Broader Management Focus Needed to Better Control
Caseload (GAO/T-HEHS-95-164, May 23, 1995). 

\6 The estimated savings, provided by SSA's actuarial staff, are
based on fiscal year 1994 data and represent the discounted present
value of the cash benefits that would have been paid over a lifetime
if the individual had not left the disability rolls by returning to
work. 

\7 GAO estimate based upon SSA actuarial estimates. 


   MAGNITUDE OF DISABILITY COSTS
   HAS TURNED PRIVATE SECTOR'S
   ATTENTION TO IMPROVING
   RETURN-TO-WORK PROGRAMS
---------------------------------------------------------- Chapter 1:1

The magnitude of disability costs has caused growing concern in the
private sector.  Some disability-related costs borne by the private
sector are more obvious than others.  The most apparent costs include
insurance premiums, cash benefits, rehabilitation benefits, and
medical benefits paid through workers' compensation and
employer-sponsored disability insurance programs.  Workers'
compensation laws require employers to bear the cost of disabilities
caused by an individual's job, and some employers offer short-term or
long-term insurance or both for disabilities not caused by the
individual's job.  However, in addition to the costs of such
programs, there may be other, less obvious costs such as payments to
employees who must work overtime, the added expense of training and
using temporary workers, and retraining disabled employees when they
return to work.  Taking such costs into account, studies have
estimated that the employer's full cost of disability ranges from 6
to 12 percent of payroll.\8

At one time, the common business practice was to encourage someone
with a disability to leave the workforce.  In recent years, however,
concern has grown about the effect of disability on costs,
productivity, competitiveness, and employee and customer relations. 
As a result, the private sector has begun to develop and implement
strategies for helping disabled workers return to work as quickly as
possible.\9 These efforts include intervening as soon as possible
after a disabling event occurs, helping the worker set return-to-work
goals, providing the services the worker needs to return to work, and
offering incentives that encourage return to work.  Similar
approaches have also been implemented in the social insurance
disability programs of other countries. 

To develop information on private sector return-to-work practices for
this report, we surveyed 21 people from the private sector recognized
for their involvement in developing disability management programs
that focus on return to work.  As well as working to develop
return-to-work programs within their own companies, all 21 have been
actively involved in efforts by the Washington Business Group on
Health or the Health Insurance Association of America to develop and
promote such programs.\10 As a group, these 21 individuals
represented extensive experience in managing disability under
workers' compensation and disability insurance programs.  We
conducted in-depth interviews with five respondents to supplement the
survey responses.  (See app.  I for a list of individuals contacted
during our review.)


--------------------
\8 UNUM, Disability Management:  Costs and Solutions (Portland, Me.: 
UNUM Corporation, July 1994),
p.  23; and Phillip L.  Polakoff and John S.  Tortarolo, "The Future
of Disability Management Is ...  Integration," Washington Business
Group on Health, 1994 National Disability Management Conference
(Washington, D.C.:  WBGH, 1994), p.  2. 

\9 Private sector disability managers also place great emphasis on
efforts to prevent disabilities.  Implementing safety and prevention
programs requires direct access to workers and their workplace. 
While employers have such access, SSA does not; therefore, our report
focuses on return-to-work efforts. 

\10 The Washington Business Group on Health (WBGH) is a nonprofit
organization of nearly 200 employers from all major segments of U.S. 
industry.  In 1990, with funding from the U.S.  Department of
Education's National Institute on Disability and Rehabilitation
Research, WBGH established the Institute for Rehabilitation and
Disability Management.  WBGH also sponsors an annual national
disability management conference. 


   SSA'S RETURN-TO-WORK EFFORTS
   HAVE BEEN STATIC
---------------------------------------------------------- Chapter 1:2

Technological, medical, and societal changes have increased the
potential for more people with disabilities to work, and some SSA
data indicate that as many as 3 out of 10 persons on the disability
rolls may be good candidates for return to work.  However, few
beneficiaries ever leave the rolls by returning to work.  For
example, less than half of 1 percent of the beneficiaries have left
the DI program annually during the last several years because they
returned to work, according to SSA data. 

As we recently reported, SSA focuses little attention on returning
beneficiaries to the workplace.  SSA's capacity to identify and
assist in expanding beneficiaries' productive capacities have been
limited by weaknesses in the design and implementation of the DI and
SSI programs.  SSA does not have a system for functionally evaluating
each individual's return-to-work potential and identifying the
return-to-work services needed by those who have the potential to
return to the workplace.  Instead, SSA's primary focus is on
processing disability applications to determine whether applicants
meet disability criteria and then paying benefits to those found
eligible. 


      DI AND SSI PROGRAM STRUCTURE
-------------------------------------------------------- Chapter 1:2.1

The DI and SSI programs pay disability benefits to people who have
long-term disabilities.  To be eligible for benefits, an adult must
have a medically determinable physical or mental impairment that (1)
is expected to last at least 1 year or result in death and (2)
prevents the individual from engaging in substantial gainful
activity.  Regulations currently define substantial gainful activity
as work that produces countable earnings of more than $500 a month
for disabled individuals and $960 a month for individuals who are
blind.  Furthermore, to qualify, an individual not only must be
unable to do his or her previous work, but--considering age,
education, and work experience--the individual also must be unable to
do any other kind of substantial work that exists in the national
economy. 

Although both programs use the same definition of disability, they
differ in important ways.  Established under title II of the Social
Security Act, DI is an insurance program funded by payroll taxes paid
by workers and their employers into a Social Security trust fund.\11
Similar to private long-term disability insurance programs, the DI
program is for workers who have lost their source of income because
of long-term disability.  To be insured under DI, an individual must
have worked for certain minimum periods with a specified minimum
level of earnings in jobs covered by Social Security.  Reflecting the
program's long-term disability character, DI benefits generally
cannot begin until 5 months after the onset of disability.  Medicare
coverage is provided to beneficiaries 24 months after entitlement to
DI cash benefits commences. 

By contrast, the SSI program, established under title XVI of the
Social Security Act, is not an insurance program and has no prior
work requirements.  Financed from general tax revenues, SSI is a
means-tested income assistance program for disabled, blind, or aged
individuals who have low income and limited resources, regardless of
work history.\12 Unlike the DI program in which benefits generally
cannot begin until 5 months after disability onset, SSI benefits
begin immediately upon entitlement.  In most cases, SSI entitlement
makes an individual eligible for Medicaid benefits. 

Because the SSI program is a means-tested income assistance program
with no work history requirements, many of the beneficiaries it
serves may have different characteristics than those served by
private sector programs.  By definition, individuals qualify for
employer-sponsored disability benefits because they were employed at
the time they became disabled.  They therefore have recent work
histories and current job skills when they apply for benefits.  In
contrast, many SSI applicants have little or no recent work history
or current job skills.  An SSA study in 1994 found that 42 percent of
SSI applicants reported leaving their last job more than 12 months
before applying for benefits, and another 27 percent said they did
not know when they left their last job.\13

When individuals apply for DI or SSI disability benefits, SSA relies
on state Disability Determination Services, agencies that are funded
by SSA, to determine the medical eligibility of applicants.  If found
disabled, the beneficiary receives benefits until he or she dies,
converts to Social Security retirement at age 65, or is determined by
SSA to be no longer eligible for benefits because of earnings or
medical improvement.  The law requires SSA to conduct a continuing
disability review (CDR) at least once every 3 years to redetermine
the eligibility of DI beneficiaries if medical improvement is
possible or expected.\14,15 Otherwise, SSA is required to schedule a
CDR at least once every 7 years. 


--------------------
\11 Federal Insurance Contribution Act payroll taxes are allocated
among the Disability Insurance Trust Fund, Old Age and Survivors
Trust Fund, and the Medicare Trust Fund. 

\12 General revenues include taxes, customs duties, and miscellaneous
receipts collected by the federal government that are not earmarked
by law for a specific purpose. 

\13 See U.S.  Department of Health and Human Services (HHS), Social
Security Administration, Results of 1994 Two-Day Field Office Survey
of Disability Applicants, agency correspondence S5H, Mar.  22, 1994. 
In this study, Social Security field offices surveyed applicants for
disability benefits on 2 days during 1994.  Field office staff
administered the survey after completion of the initial claims
interview. 

\14 For a more complete discussion of SSA's performance in completing
CDRs, see GAO/T-HEHS-95-164, May 23, 1995.

\15 The Social Security Independence and Program Improvements Act of
1994 (P.L.  103-296) directed SSA to perform a minimum number of CDRs
for SSI beneficiaries.  As now required, SSA plans to conduct 100,000
CDRs on SSI adults and on one-third of SSI children turning age 18
for each of the 3 fiscal years beginning in 1996. 


      REDESIGN OF SSA'S DISABILITY
      PROGRAMS NEEDED TO ENCOURAGE
      RETURN TO WORK
-------------------------------------------------------- Chapter 1:2.2

SSA's process for determining disability generally does not directly
assess each applicant's functional capacity to work.\16 The Social
Security Act defines disability in terms of the existence of physical
or mental impairments that are demonstrable by medically acceptable
clinical and laboratory diagnostic techniques.  In implementing the
act through its regulations, SSA has developed a Listing of
Impairments (generally referred to as "the listings") identifying
some medical conditions that are presumed to be sufficient in
themselves to preclude individuals from engaging in substantial
gainful employment.\17 The presumed link between inability to work
and presence of such medical conditions establishes the basis for
SSA's award of disability benefits. 

According to SSA, the medical conditions identified in the listings
serve as proxies for functional evaluations because such impairments
are presumed to be severe enough to impose functional restrictions
sufficient to preclude any substantial gainful activity.  According
to SSA data, about 70 percent of new awardees are found to be
eligible because their conditions meet or equal listed impairments
that serve as proxies for functional assessments of ability to work. 
Only the remaining 30 percent of new awardees are eligible because
they have been further evaluated on the basis of separately developed
nonmedical factors, including residual functional capacity, age,
education, and vocational skills. 

Relevant studies, however, indicate that the scientific link between
medical condition and work incapacity is weak.  While it is
reasonable to expect that some medical impairments will completely
prevent individuals from engaging in any minimal work activity (for
example, those who are quadriplegic with profound mental
retardation), it is less clear that some other impairments that
qualify individuals for disability benefits completely prevent
individuals from engaging in any substantial gainful activity (for
example, those who are missing both feet).  Moreover, while most
medical impairments may have some influence over the extent to which
an individual is capable of engaging in gainful activity, other
factors--vocational, psychological, economic, environmental, and
motivational--are often considered to be more important determinants
of work capacity. 

Beyond the issue of whether SSA's eligibility determination process
adequately assesses work capacity, the process itself diverts the
applicant's attention from the possibility of returning to work. 
Instead, the process focuses the applicant's attention on proving
that he or she is unable to work.  From the moment an individual
applies for disability benefits, SSA's eligibility determination
process (which can take from a minimum of several months to 18 months
or longer for individuals who initially are denied and appeal)
focuses on proving or disproving that the individual meets SSA's
disability definition, not on assessing how the individual could be
helped to return to work. 

The eligibility determination process itself may erode motivation to
work.  By the time applicants are approved to receive benefits, they
have been through a lengthy process that requires them to prove an
inability to work; they have testified about their disabilities
before program officials and the health care community; family and
friends may have helped to demonstrate their work incapacity; and
being out of the workforce may have eroded their marketability. 
These factors are believed to reduce receptivity to any efforts aimed
at returning to work. 

The Social Security Act states that people applying for disability
benefits should be promptly referred to state vocational
rehabilitation agencies for services to maximize the number of such
individuals who could return to productive activity.  The
Rehabilitation Act of 1973, as amended, authorizes the Department of
Education's vocational rehabilitation program, which provides federal
funds to a network of state vocational rehabilitation agencies, to
operate the country's public vocational rehabilitation program.  The
federal share of funding for these services is about 80 percent; the
states pay the balance. 

Under current procedures, the Disability Determination Service in
each state decides whether to refer DI and SSI applicants to state
vocational rehabilitation agencies, which in turn decide whether to
offer them services such as guidance, counseling, and job placement,
as well as therapy and training.  In practice, the Disability
Determination Services refer, on average, only about 8 percent of DI
and SSI beneficiaries to state vocational rehabilitation agencies,
and we have estimated that less than 10 percent of those referred
actually were accepted as clients.\18 In total, these state agencies
have little impact on DI and SSI, successfully rehabilitating only
about 1 out of every 1,000 beneficiaries, on average, each year. 

State vocational rehabilitation agencies may be cautious about
accepting DI beneficiaries because SSA does not contribute to the
cost of services these agencies provide unless a beneficiary
successfully returns to work.\19 For payment purposes, SSA defines
success as returning to work for 9 continuous months with earnings at
the substantial gainful activity level; whereas, state vocational
rehabilitation agencies, on the basis of Rehabilitation Services
Administration regulations, define success for all other clients as
placing the individual in suitable employment, paid or unpaid, for 60
days.  In early 1996, SSA began collecting information on the number
of referrals from Disability Determination Services that the state
vocational rehabilitation agencies accept.  This step is the starting
point of the SSA's implementation of new regulations allowing it to
use vocational rehabilitation service providers other than state
agencies. 

Whether beneficiaries receive vocational rehabilitation services when
such services would be most effective is also an issue.  SSA does not
have access to disabled workers until they come to SSA to apply for
benefits.  SSA survey results indicate that nearly half of DI and SSI
applicants with work histories have not worked for more than 6 months
immediately before applying to SSA for disability benefits.  But even
after they apply, vocational rehabilitation services can be delayed
for long periods because, generally, SSA does not refer anyone for
those services until he or she has been approved as a beneficiary--a
process that can take several months and may take 18 months or
longer. 

DI and SSI disability beneficiaries may not view returning to work as
an attractive option because, by doing so, they risk losing the
security of a guaranteed monthly income and medical coverage.  To
reduce this risk, the Congress has established incentive provisions
to safeguard cash and medical benefits while a beneficiary tries to
return to work.  However, because of weaknesses in design and
implementation, these incentives have not encouraged many
beneficiaries to attempt to return to work.  The work incentives do
not appear sufficient to overcome the prospect of a drop in income
for many who face low-wage employment or to allay the fear of losing
medical coverage and possibly other federal and state assistance. 


--------------------
\16 App.  IV describes the eligibility determination process in more
detail. 

\17 SSA has reported that "some, but not all, of the Listings
consider functional consequences of an impairment ..." and that
"functional considerations vary significantly among the Listings."
See HHS, SSA, Plan for a New Disability Claim Process, SSA Pub.  No. 
01-0005 (Sept.  1994), p.  11.  In addition, according to SSA, the
reliability of the listings has not been rigorously evaluated. 

\18 See Social Security:  Little Success Achieved in Rehabilitating
Disabled Beneficiaries (GAO/HRD-88-11, Dec.  7, 1987). 

\19 Through 1981, SSA allocated funds to state vocational
rehabilitation agencies to finance services provided to beneficiaries
regardless of rehabilitation outcome.  According to SSA, success
rates were not much higher under this system than under the current
reimbursement program. 


   PRIVATE SECTOR PROGRAMS FOR
   DISABLED WORKERS
---------------------------------------------------------- Chapter 1:3

Private sector businesses underwrite all or part of two primary
disability benefit programs for disabled workers:  workers'
compensation programs and employer-sponsored disability insurance
plans.  Growing concerns about the magnitude of disability costs have
prompted many in the private sector to turn their attention to
developing approaches to manage disability.  Advocates of disability
management stress the need to develop an integrated approach to
manage all types of disability cases, including workers' compensation
and employer-sponsored disability insurance. 


      WORKERS' COMPENSATION
      PROGRAMS
-------------------------------------------------------- Chapter 1:3.1

Workers' compensation programs are designed to provide medical care
and cash benefits to replace lost earnings when workers are injured
or become ill in connection with their jobs.  Each state has enacted
its own workers' compensation requirements for people employed in
that state.  As of 1992, workers' compensation laws covered about 88
percent of the nation's wage and salary workers.\20

Only in New Hampshire does the state law cover all jobs.\21

Workers' compensation programs are financed almost exclusively by
employers and are based on the principle that the cost of
work-related accidents is a business expense.  Most states permit
employers to carry insurance against work accidents with commercial
insurance companies or to qualify as self-insurers by giving proof of
financial ability to carry their own risk.  States also may impose
requirements that affect how employers and insurers manage workers'
compensation cases.  For example, some states require that employers
and insurers offer specified rehabilitation services, leaving
disability managers with no discretion in deciding whether the
services are needed. 

A large majority of compensation cases involve temporary total
disability, which means the worker is unable to work while recovering
from an injury but is expected to recover fully.  When it is
determined that the worker is permanently and totally disabled for
any type of gainful employment, then permanent total disability
benefits are payable.  Both temporary and permanent total disability
are usually compensated at the same rate, which is usually calculated
as a percentage of weekly earnings--most commonly two-thirds of
earnings.  All programs, however, place dollar maximums on weekly
benefits payable. 

When people receiving workers' compensation benefits also qualify for
DI benefits, SSA generally reduces their DI benefits by the amount of
cash benefits they receive under workers' compensation.  But the
number of people with reduced DI benefits is relatively small--in
1992, about 103,000 out of about 3.2 million DI beneficiaries had
their DI benefits reduced by the amount of their workers'
compensation benefits, according to the National Academy of Social
Insurance. 


--------------------
\20 This figure of 88 percent includes federal workers' compensation
laws that cover federal government employees, longshore and harbor
workers, and coal miners with "black lung" disease. 

\21 Among the workers not covered by other states' programs, the most
common are those in domestic service, agricultural employment, and
casual labor. 


      EMPLOYER-SPONSORED
      DISABILITY INSURANCE PLANS
-------------------------------------------------------- Chapter 1:3.2

While workers' compensation replaces income lost because of
work-related injuries and illnesses, some employers sponsor
disability insurance plans that replace income lost because of other
injuries and illnesses.  These plans can provide short-term or
long-term disability coverage or both.  Employers who sponsor
disability insurance plans either self-insure or use commercial
insurers to provide coverage. 


         SHORT-TERM DISABILITY
         INSURANCE
------------------------------------------------------ Chapter 1:3.2.1

About 44 percent of all private employees have some type of
short-term disability insurance that is provided and paid for, at
least in part, by employers, according to National Academy of Social
Insurance estimates based on Department of Labor data.  Five
states--California, Hawaii, New Jersey, New York, and Rhode
Island--have mandatory temporary disability insurance programs that
are financed by employers and/or employees.  These programs typically
pay 50 percent of prior pay for 26 to 52 weeks when workers cannot
perform regular or customary work because of a physical or mental
condition. 

Employers may purchase sickness and accident insurance from
commercial insurers or they may self-insure.  Under short-term
disability insurance, disability generally is defined as the
inability to perform one's own occupation, and generally benefit
payments begin only a few days after the disability begins.  Benefits
usually last for up to 6 months and typically replace about 50
percent of the worker's prior earnings. 


         LONG-TERM DISABILITY
         INSURANCE
------------------------------------------------------ Chapter 1:3.2.2

About 25 percent of all private employees have some type of private
long-term disability insurance that is paid for, at least in part, by
employers, according to National Academy of Social Insurance
estimates based on Department of Labor data.  Private long-term
disability benefits usually do not begin until about 3 to 6 months
after the onset of disability, or after short-term disability
benefits are exhausted.  The benefits usually are designed to replace
a specified percentage of predisability earnings--most commonly 60
percent.  Although long-term plans may initially pay benefits based
on the recipient's inability to perform his or her own occupation,
after 2 years they generally pay benefits only if the individual is
unable to perform any occupation. 

Private employees who have no employer-sponsored long-term disability
insurance generally must look to SSA's DI program as their primary
source of disability assistance.\22 Although some individuals may
purchase their own individual disability insurance coverage, most
individuals rely on the DI program for long-term disability benefits
and medical coverage.  The DI program is the safety net for people
who are unable to work and have no other source of benefits or
assistance in returning to work. 

Almost all private long-term disability insurance benefits are
coordinated with DI benefits; that is, private benefits are reduced
dollar for dollar by the amount of DI benefits.  The rationale for
reducing private benefits is to provide an incentive to return to
work by paying only the targeted partial replacement of earnings. 
Also, reducing private benefits dollar for dollar against DI benefits
can lower disability insurance premiums.  As a result, it is common
for private plans to require claimants to apply for DI benefits. 


--------------------
\22 Besides long-term disability insurance, some individuals may work
for employers who have pension and retirement plans that provide
disability benefits. 


   DISABILITY PROGRAMS IN GERMANY
   AND SWEDEN
---------------------------------------------------------- Chapter 1:4

The disability programs financed by the social insurance systems in
Germany and Sweden employ policies and practices that have been
identified by the U.S.  private sector and other experts as being key
to disability management.  Programs in both Germany and Sweden offer
an array of services, assistance, and incentives to help people with
disabilities remain at or return to work.  Germany has a
long-standing tradition of emphasizing rehabilitation over granting
permanent disability benefits (more commonly referred to as
pensions), and Sweden has only recently adopted an emphasis on
returning people with disabilities to work. 


      DISABILITY PROGRAMS IN
      GERMANY EMPHASIZE
      REHABILITATION OVER PENSIONS
-------------------------------------------------------- Chapter 1:4.1

German laws and policies stress the goal of "rehabilitation over
pension." This means that cash benefits are awarded only after it is
determined that a person's earning capacity cannot be restored by
rehabilitation or other interventions.  Under German social law,
rehabilitation is an entitlement for people with physical or mental
disabilities and for those threatened by such disabilities. 

In Germany, disability pensions, rehabilitation, and other forms of
return-to-work assistance are provided by a complex system of
pension, employment, accident, and health (often referred to as
sickness) insurance funds.\23 For people with disabilities that
resulted from work-related accidents or occupational diseases,
accident insurance finances disability pensions as well as medical
and vocational rehabilitation.  Although most non-work-related
disability pensions are paid by the pension insurance funds, most of
the return-to-work assistance provided to people with disabilities is
financed by employment insurance.  However, to reduce the number of
people requiring permanent disability benefits, the pension insurance
funds pay for medical and vocational rehabilitation for individuals
meeting certain work requirements.\24 For those who have not worked,
employment assistance is available from public social assistance and
the employment office. 

All disability pension applicants are considered for rehabilitation
and for return to work.  Those who are able to work in their former
or similar occupations and earn at least half of the average income
in that profession are not eligible for any pension, regardless of
the disabling condition.  If successful rehabilitation seems
unlikely, or fails, the pension insurance funds may grant a full or
partial pension on either a permanent or temporary basis to a person
with reduced earnings capacity caused by a disability. 

Most disability pensions awarded in Germany are full and permanent. 
Full or "total disability" pensions are granted to people who can no
longer engage in gainful employment.  Partial or "occupational
disability" pensions may be awarded to people who, for health
reasons, can only earn less than half of the amount earned by a
healthy person in the same or comparable occupation.  A temporary
"fixed-term" pension--either full or partial--may be awarded if there
are reasonable grounds to believe that the reduced earnings capacity
can be remedied within a foreseeable period. 


--------------------
\23 Regulated by law, the organizations that administer these
compulsory social insurance funds are autonomous bodies in that they
are managed by employer and employee representatives.  Because
responsibility for rehabilitation is shared by the different social
insurance funds and programs, standardization of benefits and
interagency coordination have been mandated by law.  The Federal
Rehabilitation Council--composed of representatives of the various
social insurances and programs--was founded to help coordinate the
different insurance funds in lieu of government control.  The
Ministry of Labor and Social Affairs influences policy and provides
general supervision. 

\24 To receive vocational rehabilitation from the pension insurance
funds, individuals must have been in covered employment or activity
before their disabling conditions, and must have contributed to the
pension insurance fund for at least 15 years; have contributed for 3
of the last 5 years and would receive a pension because of reduced
working capacity; or have already received medical rehabilitation
financed by the pension funds.  People who do not meet the work
requirements of the pension insurance funds and who have disabling
conditions that are not work-related receive return-to-work
assistance through the employment office, which administers the
employment insurance funds. 


      DISABILITY PROGRAM IN SWEDEN
      NOW EMPHASIZES
      RETURN-TO-WORK GOAL
-------------------------------------------------------- Chapter 1:4.2

The goal of Swedish disability policy is to provide people with
disabilities the same opportunity as others for earning a living and
participating in community life.  Programs for assisting people with
disabilities operate within the broader structure of the country's
universal social insurance system--providing protection against
sickness, work injury, disability, old age, and unemployment--and its
health and employment programs.\25 Social insurance offices in Sweden
are responsible for awarding disability benefits (or pensions) and,
since 1992, for leading rehabilitation efforts.\26 To facilitate
rehabilitation, the social insurance offices have been allocated
special funds for purchasing return-to-work services and assistance
from either public or private sources.\27

Decision-making in Sweden's social insurance system starts with the
identification of individuals who may need rehabilitation or other
forms of employment assistance to return to work.  If, however, an
individual is deemed unlikely to return to work, or if rehabilitation
is unsuccessful, then a disability pension may be granted. 

Disability pensions are based on reduced work capacity, not the
presence of a particular illness or injury.  Under Swedish law,
permanent or temporary disability pensions can be awarded to
individuals between the ages of 16 and 64 and who because of illness
or other reductions in physical or mental performance cannot support
themselves by employment.  If work capacity is permanently reduced by
at least 25 percent, Swedish nationals may receive a basic disability
pension, regardless of work history. 

Full, three-quarters, half, or one-quarter basic pensions may be
granted to individuals with disabilities, depending upon the extent
to which work capacity is reduced.\28 In addition to a basic pension,
an individual with a work history may also receive a supplementary
pension based on employment time and earnings.  Sweden also grants
temporary disability pensions if the reduction in work capacity is
not considered permanent.\29

A variety of other cash benefits may also be awarded in Sweden. 
Sickness benefits may be paid indefinitely to individuals with
reduced work capacity.  Pension supplements are available to those
receiving only the basic pension or who have a low supplementary
pension.  Disability allowances provide compensation for extra costs
that people incur from their disabilities.  And rehabilitation
allowances cover loss of earnings and certain kinds of expenditures
for people participating in vocational rehabilitation. 


--------------------
\25 The Swedish social insurance system also includes parental
insurance, child allowances, and maintenance advances. 

\26 Disability pensions are centrally administered and regulated by
the National Social Insurance Board in Sweden; local and regional
social insurance offices carry out day-to-day program operations and
decision-making.  The National Social Insurance Board is an
independent governmental authority under the jurisdiction of the
Ministry of Health and Social Affairs. 

\27 Return-to-work assistance in Sweden is also financed by the labor
market authorities. 

\28 A full disability pension from the basic pension scheme is the
same as a full old-age pension. 

\29 The temporary pension is granted if the disability, while not
permanent, is expected to continue for a considerable
period--generally, a minimum of 1 year. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:5

The Chairman of the Senate Special Committee on Aging asked us to
report on ways to improve SSA's return-to-work efforts.  To develop
this information, we (1) identified key practices used by U.S. 
private sector companies to return disabled workers to the workplace
and (2) obtained examples of how other countries' social insurance
programs approach returning people with disabilities to work
(discussed in chs.  2, 3, and 4). 


      U.S.  PRIVATE SECTOR
-------------------------------------------------------- Chapter 1:5.1

To develop the information on the private sector in this report, we
interviewed officials of selected employers, insurers, and other
organizations known for their leadership in disability management
(see app.  I).  We reviewed documents they provided, and we also
performed an extensive review of literature on disability management. 

In addition, through a mail survey, we obtained the views of 21
disability managers from companies or other organizations that are
leaders in developing disability management programs.\30 As a group,
these 21 individuals represented extensive experience in managing
disability under workers' compensation and disability insurance
programs.  Of the 21 individuals, 8 had managed only disability
insurance cases; 4 had managed only workers' compensation cases; and
9 had managed both.  We did not verify that the information reported
in the responses to our survey was factually accurate, but we
conducted extensive interviews with five respondents to supplement
the survey responses. 

Our survey instrument presented the respondents with a list of
disability management practices and asked whether their current
programs incorporated each practice.  We then instructed them to
assume they were designing a model disability management program and
asked them to assess how important they believed each practice would
be in their model program.  We asked them to assess the importance of
each practice on a scale of 1 to 5, with 1 equaling "not important"
and 5 equaling "very important," regardless of whether their current
programs incorporated that practice. 

Appendix II presents the survey instrument as well as data on how
many respondents said their companies had incorporated each
disability management practice in their programs.  It also shows the
mean rating of the importance that the respondents placed on
including each practice in a model disability management program. 
The results of our survey represent the views of the disability
managers who responded and should not be considered necessarily
representative of the views of other disability managers.  However,
as we intended, the results illustrate what "leading edge" companies
believe is important. 

In addition, we obtained comments from disability managers of 15
companies on a summary of our analysis of private sector
return-to-work practices.  We asked them to assess the accuracy,
completeness, objectivity, and soundness of our analysis.  In
general, they agreed with all aspects of our analysis, and we made
only minor technical changes to this information based on their
comments.  A bibliography of the literature we used in our analysis
of private sector disability management and a list of related GAO
products are at the end of this report. 

While many in the private sector believe that their proactive
return-to-work efforts have resulted in net dollar savings, there
have been no rigorous studies that present conclusive data on the
cost-effectiveness of disability management, particularly with
respect to the extent to which specific components of return-to-work
programs may be responsible for cost savings. 


--------------------
\30 We sent the survey instrument to disability managers of 26
companies, and 21 responded. 


      GERMANY AND SWEDEN
-------------------------------------------------------- Chapter 1:5.2

To obtain examples of how other countries' social insurance programs
approach returning people with disabilities to work, we did an
extensive review of the literature on disability programs in other
countries.  To develop further information on return-to-work
approaches in other countries, we interviewed a number of program
officials and other experts on disability programs in Germany and
Sweden, and reviewed the documents they provided.  For each country,
we obtained information on (1) program goals, benefits, and
incentives; (2) early intervention efforts; (3) the type of
return-to-work measures and services offered as well as how the
assistance is provided and funded; (4) the eligibility
decision-making process; and (5) how cases are managed when
return-to-work services are provided.  Appendix III lists the people
we interviewed in Germany and Sweden. 

We selected disability programs in Germany and Sweden for review
because (1) both countries have political structures and standards of
living, including the use of technology, similar to those in the
United States, and (2) their disability programs have policies and
practices that have been identified by the U.S.  private sector and
other experts as being key to disability management:  early
intervention and an emphasis on return to work through the provision
and management of services, incentives, and rehabilitation. 

As with disability management programs in the U.S.  private sector,
social insurance programs in Germany and Sweden spend money on
return-to-work efforts to reduce disability costs.  However, in
general, rigorous studies demonstrating the cost-effectiveness of
programs in Germany and Sweden do not exist.  Where appropriate, we
discuss the few studies that have examined outcomes of certain
practices. 

We did not independently verify the accuracy of the data used in this
report.  Except for this, our work was performed in accordance with
generally accepted government auditing standards between February
1995 and March 1996. 


EARLY INTERVENTION CRITICAL TO
RETURN TO WORK
============================================================ Chapter 2

Respondents to our private sector survey generally indicated they
believe that early intervention is of paramount importance in
returning disabled workers to the workplace.  Early intervention
involves the initiation of stay-at-work or return-to-work efforts as
soon as possible after a disabling, or potentially disabling, event
occurs.  The respondents to our survey stressed the importance of
several early intervention practices in their return-to-work programs
(see table 2.1).\31



                         Table 2.1
          
              Key Early Intervention Practices

              Intervene early
------------  --------------------------------------------
Practice 1    Address return-to-work goals from the
              beginning of an emerging disability

Practice 2    Provide return-to-work services at the
              earliest appropriate time

Practice 3    Maintain communication with workers who are
              hospitalized or recovering at home
----------------------------------------------------------
Disability management literature supports the respondents' focus on
early intervention, emphasizing that the longer an individual remains
away from work because of a disabling condition, the less likely it
is that the individual will ever return to work.  One study
emphasized that the timing of intervention is not a question of
months, but of days or even hours after a disabling event
occurs.\32,33 The literature emphasizes that disability cannot be
explained solely by a person's medical condition and that the
decision to return to work depends greatly on the disabled worker's
personal motivation. 

In this view, long absences from the workplace because of disability
can lead to a disability mind-set--a condition of discouragement in
which disabled workers, believing they will not be able to return to
work, lose the motivation to try.  Studies have shown that only one
in two newly disabled workers who remain out on disability 5 months
or more will ever return to work.\34

According to one study, a key to disability management success is the
immediate creation, or maintenance, of the expectation that an
individual has the potential to work and will return to work.\35


--------------------
\31 Survey respondents we interviewed said that good return-to-work
practices apply to all types of disabilities.  The effectiveness of
any given practice is independent of whether disabilities arise from
work-related or non-work-related injuries or illnesses. 

\32 H.  Allan Hunt, Rochelle V.  Habeck, Patricia Owens, and others,
"Disability and Work:  Lessons From the Private Sector," paper
prepared for the Disability, Work, and Cash Benefits Conference,
sponsored by the National Academy of Social Insurance and the
National Institute for Disability and Rehabilitation Research, Santa
Monica, Calif., Dec.  8-10, 1994, p.  32.

\33 SSA cannot intervene at such an early stage because it does not
have access to disabled workers until they come to SSA to apply for
benefits, which can be many months after the onset of disability. 

\34 Sheila H.  Akabas, Lauren B.  Gates, Donald E.  Galvin, and
others, Disability Management:  A Complete System to Reduce Costs,
Increase Productivity, Meet Employee Needs, and Ensure Legal
Compliance (New York:  American Management Association, 1992), p. 
11. 

\35 Hunt, Habeck, Owens, and others, p.  32. 


   ADDRESS RETURN-TO-WORK GOALS
   EARLY
---------------------------------------------------------- Chapter 2:1

Of the 21 respondents to our private sector survey, 18 stated they
address return-to-work goals from the beginning of an emerging
disability.  When we asked the respondents to rate the importance of
including this practice in a model disability management program,
they gave goal-setting a high mean rating of 4.7 (on a scale of 1 to
5, with 1 equaling "not important" and 5 equaling "very
important").\36 By contrast, return-to-work goals for SSA's
disability beneficiaries are not addressed, if at all, until the
eligibility determination process is completed, which takes a minimum
of several months and can take 18 months or longer for individuals
who are initially denied benefits and appeal. 

Addressing return-to-work goals early requires that injuries and
illnesses be reported quickly to disability managers.  One workers'
compensation program manager, for example, told us that her company
encourages reporting of injuries and illnesses within 24 hours.  To
encourage such prompt reporting, one of the company's divisions has a
policy of not charging any disability expenses to the manager's
profit and loss center if the injury or illness is reported within 24
hours.  Another company instructs employees to report claims for all
absences of more than 7 days to the company's disability management
team.  We were told that a team then begins the process of developing
a return-to-work plan in consultation with the employee and his or
her treating physician rather than waiting until the employee is
regarded as disabled. 

Some respondents said they use disability duration guidelines as a
tool for evaluating the expected length of an individual's absence
from work because of illness or injury.  Such guidelines commonly are
commercially produced compilations of medical data on the
characteristic duration of different types of disabilities according
to diagnoses, symptoms, and occupational factors.  For employers or
insurers with large databases, duration guidelines can reflect actual
experience in combination with medical and vocational research.  The
employer or insurer can use this information to work with the
disabled individual and his or her physician to set a target date for
return to work. 

In Germany and Sweden, laws and policies require that an individual's
return-to-work potential be assessed soon after the onset of a
disabling condition.  Consequently, people with disabilities are
generally considered for rehabilitation and return to work at
relatively early stages in their contacts with the social insurance
offices.  In Germany, the health insurance funds generally inquire
about the appropriateness of rehabilitation for individuals drawing
sickness benefits more than 10 weeks.  In addition, vocational
counselors often discuss rehabilitation and return-to-work plans with
work accident or occupational illness victims while they are still in
the hospital.  And everyone applying for a disability pension in
Germany is considered by the pension insurance funds for
rehabilitation and return to work before being determined eligible
for permanent benefits.\37

Under Swedish laws and policies, both the private and public sectors
are responsible for the early identification of candidates for
rehabilitation and return to work.  Since 1992, employers have been
responsible for investigating whether employees who receive sickness
benefits for 4 weeks or who are absent from work frequently because
of illness need some type of rehabilitation.  Employers are also
responsible for arranging for a rehabilitation examination and
reporting this to the social insurance office. 

When employers disregard their responsibilities, Sweden's social
insurance offices arrange for the examination and start planning
rehabilitation for the disabled workers.\38 Because the social
insurance offices monitor sickness benefits, they are able to
identify who may need rehabilitation or other forms of employment
assistance.  After someone has received sickness benefits for about 4
weeks (28 to 30 days), a social insurance office begins the process
of assessing whether the person will need vocational rehabilitation
to return to work.\39


--------------------
\36 Respondents were asked to rate the importance of 32 practices. 
Their mean ratings of the importance of these practices ranged from
2.1 to 4.9.  Eighteen of the 32 practices had mean ratings of 4.1 or
higher.  See app.  II for a list of the practices and their mean
ratings. 

\37 Germany's employment offices also play a significant role in
identifying the vocational rehabilitation needs of individuals who
are no longer employed and come to the employment offices seeking
work.  Of those receiving vocational assistance in 1992 in Germany,
about 82 percent were provided services through the employment
offices. 

\38 Social insurance offices in Sweden have no mechanisms or
sanctions to force employers to comply with their rehabilitation
responsibilities.  According to social insurance office surveys,
employers do not arrange for rehabilitation examinations in about 40
to 50 percent of the cases. 

\39 In Sweden, doctors are responsible for determining whether
medical rehabilitation is necessary. 


   PROVIDE RETURN-TO-WORK SERVICES
   AT THE EARLIEST APPROPRIATE
   TIME
---------------------------------------------------------- Chapter 2:2

Consistent with the early intervention emphasis, most respondents to
our survey stated they believe it is important to provide
rehabilitation services from the onset of disability.  Such services,
which are intended to restore an individual's health, functional
capacities, or ability to engage in useful and constructive activity,
fall into two basic categories:  medical and vocational.  Medical
rehabilitation involves physical and mental care services, while
vocational rehabilitation includes services such as vocational
assessment, labor market surveys, developing alternative work plans,
retraining, and assistance with job-seeking skills.  Vocational
rehabilitation focuses primarily on helping individuals with
disabilities enter a different job or career. 

The respondents to our survey tended to view medical rehabilitation
as having more priority than vocational rehabilitation during the
early stages of a disability.  Of the 21 respondents, 18 said they
provide medical rehabilitation services from the onset of
disabilities, but only 12 said they provide vocational services from
onset.  Similarly, in rating the importance of rehabilitation
services in a model disability management program, the respondents'
mean rating for providing medical services from onset was 4.3,
compared with a mean rating of 3.7 for providing vocational services
from onset. 

The respondents' preference for medical before vocational
rehabilitation services in the early stages of disability is not
surprising.  All 21 respondents to our survey said that their initial
goal is to return the worker to the same job he or she was doing
before the disabling event.  During follow-up interviews, several
respondents stated that workers who have potential to return to their
old jobs generally need only medical services to go back to work, but
it is important that these medical services be provided as early as
possible.  When it appears the worker will be unable to return to the
same job, disability managers turn to vocational services, which
focus more on assisting the disabled employee to enter a different
job or career. 

Most individuals who apply to SSA for disability benefits are not
working, but SSA's focus is not on returning them to work.  The
agency's efforts instead focus on determining their eligibility for
cash benefits.  Assessment for vocational rehabilitation services to
enable return to work occurs, if at all, after the eligibility
determination process is completed, which, as mentioned before,
sometimes takes 18 months or longer. 

In Germany and Sweden, laws and policies emphasize providing
return-to-work services and assistance at the earliest appropriate
time.  Similar to the private sector in this country, a guiding
principle of Germany's social insurance system is that intervention
should occur at the earliest possible stage of disability to minimize
the degree and effects of the disability.  Intervention often begins
when the treating physician, one of the insurance agencies, or the
employer urges a person receiving sickness benefits to apply for
medical rehabilitation.\40 Ability and capacity to work are assessed
at this time.  Following medical rehabilitation, in cases where it is
warranted, the person will be referred to vocational rehabilitation
or other types of return-to-work services and assistance.\41
Disability pensions are not awarded until it has been determined that
the person's earning capacity cannot be restored through
rehabilitation. 

In Sweden, as mentioned before, employers are responsible for the
early identification of workers who need rehabilitation and for
taking early intervention steps.  Employers often fail to do this,
however, and the social insurance offices, which closely monitor the
use of sickness benefits, intervene.  After someone has received
sickness benefits for about 4 weeks, the social insurance office
collects information from the person's doctor or employer to
determine whether vocational rehabilitation will be needed for return
to work.\42 The goal of the social insurance office is to make this
decision within the next 2 weeks.  If such assistance is warranted,
the social insurance office may purchase vocational rehabilitation
and related employment services.  If after receiving such services,
the person does not return to work and still has the disabling
condition, he or she can continue to receive sickness benefits. 
After 12 to 13 months of receiving these benefits, a decision is made
to grant the person either a permanent disability pension or a
temporary pension and possibly more vocational services. 

An official at the National Social Insurance Board in Sweden has
concluded early intervention pays for itself.  His study found that
early screening and contact with clients and employers, greater
attention to diagnoses, and close cooperation among the social
insurance offices and the medical and vocational rehabilitation
providers reduced social insurance costs by returning people to the
workplace sooner.  The study noted that the reduction in sick leave
and the probable accompanying increase in days worked was more than
sufficient to pay for the increased administrative costs.  This same
official told us that just by intervening with phone calls at the
14th day of someone receiving sickness benefits saves the social
insurance offices money. 


--------------------
\40 Except for work injury claimants, rehabilitation in Germany
cannot begin without the individual applying for it. 

\41 Before someone is referred to vocational rehabilitation in
Germany, a physician ascertains whether the person could return to
the original job or to a different job--through transfer, retraining,
workplace accommodations, or assistive devices--with the same
employer. 

\42 As noted, doctors in Sweden are responsible for determining
whether medical rehabilitation is necessary. 


   MAINTAIN COMMUNICATION WITH
   DISABLED WORKERS
---------------------------------------------------------- Chapter 2:3

To help maintain motivation to return to work, respondents to our
survey indicated they believe it is important to establish early
contact and to stay in touch with disabled workers.  Of the 21
respondents to our survey, 19 stated they maintained communication
with workers who are hospitalized or recovering at home.  When asked
to rate the importance of including this type of communication in a
model disability management program, the respondents gave it a mean
rating of 4.7. 

Contacting a worker soon after an injury or illness and then
continuing to communicate with the worker is important because the
worker needs to be reassured there is a job to return to and that the
employer is concerned about his or her recovery.  Such reassurances
can help maintain motivation to return to work.  One disability
manager stated that her company contacts workers within 24 hours of a
reported illness or injury and recontacts them every 2 weeks by
telephone.  Another stated her company's case managers are required
to contact workers at least once a week. 

The person responsible for maintaining communication varied from
company to company.  One respondent said in her company a registered
nurse case manager contacts hospitalized workers before they return
home, and the case manager maintains contact until the disabled
worker returns to full duty.  She said the first week after an injury
is a window of opportunity that is critical to minimizing a worker's
time lost from work.  In other instances, one company uses a
disability management vendor to maintain contact, and another
stresses that the worker's supervisor maintain contact.  Depending on
whether a company is self-insured or insured by a commercial carrier,
contacts with disabled workers may also be maintained by insurance
company personnel. 

By contrast, SSA's contacts with disability applicants are limited to
efforts to obtain the evidence needed to determine eligibility for
cash benefits.  Rather than encourage the applicant to return to
work, these contacts probably serve only to strengthen the
applicant's resolve to prove he or she is disabled. 

In both Germany and Sweden, insurance offices contact individuals
receiving sickness benefits to determine whether they will be able to
return to work without intervention or whether they will need some
type of assistance to do so.  As mentioned, workers in Germany who
draw sickness benefits longer than 10 weeks are generally contacted
by the health insurance funds or their employer to inquire about the
appropriateness of rehabilitation measures.  In Sweden, social
insurance offices telephone workers after they have received sickness
benefits for 14 days to determine what, if anything, needs to be done
to get them back to work. 


IDENTIFYING AND PROVIDING
RETURN-TO-WORK SERVICES
EFFECTIVELY
============================================================ Chapter 3

Not only must rehabilitation services be provided at the earliest
appropriate time, but disability managers need to ensure that the
services are appropriate for each individual.  The respondents to our
survey generally told us they attempt to provide return-to-work
assistance that is tailored to the individual and that they manage
disability cases with a view toward achieving return-to-work goals. 
This approach seeks to avoid unnecessary expenditures while investing
in cost-effective techniques for achieving return-to-work goals for
disabled workers.  Respondents to our survey told us they employ
several key practices in identifying and providing appropriate
services and managing their return-to-work programs (see table 3.1). 



                         Table 3.1
          
              Key Practices in Identifying and
             Providing Return-to-Work Services

              Identifying and providing services
              effectively
------------  --------------------------------------------
Practice 1    Assess the individual's return-to-work
              potential and needs

Practice 2    Offer transitional work opportunities that
              enable disabled workers to ease back into
              the workplace

Practice 3    Use case management techniques when
              appropriate to help disabled workers return
              to work

Practice 4    Ensure that medical service providers
              understand the essential job functions of
              the disabled worker
----------------------------------------------------------

   ASSESS RETURN-TO-WORK POTENTIAL
   AND SERVICES NEEDED
---------------------------------------------------------- Chapter 3:1

Of the 21 respondents to our survey, 20 stated that they assess
return-to-work potential early in the process.  As some respondents
emphasized, return-to-work potential is not determined merely by a
medical diagnosis showing the presence of an impairment but, rather,
by functionally evaluating each individual's capacity to work after
his or her medical condition has stabilized.  When we asked the
respondents to rate the importance of including early assessment of
return-to-work potential in a model disability management program,
they gave it a mean rating of 4.8 on a scale of 1 to 5. 

By contrast, SSA's process for determining disability generally does
not directly assess each applicant's functional capacity to work. 
Instead, as mentioned before, SSA's evaluation process presumes that
certain medical conditions are in themselves sufficient to preclude
work.  SSA enumerates such medical conditions in its Listing of
Impairments.\43 These listings serve as proxies for functional
evaluations, identifying impairments that are presumed to impose
functional restrictions sufficient to preclude any gainful activity. 
About 70 percent of new awardees are eligible because their
conditions meet or equal listed impairments that are presumed to be
disabling.  Only the remaining 30 percent of new awardees are
eligible because they have been further evaluated on the basis of
separately developed nonmedical factors, including residual
functional capacity, age, education, and vocational skills. 

Fifteen of the 21 respondents to our survey also stated their
return-to-work programs attempt to provide services at the earliest
appropriate time.  In rating the importance of including vocational
services in a model disability management program, the respondents
gave this practice a mean rating of 4.4.  However, 12 respondents
said that as part of their effort to provide appropriate services,
they provide these services only to individuals who are deemed likely
to return to work.\44 The motivation for this approach is to avoid
investing funds in vocational services when the risk is high that a
disabled worker will not return to work even after receiving
vocational services.\45

Some companies have begun developing profiles of characteristics that
help them identify the disabled workers who are most likely to
benefit from vocational rehabilitation services and return to work. 
For example, two insurers we contacted had studied thousands of
long-term disability cases and developed profiles that include, among
other factors, age, gender, marital status, whether the disability
was caused by accident or illness, whether the disability occurred on
the job, and type of disability. 

Using such a profile, one insurer categorizes each long-term disabled
worker in one of three groups:  (1) those who are unlikely to return
to work regardless of whether they receive vocational rehabilitation
services, (2) those who are likely to return to work but do not need
rehabilitation services to do so, and (3) those who are likely to
return to work but need rehabilitation services to do so.  The
company focuses its attention on individuals in the third group
because they have the greatest potential for cost-effective use of
rehabilitation resources.  This approach results in a relatively
small proportion of beneficiaries receiving rehabilitation services. 
Officials of insurance companies we contacted estimated that about 3
to 7 percent of their long-term disability beneficiaries receive
vocational rehabilitation services. 

These companies expect to save more than they spend on their
investment in rehabilitation services.  For example, one insurance
company reported that for every dollar spent on rehabilitation, it
had saved an average of $10 in long-term disability reserves and
expected the savings ratio to increase as the company gained
experience in identifying the people most likely to benefit from
rehabilitation services.\46 Another insurance company reported
average savings of $35 in long-term disability reserves for every
dollar spent on rehabilitation services. 

In Germany and Sweden, return-to-work services and assistance are
fairly extensive and tailored to meet individual needs.  An
individual may receive a combination of different benefits and
services, such as medical or vocational rehabilitation, employment or
social assistance, as well as cash assistance while applying for or
participating in rehabilitation. 

As noted in chapter 1, rehabilitation is an entitlement in Germany. 
Vocational assistance measures include assistance in retaining or
obtaining a job (including grants to the employer); assistance in
selecting an occupation (including work trials or sheltered
workshops); basic training and retraining to prepare for an
occupation (including basic education necessary to attend more
advanced training courses); workplace adaptations; and wage subsidies
for employees who are difficult to place.  The duration of vocational
assistance varies greatly and can last as long as 2 years for basic
training or retraining programs.  The person's aptitude,
inclinations, and former occupations are taken into account as well
as labor market conditions when accepting an individual into a
vocational retraining program. 

Providing appropriate return-to-work assistance to people with
disabilities is viewed as a cost-effective investment in Germany. 
Officials we interviewed noted that placement rates for individuals
who completed vocational retraining have been fairly high, although
there are no quantitative data documenting overall
cost-effectiveness.  Surveys in Germany have found that about 80
percent of former trainees were working one year after completing
their vocational retraining, and these results have remained steady
over a number of years for a wide range of occupations.\47 However,
some retraining centers have waiting lists in certain vocational
areas.  For example, we were told that a Frankfurt retraining center
had a 1- to 2-year waiting list for those to be retrained as office
workers. 

Swedish laws and policies that address people with disabilities as
well as the country's generous package of noncash benefits and
services are aimed at helping individuals remain at or go back to
work.  To make the workplace accessible, employers by law must adapt
working conditions, including the organization of work, to suit the
needs of those with functional impairments.  Government subsidies may
be disbursed to employers who adapt their workplaces to the special
needs of a person with a functional disability, install technical
aids, or engage a personal assistant for a worker with a disability. 
In addition, under a law that took effect January 1, 1994, people who
have severe functional disabilities and who need help with certain
daily activities are entitled to personal assistance.\48

In Sweden, people with disabilities have, like others, the right to
assistance from the regular employment office in finding employment. 
Employment assistance measures include assessment of working
capacity, occupational rehabilitation, vocational guidance,
subsidized employment, sheltered employment, on-the-job training, and
probationary employment at companies that agree to such arrangements. 
Rehabilitation is not meant to be a lengthy process, but rather a
short, intensive period of medical, social, and work-related training
to help the individual to return to work as soon as possible. 


--------------------
\43 As mentioned, SSA has reported that "some, but not all, of the
Listings consider functional consequences of an impairment ..." and
that "functional considerations vary significantly among the
Listings." See Plan for a New Disability Claim Process, p.  11. 

\44 In some states, workers' compensation laws require that specified
vocational rehabilitation services be offered to all workers with
occupational disabilities, regardless of whether disability managers
believe the services should be provided. 

\45 Many DI beneficiaries may be more severely impaired than the
average beneficiary in employer-sponsored, long-term disability
insurance programs.  In the private sector, many companies require
that claimants file for DI when they apply for private long-term
disability benefits.  Some of these individuals return to work
through the companies' return-to-work programs, but those whose
conditions are too severe to succeed in returning to work will likely
become DI beneficiaries. 

\46 This insurance company defined disability reserves as amounts
accrued on an actuarial basis to pay future long-term disability
benefits. 

\47 Data we were able to obtain did not indicate the placement rate
by severity of the disability.  In addition, we were told that
placement rates at some retraining centers have decreased in the last
few years because of a faltering economy. 

\48 Obtaining assistance under the Act Concerning Support and Service
for Persons with Certain Functional Impairments is not dependent upon
returning to work. 


   OFFER TRANSITIONAL WORK
   OPPORTUNITIES
---------------------------------------------------------- Chapter 3:2

All but one of the 21 respondents to our survey said they offer
transitional work opportunities to help disabled workers ease back
into the workplace.  Transitional work (also known as modified work
or light duty) involves changing the work environment to allow an
employee who has been disabled to return to work at a job that is
less physically or mentally demanding than his or her previous
assignment.  When asked to rate the importance of including
transitional work opportunities in a model disability management
program, the respondents gave it a mean rating
of 4.8. 

Workplace modifications that provide transitional work opportunities
may include job restructuring, assistive devices, workstation
modifications, reduced hours, or reassignment to another job.  For
example, one respondent said that reducing the worker's hours is
typically her company's first approach.  Another said that in her
company's restaurant operations, employees are cross-trained so they
can exchange positions or shift tasks if one of them, for instance,
is experiencing back problems. 

The Americans With Disabilities Act (ADA) requires an employer with
15 or more employees to make "reasonable accommodations" for the
known disability of an applicant or employee unless doing so would
impose an "undue hardship" on the employer.  A reasonable
accommodation could include reassigning an employee to another job. 

Three insurance companies stated that although not obligated to do so
under ADA, they had paid for workplace modifications for disabled
beneficiaries formerly employed by firms that provided disability
coverage through these insurance companies.  The insurance companies
viewed these expenditures as cost-effective investments because
benefit payments to these beneficiaries were reduced or eliminated
after the beneficiaries returned to work.  One of these insurance
companies often contracts to spend up to $2,000 on workplace
modifications on behalf of a disabled beneficiary.  In some
circumstances, however, the company has spent more than $2,000 on
modifications to help an individual return to work.  By contrast, SSA
does not promote the provision of job accommodations that could
enable an individual to return to work.\49

In both Germany and Sweden, transitional work opportunities may be
arranged for people with disabilities.  Such transitional work may be
considered for people with disabilities who can return to work
part-time and gradually increase their daily work hours until they
reach their maximum work capacity.  In Germany, such a gradual return
to the original job is a formalized process known as stepwise
reintegration, and it is implemented under the guidance of the
treating physician and the company's doctor.\50 In Sweden,
transitional opportunities include the adaptation of working
conditions to suit the needs of people with functional impairments,
trial work, on-the-job training, and part-time work leading to
full-time work. 


--------------------
\49 However, SSA does not preclude state vocational rehabilitation
agencies from pursuing job accommodations for the beneficiaries they
serve. 

\50 Stepwise reintegration in Germany also involves a written
contract between the employer and the person attempting the gradual
return to work.  The contract must state, among other things, the
beginning and end dates for the stepwise process, the timing of the
various reintegration steps, and the salary the worker will receive
at the various steps. 


   USE CASE MANAGEMENT TECHNIQUES
   WHEN APPROPRIATE
---------------------------------------------------------- Chapter 3:3

Most respondents to our survey (20 of 21) said they use disability
case management techniques, when appropriate, to help disabled
workers return to work.  When asked to rate the importance of
including case management in a model disability management program,
respondents to our questionnaire gave it a mean rating of 4.5.  By
contrast, under current procedures, SSA does not assess which cases
may warrant case management.\51

Although disability case management may be defined and implemented
differently by different companies, it generally can encompass
identifying, evaluating, and coordinating the delivery of
return-to-work services, including social, health care, and
rehabilitation services.  The case manager may do such things as help
the individual understand or obtain transitional work opportunities
or assist in talking with the individual's doctor about treatment and
recovery. 

Although most respondents believe case management is important, they
have implemented it in different ways.  For example, some respondents
employ their own staff of case managers, but others rely on the
staffs of their disability insurers or third-party administrators. 
Furthermore, respondents differed in how they assign case managers. 
One self-insured employer, for example, assigns someone from its
disability management team to act as case manager on every disability
case, regardless of whether the case involves workers' compensation
or short-term or long-term disability insurance.  But in another
instance, a disability insurance company determines on a case-by-case
basis whether the case is complex enough to warrant a case manager. 

Disability managers we contacted told us their case managers
typically have caseloads of no more than 50 disabled workers.  When
workers are determined to have rehabilitation potential, case
managers continue to manage their cases for extended periods, for
example, up to 2 years. 

In Germany, two national officials we interviewed stated that the
accident insurance program (similar to workers' compensation in the
United States) is viewed as being more effective than the pension
insurance office in returning people with disabilities to work.  The
program is more successful, in part, because it assigns individual
advisers (or case managers) soon after the onset of a disabling
condition. 


--------------------
\51 Although SSA generally does not use case management, SSA's
Project NetWork demonstration has been studying the use of four case
management models.  See SSA's Rehabilitation Programs
(GAO/HEHS-95-253R, Sept.  7, 1995).  For beneficiaries served by
state vocational rehabilitation agencies, agency personnel determine
whether any case management is provided. 


   ENSURE THAT MEDICAL SERVICE
   PROVIDERS UNDERSTAND ESSENTIAL
   JOB FUNCTIONS
---------------------------------------------------------- Chapter 3:4

Almost all respondents to our survey (19 of 21) said they attempt to
ensure that medical providers understand the disabled worker's
essential job functions because the treating physician's decision to
release the worker affects the timing of the worker's return to the
workplace.  When asked to rate the importance of this practice in a
model disability management program, the respondents gave it a mean
rating of 4.6.  By contrast, SSA generally contacts treating
physicians only to request medical information needed to determine
whether applicants meet disability eligibility criteria. 

In the view of private sector disability managers, it is important
not only that the physician understand the disabled worker's
essential job functions, but also that the physician understand the
impact of any transitional work opportunities or other job
accommodations that the employer is willing to provide.  Otherwise,
the physician may not release the individual to return to work until
he or she can function at predisability levels.  As some disability
managers told us, actions taken to ensure that medical providers
understand the essential job functions and focus on return-to-work
issues should be viewed as part of the early intervention strategy. 

At one of the respondents' companies, for example, a supervisor
accompanied employees with occupational injuries on the first visit
to a physician.  And at some respondents' organizations, case
managers communicate with treating physicians to make sure the
physicians understand the essential job functions of disabled
workers.  Others said they try to direct disabled workers to
physicians who are familiar with their companies' operations. 
Several respondents said their companies sometimes provide treating
physicians with videotapes of the actual job functions that would be
expected of disabled workers.  Also, to provide physicians with
general familiarity about the jobs performed by workers, two
respondents said their companies take physicians on tours of company
facilities. 

Some disability managers told us they have concerns about the degree
to which the medical community focuses on return-to-work issues. 
They believe physicians should proactively address the question of
return to work with injured and ill workers.  However, in their view,
medical training in the United States does not sufficiently emphasize
the desirability of disabled workers' returning to work at the
earliest appropriate time.  As a result, these disability managers
believe physicians generally give insufficient priority to
return-to-work issues. 

Most respondents to our survey believed that return-to-work efforts
are enhanced by organized systems of care.\52 An organized system of
care gives companies greater opportunity to educate physicians in the
requirements of jobs performed by the companies' workers.  As well as
focusing on care, health care providers in an organized system of
care can collaborate with employers on setting return-to-work
expectations for members who become disabled.  Of the 21 respondents,
only 8 said they currently use an organized system of care as part of
the strategy for returning disabled workers to the workplace. 
However, when asked to rate the importance of including an organized
system of care in a model disability management program, 16 of the 21
respondents gave it a rating of 4 or 5. 

In Germany, physician education plays an important role in the
rehabilitation and return-to-work process.  The Federal
Rehabilitation Council issues guidelines for doctors to follow during
the rehabilitation process.  Among other things, the guidelines
describe the duties of the doctor while his or her patient is
undergoing rehabilitation (medical and vocational) and they inform
the doctor about the various rehabilitation centers and specialized
equipment that is available.  Moreover, the guidelines stress the
importance of working closely with employment office officials so
that a disabled worker may keep a job or find a new one, depending on
the person's residual functional capacities. 


--------------------
\52 An organized system of care is a group or network of health care
providers that integrates the financing and delivery of a full
continuum of care for its enrolled population and is held clinically
and fiscally accountable for the outcomes and health status of its
members. 


WORK INCENTIVES FACILITATE RETURN
TO WORK
============================================================ Chapter 4

Respondents to our survey generally told us they believe it is
important that the cash and medical benefits structure provide
incentives for disabled workers to return to work.  However, as some
respondents emphasized, such work incentives by themselves are not
sufficient to make a return-to-work program successful.  Incentives
must be part of an integrated strategy that includes effective early
intervention and the identification, provision, and management of
return-to-work services.  The respondents to our survey indicated
several key practices in providing work incentives (see table 4.1). 



                         Table 4.1
          
           Key Practices for Providing Incentives
                     to Return to Work

              Use appropriate incentives
------------  --------------------------------------------
Practice 1    Structure cash benefits to encourage
              disabled workers to rejoin the workforce

Practice 2    Maintain medical benefits for disabled
              workers who return to work

Practice 3    Include a contractual provision that can
              require the disabled worker to cooperate
              with return-to-work efforts
----------------------------------------------------------
As we reported recently, work incentives available to DI and SSI
beneficiaries do not appear sufficient to make returning to work an
attractive option.  By returning to work, they risk losing the
security of a guaranteed monthly income and medical coverage. 
Weaknesses in the design and implementation of the work incentives
have made these provisions ineffective in overcoming the prospect of
a drop in income for many who face low-wage employment or to allay
the fear of losing medical coverage. 


   STRUCTURE CASH BENEFITS TO
   PROVIDE RETURN-TO-WORK
   INCENTIVE
---------------------------------------------------------- Chapter 4:1

When asked to rate how important it would be for a model program to
include a cash benefit structure that encourages return-to-work, the
respondents gave this practice a relatively high mean rating of 4.4;
however, only 14 of the 21 respondents said that their current cash
benefits structure actually provides an incentive to return to work. 
The following are examples of how some respondents' companies
structure cash benefits to make returning to work more financially
attractive than remaining away from work: 

  -- While away from work, the disabled worker receives disability
     benefits equivalent to 60 percent of predisability earnings.  If
     the individual returns to work, his or her earnings are
     supplemented by an incentive benefit amount so that total income
     can be considerably higher than the disability benefits the
     worker was receiving.  The worker continues to receive an
     incentive benefit until his or her earnings reach 80 percent of
     predisability earnings. 

  -- If a disabled worker returns to work, he or she continues to
     receive unreduced disability benefits for 1 year, unless the
     total of earnings and benefits would be greater than the
     individual's predisability earnings.  After 1 year, the worker
     continues to receive disability benefits, but these benefits are
     reduced by an amount equal to 70 percent of the worker's
     earnings. 

  -- Disabled workers are allowed a trial work period, usually 6
     months, during which long-term disability benefits can be
     reinstated without reapplication if the worker cannot remain at
     work. 

  -- If a disabled worker returns to work, he or she can receive up
     to $350 per month for each family member to cover family care
     expenses.  Under certain conditions, an insurance company will
     reimburse a claimant for moving expenses incurred in relocating
     to take a job. 

As mentioned, the respondents indicated they believe it is highly
important to structure cash benefits to provide an incentive to
return to work; however, we noted that their mean rating for this
practice was slightly lower than the mean ratings they gave to other
return-to-work practices they considered important, such as
maintaining communication, setting return-to-work expectations as
early as possible, ensuring that medical service providers understand
essential job functions, and providing transitional work
opportunities.  This highlights, as some respondents commented, that
although financial incentives are important, a successful
return-to-work program must effectively integrate financial
incentives with other important practices. 

Disability management literature supports the view that the cash
benefits structure can affect the disabled worker's attitude toward
returning to productive activity in the workplace.  Short-term
disability insurance generally replaces 40 to 70 percent of earnings
for periods ranging from 30 days to 6 months; whereas, long-term
disability insurance usually replaces about 60 percent of prior
earnings, with maximum limits on monthly benefits, for periods that
can extend to retirement or longer.  Studies show that if disability
benefits are too generous, the benefits can create a disincentive for
participating in return-to-work efforts.  For example, studies of
workers' compensation programs have concluded that the larger the
percentage of original wages that is paid to disabled workers, the
more difficult it is to bring them back to work.\53

In Germany, we found that the social insurance programs offer
financial incentives to encourage individuals with disabilities to
participate in rehabilitation programs and return to work.  As
mentioned before, individuals who are considered good candidates for
rehabilitation are not awarded disability pensions.  Instead, to
encourage participation in rehabilitation, they can receive a cash
benefit that is greater than unemployment or welfare allowances. 
Depending on individual circumstances, expenses for room and board,
household assistance, travel, and other expenses incurred while
undergoing medical or vocational rehabilitation may also be
covered.\54 However, one official we interviewed stated that economic
incentives are limited.  In his view, the key to encouraging return
to work is the individual's motivation and positive perspective, and
the disability program's processes must be designed to reinforce that
motivation.  Germany's process is designed to identify individuals
who are good candidates for rehabilitation before they are awarded
disability pensions. 

In Sweden, individuals with return-to-work potential may be awarded
only a temporary disability pension.  This time-limited benefit is
awarded if the individual's reduced work capacity is not considered
permanent but is expected to continue for a significant period (as a
rule, a minimum of 1 year).  To encourage such individuals to
participate in vocational rehabilitation, Sweden provides a
rehabilitation allowance, which includes a benefit to cover loss of
earnings, and a special grant to cover certain kinds of expenses
connected with rehabilitation. 

Because Sweden's permanent disability pensions replace a high
proportion of income, some workers may consider it more attractive to
avoid rehabilitation and try to obtain a permanent pension. 
Currently, permanent disability pensions replace 65 to 70 percent of
income for individuals who receive both a basic and a supplementary
pension on the basis of having a work history.  Supplemental,
collective bargaining agreements add another 10 to 20 percent to the
earnings replacement. 


--------------------
\53 Akabas, Gates, Galvin, and others, p.  11. 

\54 There are limits to these benefits.  For example, an individual
cannot decline a job and return to training without a valid medical
reason (for instance, a progressive or different illness), as
determined by the financing insurance agency. 


   MAINTAIN MEDICAL BENEFITS FOR
   DISABLED EMPLOYEES WHO RETURN
   TO WORK
---------------------------------------------------------- Chapter 4:2

Discussions of SSA's return-to-work efforts often emphasize that
beneficiaries are reluctant to return to work because they fear
losing their premium-free Medicare or Medicaid benefits.  By
contrast, in the private sector, medical benefits provide an
incentive to return to work because it is by returning to work that
disabled workers can be most assured of retaining these benefits. 
Respondents to our survey, when asked to rate the importance of
including continuation of medical benefits in a model disability
management program, gave this practice a mean rating of 4.1. 

In the private sector, disabled workers jeopardize their medical
benefits by remaining away from work because employers eventually may
terminate their employment.  If terminated, such individuals may no
longer be enrolled in the employer-sponsored health plan.  If they
later go back to work with a new employer, the new employer may not
offer employer-sponsored medical benefits, or the employee may be
excluded from coverage because of preexisting conditions.\55

These possibilities give a disabled worker an incentive to return to
a job with his or her old employer.  In contrast, in the DI and SSI
programs, beneficiaries face the loss of premium-free Medicare or
Medicaid benefits if they return to work, and moreover, the job they
get may not offer medical benefits or may not provide coverage
because of preexisting conditions.  This discourages DI and SSI
beneficiaries from returning to the workplace. 

DI beneficiaries who return to work can receive premium-free Medicare
benefits for 39 months following a trial work period; however, to
retain coverage thereafter, they must pay the same monthly cost as
uninsured retired beneficiaries.  SSI beneficiaries can continue
receiving Medicaid coverage after their earnings become too high to
allow a cash benefit, but coverage ends when their earnings reach a
higher threshold amount that varies from state to state.  For
example, the threshold amount in 1994 was $17,480 in Pennsylvania and
$22,268 in California. 

In Germany and Sweden, loss or retention of health care insurance is
not an issue in a worker's decision on whether to participate in
rehabilitation or attempt returning to work.  The individual will
continue to belong to the compulsory insurance system that provides
sickness and disability protection. 


--------------------
\55 Under the Consolidated Omnibus Budget Reconciliation Act of 1986,
a terminated employee may, at his or her own expense, maintain the
medical coverage formerly provided under the employer-sponsored group
plan for a specified period. 


   REQUIRE COOPERATION WITH
   RETURN-TO-WORK EFFORTS
---------------------------------------------------------- Chapter 4:3

Only 12 of the 21 respondents to our survey said their organizations
have contractual provisions that can require disabled employees to
cooperate in return-to-work efforts as a condition of eligibility for
disability insurance benefits.  When asked to rate the importance of
including this requirement in a model disability management program,
however, the respondents gave it a mean rating of 4.1.  This
relatively high rating is consistent with one study that found that
return-to-work efforts cannot be nurtured in an environment in which,
among other things, participation in a vocational rehabilitation
program is entirely voluntary. 

Some respondents stated that the ability to require cooperation as a
condition of eligibility for benefits is important because it can
help motivate an individual with a disability to try to return to
work.  At the same time, however, some respondents cautioned that
such a requirement must be invoked carefully because a company could
spend money on return-to-work efforts for individuals who participate
because they feel compelled but ultimately do not return to work
because of a basic lack of motivation.  The Social Security Act
provides for withholding benefits if a beneficiary refuses without
good cause to accept rehabilitation services. 

In Germany and Sweden, individuals may also be denied benefits for
not participating in or cooperating with rehabilitation when it is
recommended by one of the insurance offices.  For example, the
pension insurance funds in Germany can deny an individual
rehabilitation benefits or a disability pension if they do not
participate in or sufficiently cooperate with the recommended
rehabilitation program.  Similarly, if someone refuses to participate
in training because that person would rather receive an unemployment
benefit than undergo rehabilitation, the employment office can stop
his or her benefits.\56 The social insurance offices in Sweden may
also revoke benefits, including pension benefits, for those who
refuse to participate in vocational rehabilitation.  We do not have
information on the extent to which these provisions are actually
invoked in Germany and Sweden. 


--------------------
\56 Benefits are initially stopped for 3 months.  If the individual
still refuses to participate, the office can stop the benefits for
another 3 months.  After that, benefits may be stopped for 3 years. 


CONCLUSIONS, RECOMMENDATION, AND
AGENCY COMMENTS
============================================================ Chapter 5

Disability managers we surveyed spend money on return-to-work efforts
because they believe such efforts are good investments that reduce
disability-related costs.  Social insurance programs in Germany and
Sweden also spend money on return-to-work efforts to reduce
disability costs, and their goals stress the importance of work in
integrating people with disabilities into the broader social
community. 

Improving the success of SSA's return-to-work efforts offers great
potential for reducing federal disability program costs while helping
people with disabilities return to productive activity in the
workplace.  If an additional 1 percent of the 6.3 million DI and SSI
working-age beneficiaries were to leave the disability rolls by
returning to work, lifetime cash benefits would be reduced by an
estimated $2.9 billion.\57 With such large potential savings,
return-to-work services could be viewed as investments rather than as
program outlays. 

In our current study of return-to-work practices, we identified three
basic strategies employed in the U.S.  private sector as well as in
social insurance programs in Germany and Sweden.  These strategies,
which must be integrated to form a comprehensive return-to-work
program, are as follows: 

  -- Provide services and assistance sooner rather than later to
     promote and facilitate return to work. 

  -- Identify and provide necessary return-to-work assistance and
     manage cases to achieve goals. 

  -- Structure cash and medical benefits to encourage return to work. 

Lessons from the private sector and other countries' social insurance
programs argue for SSA placing greater priority on assessing
return-to-work potential soon after individuals come to SSA and apply
for disability benefits.  Currently, when an individual comes to SSA
and applies for DI or SSI benefits, SSA's priority is to determine
eligibility for cash benefits.  The need for medical and vocational
rehabilitation is not addressed until after applicants have been
approved to receive cash benefits, which can take up to 18 months or
longer from the time an application is filed. 

In conjunction with making an early assessment of return-to-work
potential, SSA needs to place greater priority on identifying and
providing, at the earliest appropriate time, the medical and
vocational rehabilitation services needed to return to work. 
Currently, SSA bases 70 percent of its awards on whether an
individual's medical symptoms, signs, and diagnostic results match
SSA's Listing of Impairments that are presumed to prevent work.  It
does not evaluate whether these people could return to work if given
appropriate assistance.  To improve return-to-work outcomes and to
identify the services needed, SSA needs to place greater emphasis on
functionally evaluating work capacity. 

Under the current legislative design, SSA provides vocational
rehabilitation services too late in the process.  In addition,
neither DI nor SSI applicants are eligible for medical rehabilitation
benefits under Medicare or Medicaid, respectively, until they are
approved for cash benefits through the lengthy eligibility
determination process.  And, in the DI program, the provision of
medical rehabilitation is further delayed because Medicare
eligibility does not begin until 24 months after applicants are
approved to receive cash benefits.\58

Finally, cash and medical benefits need to encourage beneficiaries to
return to work.  The current design of cash and medical benefits in
the DI and SSI programs often presents more hindrances than
incentives when beneficiaries consider returning to work.  The
structure of cash benefits can make it financially advantageous to
remain on the disability rolls, and studies report that DI and SSI
beneficiaries fear losing their premium-free Medicare or Medicaid
benefits if they return to work. 

The experiences of the social insurance programs in Germany and
Sweden show that the utility of return-to-work strategies is not
confined to the private sector.  Although SSA faces constraints in
applying these strategies, we believe steps should be taken earlier
to better identify and provide appropriate return-to-work assistance
to those who could return to work.  Even relatively small gains in
return-to-work successes offer the potential for significant savings
in program outlays. 


--------------------
\57 GAO estimate based upon SSA actuarial estimates. 

\58 State vocational rehabilitation agencies may provide medical
rehabilitation benefits to beneficiaries they serve and be reimbursed
for these costs if beneficiaries return to work. 


   RECOMMENDATION TO THE
   COMMISSIONER OF SSA
---------------------------------------------------------- Chapter 5:1

Our recent report, SSA Disability:  Program Redesign Necessary to
Encourage Return to Work, recommended that the Commissioner of SSA
place greater priority on return to work, including designing a more
effective means to identify and expand beneficiaries' work capacities
and better implementation of existing return-to-work mechanisms.  In
line with placing greater emphasis on return to work, we recommend
that the Commissioner develop a comprehensive return-to-work strategy
that integrates, as appropriate, earlier intervention, earlier
identification and provision of necessary return-to-work assistance
for applicants and beneficiaries, and changes in the structure of
cash and medical benefits.  The Commissioner should also identify
legislative changes needed to implement such a program. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 5:2

In commenting on a draft of this report, SSA agreed much can be
learned from the return-to-work practices of the U.S.  private sector
and disability programs in Germany and Sweden.  SSA stated that it is
already placing a high priority on return to work and cited a number
of actions SSA has taken to implement its return-to-work initiative,
such as expanding the pool of vocational rehabilitation service
providers.  Although these actions are in the right direction, we
believe they do not constitute the fundamental redirection of goals
and practices necessary to move the DI and SSI programs to a much
greater emphasis on return to work.  For example, increasing the
number of vocational rehabilitation providers does not address the
concern of earlier intervention.  Fundamental redesign is needed
because SSA's disability programs are designed to be cash benefits
programs, not return-to-work programs. 

Consistent with our recommendation that SSA should identify
legislative changes needed to implement a return-to-work program, SSA
noted that the law does not provide for, or even allow, many of the
return-to-work strategies discussed in our report.  Within this
context, however, SSA affirmed that it is interested in determining
whether the return-to-work practices of other systems could be useful
in SSA's attempts to improve the return-to-work rate of its
disability beneficiaries.  SSA emphasized that, for such efforts to
be fruitful, all players in the complex network of federal disability
policy development and program execution would need to be involved,
including several federal departments and agencies, state disability
and rehabilitation programs, private sector providers, insurance
representatives, and employer/union groups as well as the numerous
congressional committees that have roles in the development of
legislation or in budget approval for the kinds of solutions
described in our report.  We agree that it is important for all
relevant parties to be involved in policy development and program
execution.  However, as the primary manager of multibillion-dollar
programs and as the entity with fiduciary responsibility for the
trust funds, SSA must take the lead in forging the partnerships and
cooperation that will be needed in redesigning the federal disability
programs.  SSA also made a number of technical comments, which we
incorporated where appropriate.  Appendix V contains the full text of
SSA's comments and our evaluation. 


ORGANIZATIONS CONTACTED DURING
GAO'S REVIEW OF U.S.  PRIVATE
SECTOR DISABILITY MANAGEMENT
PRACTICES
=========================================================== Appendix I

American Airlines, Inc./AMR Corporation

Lynn Swaim
Manager, Workers' Compensation

Sondra Napier
Senior Analyst, Workers' Compensation

American Rehabilitation Association

Tony Young
Director, Residential Services and Community Supports

Bausch & Lomb, Inc. 

Kevin E.  Flint
Director, Benefits Finance

Burlington Industries

Don Beusse
Director, Health and Safety Services

Chrysler Corporation

Kathleen Neal
Staff Specialist, Benefit Services
Corporate Group Insurance

John D.  Wilson
Manager, Benefits Services

Commission on Accreditation of Rehabilitation Facilities

Dr.  Donald Galvin
President and Chief Executive Officer

Digital Equipment Corporation

Karen Nelson
U.S.  Disability Program Manager

DuPont Company

David B.  Helms
Senior Consultant, Health Care

Federal Express

Janna Rogers
Benefits Advisor, Benefit Planning Analysis

Fortis Benefits Insurance Company

John Althoff
Rehabilitation Manager

General Electric Company

Shelly Wolff
Corporate Health Care, Disability Program Lead

HHRC Inc. 

Marcia Carruthers
Director of Disability Management
(also serves as Executive Director,
Disability Management Employer Coalition, Inc.)

IBM Human Resources, USA

Ted Richards
Manager, Benefit Programs

Andrea M.  Epps
Program Manager, Benefit Programs

John Hancock Mutual Life Insurance Company

Richard Quebec
Product and Network Services

L.L.  Bean

Ted Rooney
Manager, Employee Health Management

Marriott International, Inc. 

Rachel Ebert
Director, Occupational Health Services

Northwestern National Life

Mark C.  Taylor
Senior Rehabilitation Case Manager, Disability Management Services

Owens-Corning Fiberglas Corporation

Amy Ahrens
Integrated Health Services Leader

Pepsico

Ellen Abisch
Manager, Workers' Compensation

Polaroid Corporation

Richard J.  Williams
Senior Corporate Benefits Administrator

Proctor & Gamble

James Palmer
Associate Director for Employee Benefits, Human Resources

Don Freeland
Senior Manager

Southern California Edison

Suzanne Mercure
Benefits Administration Manager

John Stimson
Manager, Disability Management

Texas Instruments

Susan M.  Nelson
Health Promotion and Benefits Manager

The Principal Financial Group

Catherine Bennett
Assistant Director
(also serves as Chair, Rehabilitation Subcommittee, Health Insurance
Association of America)

The Burns Group, Inc. 

John Burns, President and Chief Executive Officer

UNUM Life Insurance Company of America

Patricia M.  Owens
President, Integrated Disability Management

Washington Business Group on Health

Kathleen Kirchner
Director, Institute for Rehabilitation and Disability Management

Wells Fargo Bank

Bruce Flynn
Manager, Disability Management


SURVEY ON DISABILITY MANAGEMENT
PRACTICES
========================================================== Appendix II

This appendix presents the survey instrument that we used to obtain
information from 21 people in the U.S.  private sector generally
recognized for their leadership in developing return-to-work
programs.  The first page of the survey instrument provided
respondents with instructions for completing the survey, and the
second page defined some of the terms in the survey instrument. 

The remainder of the survey instrument listed various disability
management practices.  For each practice, we have inserted the number
of respondents who answered "yes" or "no" when asked whether their
current programs currently incorporated the practice.  For some
practices, not all respondents answered the question; therefore, the
number of responses is less than 21 in some instances.  Also, for
each practice, we have inserted the mean rating that respondents gave
when asked for their assessment of how important it is to include
that practice in a model disability management program.\59



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


--------------------
\59 On the fifth page of the survey instrument, we did not provide
any results data for practice number 9, "Pay private VR providers for
every client served." Based on follow-up discussions with several
respondents to our survey, we found that the wording of this practice
was not sufficiently clear to ensure that accurate responses were
elicited. 


PEOPLE AND ORGANIZATIONS CONTACTED
DURING GAO'S REVIEW OF SOCIAL
INSURANCE DISABILITY PROGRAMS IN
GERMANY AND SWEDEN
========================================================= Appendix III


   GERMANY
------------------------------------------------------- Appendix III:1

Dr.  Rolf Bï¿½dege, Chief Administrator
Vocational Retraining Center--Frankfurt am Main
Bad Vilbel

Dr.  Rainer G.  Diehl, Leading Physician, Rehabilitation Department
Dr.  Gunter Mï¿½bert, Psychiatrist, Rehabilitation Department
Jacob Brï¿½hler, Department Chief, Insurance and Pension Department
Petra Lee, Section Chief, Insurance and Pension Department
Regional Pension Office--Hessen
Frankfurt am Main

Dr.  Ulrich Gehrke
Federal Rehabilitation Council
Frankfurt am Main

Dr.  Harmut Haines, Ministry Advisor
Federal Ministry for Labor and Social Affairs
Bonn

Dr.  Michael Nagy, Managing Director
Vocational Training Center Heidelberg
Heidelberg

Anke Paul, Advisor, Placement and Counseling
Regional Employment Office Hessen
Frankfurt am Main

Gisela Scherer, Rehabilitation Section Chief
Employment Office
Frankfurt am Main

Dr.  Michael F.  Schuntermann, Department of Rehabilitation Science
Uwe Rehfeld, Statistician
Federation of German Pension Insurance Carriers
Frankfurt am Main


   SWEDEN
------------------------------------------------------- Appendix III:2

Patsy Bï¿½chmann
U.S.  Embassy
Labor Section
Stockholm

Dr.  Edward Palmer, Head of Research Section
Rolf Westin, Head of Division for Rehabilitation and Disability
Pension
Kristina Bengtsson, Rehabilitation Advisor
Peter Jusï¿½lius, Legal Advisor
Hannelotte Kindlund, Head of Statistical Division
Tommy Edlund, Statistics Analyst
National Social Insurance Board
Stockholm

Birgitta Magnusson, First Secretary, Disability Issues
Liso Sergo
Ministry of Health and Social Affairs
Stockholm

Lars Hultstrand, Secretary of the Social Committee
Standing Committee on Social Affairs
Parliament
Stockholm

Inger Lenas, Officer, Social Policy Issues
The Swedish Trade Union Confederation
Stockholm

Inga-Britt Lagerlï¿½f, Deputy Assistant Under-Secretary
Anna Odhner, Section Head
Ministry of Labor
Stockholm

Leif Alm, Assistant Manager
Bertil Andersson
Samhall AB
Tullinge

Lisbeth Lidbom, Program Manager for Vocational Rehabilitation and
Handicap Issues
National Labor Market Board
Solna

Christina Ebbeskog, Swedish Confederation of Salaried Employees
Stockholm

Eva Lundin, Secretary for Disability Issues
Stockholm Social Services
Stockholm

Birgitta Rydberg, County Councillor
Stockholm County Council
Stockholm

Eva Sandborg, International Advisor
Office of the Disability Ombudsman
Stockholm

Nils Eklund, Senior Auditor
The Swedish National Audit Office
Stockholm

Hans Galvï¿½r
Helena Paulsson
Employability Institute
Uppsala

Hï¿½kan Eriksson
Working Life Services
Uppsala

Jan ï¿½ke Brorson, Secretary to the Committee
The Committee for a New Structure for Sickness and Occupational
Injury Insurance
Ministry of Health and Social Affairs
Stockholm

Gunilla Sahlin, Advisor on Education, Training, and Disability Policy
Dr.  Eric Jannerfeldt
Swedish Employers' Confederation
Stockholm

Christer Johansson
The Swedish National Society for Persons with Mental Handicap
Stockholm

Anita Pettersson, Employment Officer
Annelie ï¿½sterberg, Vocational Guidance Officer
Employment Office
Stockholm

Dr.  Anders Gidlï¿½f, Institute for Futures Studies
Stockholm

Ann-Kristin Olsson, Rehabilitation Counselor
Social Insurance Office
Stockholm


FIVE-STEP SEQUENTIAL EVALUATION
PROCESS FOR DETERMINING DI AND SSI
DISABILITY
========================================================== Appendix IV

To determine whether an applicant qualifies for DI and SSI disability
benefits, SSA uses a five-step sequential evaluation process.  In the
first step, an SSA field office determines if an applicant is working
at the level of substantial gainful activity (SGA) and whether he or
she meets the applicable nonmedical eligibility requirements (Social
Security insured status, income and resources, residency, and
citizenship, for example).\60 An applicant found to be not working or
working but earning less than SGA (minus allowable exclusions) and
who meets the nonmedical eligibility requirements has his or her
case, including medical and vocational evidence, forwarded to a
Disability Determination Service (DDS) office.  Applicants who do not
meet these requirements, regardless of medical condition, are denied
benefits. 

DDS offices gather medical and any additional vocational or other
necessary evidence to determine if applicants are disabled under the
Social Security law.  In step two, the DDS office determines if the
applicant has an impairment or combination of impairments that is
severe and could be expected to last at least 12 months.  According
to SSA standards, a severe impairment is one that significantly
limits an applicant's ability to do "basic work activities," such as
standing, walking, speaking, understanding and carrying out simple
instructions, using judgment, responding appropriately to supervision
and dealing with change.  The DDS office collects all necessary
medical evidence, either from those who have treated the applicant
or, if that information is insufficient, from an examination
conducted by an independent source.  Applicants with severe
impairments that are expected to last at least 12 months proceed to
the third step in the disability determination process; applicants
without such impairments are denied benefits. 

At step three, the DDS office compares the applicant's condition with
the Listing of Impairments (referred to as "the listings") developed
by SSA.  The listings contain over 150 categories of medical
conditions (such as the loss of both feet or an IQ score below 60)
that, according to SSA, are severe enough ordinarily to prevent an
individual from engaging in SGA.  An applicant whose impairment is
cited in the listings or whose impairment is equally as severe or
more severe than those in the listings and who is not engaging in SGA
is found disabled and awarded benefits.  An applicant whose
impairment is not cited in the listings or is not of equal or greater
severity is evaluated further to determine whether he or she can
perform past work or other work. 

In step four, the DDS office uses its physician's assessment of the
applicant's residual functional capacity (RFC) to determine whether
the applicant can still perform the functional demands of work he or
she has done in the past.  For physical impairments, an RFC is
expressed in certain demands of work activity (for example, ability
to walk, lift, carry, push, pull, and so forth); for mental
impairments, an RFC is expressed in psychological terms (for example,
whether a person can follow instructions and handle stress).  If the
DDS office finds that a claimant can perform work done in the past,
benefits are denied. 

In the fifth and last step, the DDS office determines if an applicant
who cannot perform work done in the past can do other work that
exists in the national economy.\61 Using SSA guidelines, the DDS
considers the applicant's age, education, work experience, and RFC to
determine what other work, if any, the applicant can perform.  Unless
the DDS office concludes that the applicant can perform work that
exists in the national economy, benefits are allowed. 

At any point in the sequential evaluation process, an examiner can
deny benefits for reasons relating to insufficient documentation or
to lack of cooperation by the applicant.  Such reasons can include an
applicant's failure to (1) provide medical or vocational evidence
deemed necessary for a determination by the examiner, (2) submit to a
consultive examination that the examiner believes is necessary to
provide evidence, or (3) follow a prescribed treatment for an
impairment.  Benefits are also denied if the applicant asks DDS to
discontinue processing the case. 



(See figure in printed edition.)Appendix V

--------------------
\60 To be eligible for DI benefits, individuals must have worked long
enough and recently enough under Social Security.  To be eligible for
SSI benefits, individuals must not have countable monthly income
(earned and unearned income as defined by the SSI program, minus
allowable exclusions) higher than the federal benefit rate, or
countable real and personal property (including cash) worth more than
$2,000. 

\61 By definition, work in the national economy must exist in
significant numbers in the region where the applicant lives or in
several regions of the country.  It is inconsequential whether (1)
such work exists in the applicant's immediate area, (2) job vacancies
exist, or (3) the applicant would actually be hired. 


COMMENTS FROM THE SOCIAL SECURITY
ADMINISTRATION AND OUR EVALUATION
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)

Now on pp.  17 and 35. 

Now on p.  49. 


The following are GAO's comments on the Social Security
Administration's letter dated June 6, 1996. 


   GAO COMMENTS
-------------------------------------------------------- Appendix IV:1

1.  We recognize that SSA has taken actions that exemplify concern
for helping more DI and SSI beneficiaries gain independence by
returning to work.  The Commissioner stated that SSA is already
placing a high priority on return to work and cited a number of
actions SSA has taken to implement its return-to-work initiative. 
Although these actions are in the right direction, we believe the
steps SSA has taken do not constitute the fundamental redirection of
goals and practices necessary to move the DI and SSI programs to a
much greater emphasis on return to work.  Fundamental redesign is
needed because the DI and SSI programs are designed, as the
Commissioner acknowledges in her comments, to be cash benefits
programs, not return-to-work programs. 

Without a fundamental redirection of the programs, SSA's primary
focus will continue to be on determining whether individuals are
unable to work and then, after declaring them unable to work,
considering whether to refer them to a vocational rehabilitation
provider to help them return to work.  This approach does not permit
earlier points of intervention that disability managers in the
private sector and in the social insurance programs in Germany and
Sweden believe are critical in maximizing return-to-work success. 

2.  Our report acknowledges the fundamental differences between SSA's
disability programs and the disability programs we analyzed in the
U.S.  private sector and in Germany and Sweden.  Our report also
acknowledges that implementing the return-to-work strategies of these
other systems will require new legislation, and therefore, we
recommend that the Commissioner identify legislative changes needed
to implement a comprehensive return-to-work program. 

3.  Our report acknowledges that implementing practices from other
systems may not have the same impact in SSA's programs because of
differences in the populations served and other fundamental factors. 
Because even small gains in return-to-work success can result in
large reductions in program costs, however, we believe the
application of the return-to-work strategies in our report warrants
strong consideration. 

4.  We agree with SSA that, to ensure the success of a newly designed
return-to-work program incorporating the strategies presented in our
report, all relevant parties need to be involved in policy
development and program execution.  However, we believe that SSA, as
the primary manager of these multibillion-dollar programs and as the
entity with fiduciary responsibility for the trust funds, must take
the lead in forging the partnerships and cooperation that will be
necessary in redesigning the programs to place greater priority on
return to work. 

5.  Since SSA stated in its comments that the Listing of Impairments
serves as a proxy for a functional evaluation, we disagree with SSA's
assertion that our report is misleading in its discussion of SSA's
process for determining disability and its general lack of focus on
the applicant's functional capacity to work.  Our report points out
that most beneficiaries are awarded benefits on the basis of whether
they have an impairment that meets or equals a medical condition
found in SSA's Listing of Impairments.  In such cases, the
determination process does not directly assess the individual's
capacity to work but instead focuses on establishing whether the
individual has a specific medical condition.  SSA argued that the
listings consider the functional consequences of listed impairments
and it is presumed that if a person's impairment meets or equals a
listed impairment, his or her condition imposes functional
restrictions sufficient to preclude any gainful activity.  We believe
these arguments demonstrate our point--that using the listings to
determine eligibility does not provide a direct assessment of an
individual's actual capacity to work but instead results in a
presumption that a person cannot work based on the existence of
certain medical conditions.  Also, we note that SSA has reported
previously that "some, but not all, of the Listings consider
functional consequences of an impairment .  .  ." and that
"functional considerations vary significantly among the Listings."
See HHS, Plan for a New Disability Claim Process, SSA Pub.  No. 
01-0005 (Washington, D.C.:  HHS, SSA, Sept.  1994), p.  11.  Our
report was revised to clarify language describing SSA's process for
determining disability and the Listing of Impairments (see pp.  17
and 35). 

6.  We believe the report acknowledges the existence of several
constraints that SSA faces in placing greater emphasis on return to
work.  On page 13, we note that the population SSA serves may include
many individuals who are more severely impaired, have less work
history, or fewer current job skills than clients the private sector
serves.  On page 15, we acknowledge the legislative basis for the DI
and SSI programs, and accordingly, we recommend that the Commissioner
should identify legislative changes needed to implement changes to
the disability programs.  As SSA comments note, we acknowledge the
lack of rigorous studies that present conclusive data on the
cost-effectiveness of disability management.  (See pp.  26 and 27.)
For this reason, our recommendation that the Commissioner develop a
return-to-work strategy did not specify exactly which practices were
to be included or how they were to be implemented.  Rather, we
recommended that such a plan integrate, as appropriate, the
strategies discussed in our report.  We believe the development of
such a plan will require SSA to assess the costs and benefits of a
variety of return-to-work practices, and from this assessment, SSA
will be able to determine which practices are cost-effective and
should be included. 

SSA also made a number of technical comments, which we incorporated
where appropriate. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI

Cynthia A.  Bascetta, Assistant Director, (202) 512-7207
Ira B.  Spears, Evaluator-in-Charge
Carol Dawn Petersen, Senior Economist
Michele Grgich, Senior Evaluator
Kenneth F.  Daniell, Evaluator


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RELATED GAO PRODUCTS
============================================================ Chapter 1

SSA Disability:  Program Redesign Necessary to Encourage Return to
Work (GAO/HEHS-96-62, Apr.  24, 1996). 

PASS Program:  SSA Work Incentive for Disabled Beneficiaries Poorly
Managed (GAO/HEHS-96-51, Feb.  28, 1996). 

SSA's Rehabilitation Programs (GAO/HEHS-95-253R, Sept.  7, 1995). 

Social Security Disability:  Management Action and Program Redesign
Needed to Address Long-Standing Problems (GAO/T-HEHS-95-233, Aug.  3,
1995). 

OHA Backlogs (GAO/HEHS-95-228R, July 28, 1995). 

Supplemental Security Income:  Growth and Changes in Recipient
Population Call for Reexamining Program (GAO/HEHS-95-137, July 7,
1995). 

Disability Insurance:  Broader Management Focus Needed to Better
Control Caseload (GAO/T-HEHS-95-164, May 23, 1995). 

Supplemental Security Income:  Recipient Population Has Changed as
Caseloads Have Burgeoned (GAO/T-HEHS-95-120, Mar.  27, 1995). 

Social Security:  Federal Disability Programs Face Major Issues
(GAO/T-HEHS-95-97, Mar.  2, 1995). 

Supplemental Security Income:  Recent Growth in the Rolls Raises
Fundamental Program Concerns (GAO/T-HEHS-95-67, Jan.  27, 1995). 

Social Security:  Continuing Disability Review Process Improved, But
More Targeted Reviews Needed (GAO/T-HEHS-94-121, Mar.  10, 1994). 

Social Security:  Disability Rolls Keep Growing, While Explanations
Remain Elusive (GAO/HEHS-94-34, Feb.  8, 1994). 

Vocational Rehabilitation:  Evidence for Federal Program's
Effectiveness Is Mixed (GAO/PEMD-93-19, Aug.  27, 1993). 

Vocational Rehabilitation Program:  Client Characteristics, Services
Received, and Employment Outcomes (GAO/T-PEMD-92-3, Nov.  12, 1991). 


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