SSA Disability: Program Redesign Necessary to Encourage Return to Work
(Chapter Report, 04/24/96, GAO/HEHS-96-62).
Pursuant to a congressional request, GAO provided information on the
Social Security Disability Insurance (DI) and Supplemental Security
Income (SSI) programs, focusing on program weaknesses that impede the
Social Security Administration (SSA) from identifying and expanding
beneficiaries' return-to-work capabilities.
GAO found that: (1) between 1985 and 1994, the combined DI and SSI
beneficiary population increased 70 percent and the cost of cash
benefits grew 66 percent; (2) increases were due to eligibility
expansion, program outreach, fewer continuing disability reviews,
economic factors, and demographic changes; (3) the beneficiary
population is also growing younger and more beneficiaries have long-term
impairments; (4) the development of effective return-to-work strategies
for people with severe disabilities is challenging because individuals
may require various and changing levels of medical intervention or
support, remedial retraining, education, or job coaching; (5)
technological and medical advances and economic and social changes have
created more potential for some individuals with disabilities to engage
in work; (6) the SSI and DI benefit structure, their focus on
inabilities rather than abilities, and poor access to rehabilitation
services further complicate the difficult process of making disability
and work capability determinations; and (7) although the programs offer
such work incentives as trial work periods, extended eligibility, earned
income exclusion, work expense subsidies, continued health insurance
coverage, and reentitlement, they are not appropriately designed or
implemented to motivate beneficiaries to return to work.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-96-62
TITLE: SSA Disability: Program Redesign Necessary to Encourage
Return to Work
DATE: 04/24/96
SUBJECT: Disability insurance
Vocational rehabilitation
Eligibility determinations
Social security benefits
Handicapped persons
Federal social security programs
Income maintenance programs
Disadvantaged persons
Employment or training programs
Beneficiaries
IDENTIFIER: Social Security Disability Insurance Program
Supplemental Security Income Program
Old Age and Survivors Insurance Trust Fund
Social Security Disability Insurance Trust Fund
Medicaid Program
Medicare Program
Dept. of Education Vocational Rehabilitation Program
SSA Plan for Achieving Self-Support Program
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Cover
================================================================ COVER
Report to the Chairman, Special Committee on Aging, U.S. Senate
April 1996
SSA DISABILITY - PROGRAM REDESIGN
NECESSARY TO ENCOURAGE RETURN TO
WORK
GAO/HEHS-96-62
Social Security Disability Redesign
(105580)
Abbreviations
=============================================================== ABBREV
ADA - Americans With Disabilities Act
CDR - continuing disability review
CRS - Congressional Research Service
DDS - Disability Determination Service
DI - Disability Insurance
FICA - Federal Insurance Contributions Act
GA - general assistance
HCFA - Health Care Financing Administration
HHS - Department of Health and Human Services
IRWE - Impairment-Related Work Expenses
OIG - Office of Inspector General
PASS - Plan for Achieving Self-Support
RFC - residual functional capacity
SGA - substantial gainful activity
SSA - Social Security Administration
SSI - Supplemental Security Income
VR - vocational rehabilitation
Letter
=============================================================== LETTER
B-256285
April 24, 1996
The Honorable William S. Cohen
Chairman
Special Committee on Aging
United States Senate
Dear Mr. Chairman:
This report responds to your request for information on why few
Social Security Disability Insurance (DI) and Supplemental Security
Income (SSI) adult beneficiaries with disabilities are returned to
gainful employment. The report discusses weaknesses in the design
and implementation of the DI and SSI programs that impede the Social
Security Administration from identifying and expanding the productive
capacities of beneficiaries. The report also presents information on
key program trends.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter. At that time, we will send copies 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 VII.
Sincerely yours,
Jane L. Ross
Director, Income Security Issues
EXECUTIVE SUMMARY
============================================================ Chapter 0
PURPOSE
---------------------------------------------------------- Chapter 0:1
The Disability Insurance (DI) and the Supplemental Security Income
(SSI) programs are the two largest federal programs providing
assistance to people with disabilities. The two programs served 7.2
million people in 1994 and provided $53 billion in cash benefits.
The Social Security Administration (SSA) administers DI and SSI and
makes benefits determinations using a common definition of disability
for both programs. SSA is also responsible for encouraging DI and
SSI beneficiaries to return to work whenever possible. To this end,
DI and SSI applicants are to be referred to state vocational
rehabilitation agencies. The Congress has enacted various work
incentive provisions that are designed to safeguard beneficiaries'
cash and medical benefits to encourage them to test their ability to
engage in work.
Despite these statutory provisions, as well as medical and
technological changes that have afforded greater potential for some
beneficiaries to work, not more than 1 of every 500 DI beneficiaries
has left the rolls by returning to work. For this reason, the
Chairman of the Senate Special Committee on Aging asked GAO to
-- describe changes in the number and characteristics of DI and SSI
program beneficiaries over time and the implications of these
changes for returning beneficiaries to work;
-- analyze the disability determination process to assess whether
it can accurately distinguish between applicants who can work
and those who cannot; and
-- evaluate the effect of the disability determination process,
work incentives, and vocational rehabilitation on returning DI
and SSI beneficiaries to work.
BACKGROUND
---------------------------------------------------------- Chapter 0:2
Working-age adults with disabilities can obtain benefits in the form
of services and cash assistance 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, a private insurer, or a workers' compensation program.
The last resort for many people who cannot return to the workplace is
long-term cash benefits provided by workers' compensation, private
disability insurance, and DI. Long-term cash benefits, available
through SSI, are the last resort for people with disabilities who
have low income and limited assets.
DI provides cash benefits for people with disabilities covered under
Social Security who have been found to be unable to work at gainful
levels. After receiving DI benefits for 24 months, DI beneficiaries
also become eligible for Medicare. In 1994, there were 3.3 million
DI beneficiaries. SSI provides cash benefits for the aged, blind,
and disabled whose income and resources are below a specified amount.
In most cases, SSI beneficiaries are also eligible for Medicaid
coverage. In 1994, there were 2.4 million blind and disabled SSI
beneficiaries of working age. Additionally, in 1994 671,000 adult
beneficiaries received both DI and SSI benefits because they met
requirements for both programs, and 841,000 children with
disabilities received SSI benefits.
To be considered disabled by either program, an adult must be unable
to engage in any substantial gainful activity (SGA) 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 rolls, benefits
continue until death; until SSA determines that the beneficiary no
longer meets the eligibility requirements; or, in the case of DI
beneficiaries, until their benefits are converted to Social Security
retirement benefits at age 65.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3
Over the last decade, the number of DI and SSI beneficiaries
increased 70 percent because of program changes and economic and
demographic factors. By 1994, 31 percent of DI beneficiaries and 57
percent of the adult SSI beneficiaries had mental
impairments--conditions that have one of the longest anticipated
entitlement periods (about 16 years for DI). During the past decade,
the proportion of adult beneficiaries who were middle aged steadily
increased as the proportion who were older than middle aged declined,
although data on recent years suggest that this trend may reverse.
Almost one of every two beneficiaries may not be realistic candidates
for return to work because of their age or because they are expected
to die within several years. The ability to find and maintain
employment may be challenging for others because some beneficiaries
have a very limited work history, even low-wage positions may be
limited, and people with certain impairments may appear less
attractive to employers. On the other hand, advances in
technology--like standing wheelchairs and synthetic voice
systems--and the medical management of some physical and mental
impairments have created potential for some people with disabilities
to engage in work. Furthermore, there has been a trend toward
greater inclusion of and participation by people with disabilities in
the mainstream of society.
SSA is required to assess an applicant's work incapacity on the basis
of the presence of medically determinable physical and mental
impairments. However, evidence indicates that, except in cases of
very severe disabilities, making an "either/or" disability
determination based on medical condition is very difficult. Other
factors--psychosocial, environmental, and economic--also influence
work incapacity.
Weaknesses in the design and implementation of DI and SSI program
components have limited SSA's capacity to identify and assist in
expanding beneficiaries' productive capacities. Eligibility
requirements and the application process encourage people to focus on
their inabilities, not their abilities; work incentives offered by
the programs do not overcome the risk of returning to work for many
beneficiaries, and the complexities of work incentives can make them
difficult to understand and challenging to implement; and
beneficiaries receive little encouragement to use rehabilitation
services, which are relatively inaccessible to beneficiaries seeking
them.
SSA identified key return-to-work issues in mid-1994 and has
developed a draft internal document laying out four initiatives that
could be used to increase return-to-work outcomes. SSA will need to
develop an integrated approach to help more beneficiaries join the
workforce.
PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4
CURRENT CASELOAD POSES
CHALLENGES YET ADVANCEMENTS
INCREASE POTENTIAL FOR
RETURN TO WORK
-------------------------------------------------------- Chapter 0:4.1
Between 1985 and 1994, the number of people with disabilities who
received DI and SSI benefits increased from 4.2 million to 7.2
million. Program growth has been attributed to factors that
increased the number of people who came onto the rolls--for example,
eligibility expansion, program outreach, and national economic
factors--and decreased the rate at which people left the rolls
through death and retirement.
During this period, the programs experienced an increase in the
portion of beneficiaries with longer-lasting impairments,
particularly mental impairments. By 1994, mental impairments, which
are associated with the longest entitlement periods, accounted for 57
percent of the SSI beneficiary population aged 18 to 64, and 31
percent of the DI beneficiary population.
The DI and SSI adult beneficiary populations became somewhat younger
during this period. The proportion of DI beneficiaries who were
middle aged (aged 30 to 49) increased from 30 percent in 1986 to 40
percent in 1994; the proportion of SSI beneficiaries who were middle
aged increased from 36 percent in 1986 to 46 percent in 1994.
The current caseload presents challenges to developing effective
return-to-work strategies. Almost half of a cohort of beneficiaries
who entered DI in 1988 had died or reached age 65 within almost 6
years; and about the same proportion of adult DI and SSI
beneficiaries were aged 50 or older in 1994. Assisting those
individuals who can return to work will require varying approaches
and levels of support. Beneficiaries with little work history, and
perhaps some people with mental impairments, may have additional
challenges in finding and maintaining employment. Also, economic
trends, labor market competition, and welfare reform may limit the
availability of full-time employment in the future for beneficiaries
who are low-wage earners.
However, advances in medicine and assistive technologies and a trend
toward greater inclusion of and participation by people with
disabilities in the mainstream of society have created more work
potential for people with disabilities than in the past. Further,
the 1990 Americans With Disabilities Act (ADA) supports the full
participation of people with disabilities in society and fosters the
expectation that people with disabilities can work.
DETERMINING WHO CAN AND WHO
CANNOT WORK IS DIFFICULT
-------------------------------------------------------- Chapter 0:4.2
SSA is required to assess an applicant's work incapacity on the basis
of the presence of medically determinable physical and mental
impairments. However, while decisions may be more clear cut in the
cases of people whose impairments inherently and permanently prevent
work, disability determinations may be much more difficult in the
cases of people with disabilities who may have a reasonable chance to
work if they receive appropriate assistance and support. Research
studies suggest that making accurate decisions about who can and
cannot work is difficult.
PROGRAM COMPONENTS UNDERMINE
RETURN TO WORK
-------------------------------------------------------- Chapter 0:4.3
The "either/or" nature of the disability determination process
encourages applicants to focus on their inabilities. The
documentation involved in establishing one's disability can, many
believe, create a "disability mindset" that erodes motivation to
work, and the length of time required to determine eligibility can
weaken skills, abilities, and habits necessary to work.
Despite providing some financial protection for those who want to
work, work incentives do not appear to be sufficient to overcome the
prospect of a drop in income for those who accept low-wage
employment; neither do they allay the fear of losing medical coverage
and other federal and state assistance that beneficiaries who return
to work must face. Work incentive provisions are complex and
difficult to understand, making implementation a challenge. Few
beneficiaries are aware that work incentives exist, and SSA does not
promote them extensively.
Vocational rehabilitation (VR) has also played a limited role in the
DI and SSI programs, in part, because of restrictive state VR
policies and limited alternatives to the state VR system. As with
work incentives, beneficiaries are generally uninformed about the
availability of VR services and are given little encouragement to
seek them.
PROGRAM REDESIGN IS
NECESSARY TO BETTER IDENTIFY
AND EXPAND BENEFICIARY
RETURN-TO-WORK POTENTIAL
-------------------------------------------------------- Chapter 0:4.4
Although a sizable portion of the disability rolls may not be
realistic candidates for returning to work, there is a meaningful and
growing portion who can be expected to survive for many years and who
may be able to return to work. Although no solid evidence is
available, some information from SSA indicates that up to one-third
of the beneficiary population may have rehabilitation potential.
Weaknesses in the design and implementation of the DI and SSI
programs, however, have done little to identify and encourage the
productive capacities of beneficiaries who might be able to benefit
from rehabilitation and employment assistance. In this context, SSA
needs to take major action, which may require proposing new
legislation, to create and implement effective, integrated, and
consistent return-to-work strategies.
RECOMMENDATION
---------------------------------------------------------- Chapter 0:5
GAO recommends that the Commissioner of SSA take immediate action to
place greater priority on return to work, including designing more
effective means to more accurately identify and expand beneficiaries'
work capacities and better implementing existing return-to-work
mechanisms. As part of this effort, the Commissioner of SSA should
develop a legislative package for those areas in which SSA does not
currently have legislative authority to enact change in order to
position the agency to expeditiously redirect its emphasis on return
to work.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6
In commenting on a draft of this report, the Commissioner of SSA
concurred with GAO's findings and conclusions (see app. VI), but did
not indicate whether or not action would be taken to implement GAO's
recommendation. The Commissioner also made a number of technical
comments, which GAO incorporated where appropriate.
INTRODUCTION
============================================================ Chapter 1
Advances in technology and medicine and economic changes have created
more potential for people with disabilities to engage in employment.
Moreover, there has been a trend toward greater inclusion of and
participation by people with disabilities in the mainstream of
society. These changes have sparked an increased interest in public
policy on the employment of people with disabilities.
In this report, we focus on Disability Insurance (DI) and
Supplemental Security Income (SSI)--the two largest federal programs
providing assistance to people with disabilities. Provisions
contained in the legislation that created DI and SSI focus on
returning people with disabilities to self-supporting employment
whenever possible. Yet, very few people have left the disability
rolls to return to work.\1
DI is the nation's primary source of income replacement for workers
with disabilities who have paid Social Security taxes and are
entitled to benefits. SSI provides federal and state assistance to
people who are aged, blind, or disabled, regardless of Social
Security coverage, whose income and resources are below a specified
amount.\2 DI and SSI are administered by the Social Security
Administration (SSA) with the assistance of state agencies.
--------------------
\1 By return to work, we refer to both reentry into the labor force
of people with work history and initial entry of people with little
or no work history.
\2 Reference to the SSI program throughout the remainder of the
report addresses blind or disabled, not aged, recipients.
THE NUMBER OF PEOPLE WITH
DISABILITIES DEPENDS ON THE
DEFINITION OF DISABILITY
---------------------------------------------------------- Chapter 1:1
Estimates of the number of people with disabilities in the United
States depend on the definition of disability. The Survey of Income
and Program Participation--an ongoing study by the U.S. Census
Bureau of the economic well-being of the civilian
noninstitutionalized population--reports about 51.5 million people
with some type of work or functional limitation.\3
Approximately 43 million people are reported as having disabilities
when using the definition of disability in the Americans With
Disabilities Act of 1990 (ADA). According to ADA, having a physical
or mental impairment substantially limiting one or more major life
activity, having a record of such an impairment, or being regarded as
having such an impairment constitutes disability.
When disability is defined by inability to work or perform other
major activities, the size of the population with disabilities is
much smaller. For instance, about 16 million persons are work
disabled according to the U.S. Census Bureau's 1993 Current
Population Survey, which defines work disability as a self-reported
limitation in the type or amount of work a person is able to perform
because of chronic illness or impairment.
--------------------
\3 U.S. Census Bureau, unpublished data collected at the end of 1993
and the beginning of 1994.
SERVICES RANGE FROM
RETURN-TO-WORK ASSISTANCE TO
LONG-TERM CASH BENEFITS
---------------------------------------------------------- Chapter 1:2
Working-age adults with disabilities can obtain benefits in the form
of services and short- and long-term cash assistance from a number of
public and private programs (see app. I). After the onset of a
disabling condition, workers may be eligible for return-to-work
services, such as rehabilitation. The aim of such return-to-work
services is to maintain workers in their current work setting. These
services are provided through various means, including employers,
private disability insurers, state or private nonprofit vocational
rehabilitation programs, and workers' compensation programs.
If, however, a worker is temporarily unable to work while recovering
from an illness or injury but is expected to recover, the worker may
turn to short-term cash benefits to replace lost wages. To
illustrate, in the case of a temporary inability to work caused by an
illness or an off-the-job injury, a person might be eligible for
short-term cash disability benefits from state temporary disability
insurance. Five states provide this type of benefit.\4 Or, a worker
might be eligible for paid sick leave or sickness or accident
insurance benefits if a policy is provided by the employer or
purchased by the worker. If the worker is injured on the job but is
expected to recover, he or she may be eligible for temporary workers'
compensation benefits. Once the worker recovers and returns to the
workplace, temporary cash benefits end.
Those who do not return to work may seek long-term cash benefits to
replace lost wages. They may be eligible for private disability
insurance benefits--either employer-provided or from a personal
policy--or, if injured on the job, for workers' compensation. In
some cases, workers can supplement DI coverage--the country's
long-term public disability insurance program for workers--with cash
benefits from private long-term disability insurance. But a worker
who is not eligible for cash benefits from either private insurance
or workers' compensation and is unable to be accommodated in the
workplace may discover that DI offers the only potential for wage
replacement.
Long-term benefits may also be sought by people with disabilities who
have low income and limited assets, regardless of their work
histories. Individuals with little or no work history are unlikely
to be covered by employer-provided disability insurance. Moreover,
it is unlikely that such individuals could afford to purchase a
private disability policy. These individuals may apply for SSI
benefits. SSI provides income support at the national level
regardless of work connection for low-income people with
disabilities.
--------------------
\4 States that provide this benefit are California, Hawaii, New
Jersey, New York, and Rhode Island.
DI AND SSI PROGRAM DESIGN
---------------------------------------------------------- Chapter 1:3
DI and SSI are the two major public programs serving people with
disabilities. In 1994, 3.3 million disabled workers were enrolled in
DI and received, on average, about $660 a month; 2.4 million adults
aged 18 to 64 were enrolled in SSI and received, on average, about
$360 a month (beneficiaries in the 48 states plus the District of
Columbia that provided a monthly SSI supplement in 1994 received, on
average, an additional $103). In addition, 671,000 more people were
concurrently enrolled in both programs,\5 and 841,000 children with
disabilities received SSI benefits.\6
DI is designed to insure covered workers against loss of income due
to a disabling condition. The program was established in 1956 under
title II of the Social Security Act. At that time, its primary
purpose was to prevent "loss or reduction of benefit rights" for wage
earners who became disabled and were considered unable to continue
paying Social Security taxes. The program provided payment of cash
benefits to disabled workers aged 50 or older. Benefits for
dependents of disabled workers were provided by the 1958 Social
Security Amendments, and benefits to disabled workers under age 50
were provided by the 1960 amendments. The Congress authorized
Medicare coverage for DI beneficiaries in 1972, making it available
to beneficiaries after they have received cash benefits for 24
months.
Those who have worked long enough and recently enough become insured
for DI coverage,\7 but there is no requirement that a disabling
impairment happen on or because of the job. The DI program is funded
through Federal Insurance Contributions Act (FICA) taxes paid into a
trust fund by employers and workers.\8
The SSI program was authorized in 1972 under title XVI of the Social
Security Act as a means-tested income assistance program for the
aged, blind, or disabled. In most cases, SSI beneficiaries are
eligible for Medicaid coverage. SSI raised to the federal level
preexisting federal/state welfare programs authorized under various
provisions of the Social Security Act. Unlike DI beneficiaries, SSI
disabled recipients do not need to have a work history to qualify for
benefits, but they must have low income and limited assets. The SSI
program is funded through general revenues.\9
--------------------
\5 Individuals insured under Social Security who meet SSI's income
and resource requirements qualify for both DI and SSI benefits.
\6 SSA, Annual Statistical Supplement to the Social Security Bulletin
(Washington, D.C.: SSA, Aug. 1995); HHS, State Assistance Programs
for SSI Recipients, SSA Pub. No. 17-002 (Washington, D.C.: Office
of Program Benefits Policy, SSA, Jan. 1995).
\7 Workers earn up to four credits per year, and the amount of
earnings required for a credit increases each year as general wage
levels rise. In 1995, one credit was received for every $630 of
earnings. The number of work credits needed for DI benefits depends
on the worker's age when he or she becomes disabled. For instance, a
person who becomes disabled before age 24 needs six credits in the
3-year period ending when the disability starts; a 50-year-old person
needs 28 credits, 20 of which must have been earned in the 10 years
immediately before becoming disabled.
\8 FICA payroll taxes are allocated among the Disability Insurance
Trust Fund, Old Age and Survivors Trust Fund, and the Medicare Trust
Fund.
\9 General revenues include taxes, customs duties, and miscellaneous
receipts collected by the federal government that are not earmarked
by law for a specific purpose.
DISABILITY DETERMINATION
PROCESS DECIDES ELIGIBILITY
-------------------------------------------------------- Chapter 1:3.1
The Social Security Act defines disability as the inability to engage
in any substantial gainful activity (SGA)\10 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.\11 Moreover, the act states that the impairment
must be of such severity that a person not only is unable to do his
or her previous work but, considering his or her age, education, and
work experience, is unable to engage in any other kind of substantial
work that exists in the national economy.
To apply for DI or SSI benefits, a person must file an application at
any one of 1,300 SSA field offices or other authorized locations.
For SSA to determine whether an applicant qualifies for disability
benefits, the application proceeds through a five-step evaluation
process (see app. II). In step one, an SSA field office determines
if an applicant is currently engaged in SGA. If an applicant is
found not to be engaged in SGA, the field office forwards the
application to a state Disability Determination Service (DDS) office
for processing through the remaining four steps until a determination
of disability or no disability is reached. A DDS office develops
medical, functional, vocational, and other necessary evidence;
evaluates it; and determines whether the applicant meets the
disability criteria set forth in SSA regulations. Once the DDS has
determined that the applicant meets the criteria, SSA calculates the
benefits payable and makes the award.
SSA pays the costs incurred by DDSs in evaluating applications,
including the expense of collecting medical evidence they request
from hospitals, clinics, or other institutions. There are 54 DDSs
throughout the country employing about 12,000 full-time and 2,000
part-time employees. SSA reported that in fiscal year 1994 the DDSs
processed about 2.6 million initial claims, and the total DDS budget
was about $1.1 billion.
Applicants denied benefits after the initial DDS review may request a
reconsideration by the DDS office. If still not satisfied, they can
appeal to an administrative law judge. If denied again, they may
appeal to the SSA Appeals Council and, later, to the federal district
courts.
Once a person is on the disability rolls, disability benefits
continue until one of three things happens: the beneficiary dies;
SSA determines that the beneficiary is no longer eligible for
benefits; or, for DI beneficiaries, benefits convert to Social
Security retirement benefits at age 65. Generally, a beneficiary
loses eligibility for benefits under one of two conditions: (1) a
beneficiary earns more income than allowed by program rules (the
monthly ceiling is $500 for disabled DI beneficiaries and $960 for
blind DI beneficiaries; for SSI, the ceiling varies from state to
state--for example, $1,464 in Pennsylvania and $1,855 in California)
or (2) SSA decides that a beneficiary's medical condition has
improved to the point that he or she is no longer considered disabled
and can now perform work at the SGA level. In order to make this
latter determination, SSA periodically performs continuing disability
reviews.\12 The law requires SSA to conduct such a review at least
once every 3 years on DI beneficiaries whose medical improvement is
possible or expected. When medical improvement is not expected, SSA
is required to schedule a continuing disability review at least once
every 7 years.
--------------------
\10 Regulations currently define SGA as employment that produces
countable earnings of more than $500 a month for disabled individuals
and $960 a month for individuals who are blind. SSA deducts from
gross earnings the cost of items a person needs in order to work and
the value of support a person needs on the job because of the
impairment before deciding if work is SGA.
\11 SSA uses a different definition of disability for children than
for adults. Generally, the Social Security Act defines a disabled
child as a person under age 18 who suffers from any medically
determinable physical or mental impairment of comparable severity to
one that disables an adult. For a complete description of the
specific criteria, see Social Security: Rapid Rise in Children on
SSI Disability Rolls Follows New Regulations (GAO/HEHS-94-225, Sept.
9, 1994). When we refer to SSA's definition of disability in this
report, we are referring to the definition applicable to adults.
\12 For a more complete discussion of SSA's performance in conducting
continuing disability reviews, see Disability Insurance: Broader
Management Focus Needed to Better Control Caseload
(GAO/T-HEHS-95-164, May 23, 1995).
STATUTE PROVIDES FOR
RETURNING BENEFICIARIES TO
WORK
-------------------------------------------------------- Chapter 1:3.2
The Social Security Act states that people applying for disability
benefits should be promptly referred to state vocational
rehabilitation (VR) agencies for services in order to maximize the
number of such individuals who can return to productive activity.
However, the act does not require that all applicants be referred to
VR agencies because doing so would not be useful in many
circumstances (for example, a 62-year-old person who experienced an
accident resulting in total paralysis would be unlikely to benefit
sufficiently from VR to return to work). DDS offices decide whether
or not to refer applicants to state VR agencies. DDS offices make
referral decisions using SSA's recommended criteria and additional
criteria developed in consultation with state VR agencies to screen
out applicants who are not considered to be reasonable candidates for
rehabilitation.
Once a referral has been made, a state VR agency weighs the
candidate's potential for rehabilitation against that of other VR
applicants. If the VR agency decides to offer services to the
applicant, it contacts the applicant directly. State VR agencies
also provide rehabilitation services to people not involved with the
DI and SSI programs. VR services include, for example, guidance,
counseling, and job placement, as well as therapy and training.
State VR agencies are reimbursed by the federal government for the
rehabilitation cost of each DI/SSI client who is returned to
employment at the SGA level for 9 continuous months. The Social
Security Act provides for withholding benefits from beneficiaries for
refusal, without good cause, to accept rehabilitation services
offered to them.
A beneficiary who engages in work encounters additional challenges,
however. By returning to work, a beneficiary trades guaranteed
monthly income and premium-free medical coverage for the
uncertainties of competitive employment. To reduce this risk, the
Congress has established program provisions, referred to as work
incentives, to safeguard cash and medical benefits while a
beneficiary tries to return to work. For example, DI provisions
allow beneficiaries to engage in a trial work period during which
they can earn any amount without affecting their benefits.\13
Beneficiaries who complete a trial work period but who do not
medically recover can retain Medicare coverage for at least an
additional 39 months. In addition, cash benefits can be reinstated
for any month within a 36-month period following the end of a trial
work period if a beneficiary's earnings drop below the SGA level.
Under SSI provisions, beneficiaries whose impairments continue are
allowed to earn above the SGA level and to continue to receive
reduced cash benefits indefinitely. Also, SSI beneficiaries whose
earnings eliminate eligibility for cash benefits can continue to
receive Medicaid coverage if their incomes remain within certain
limits.
Despite congressional interest in helping return DI and SSI
beneficiaries to employment, few beneficiaries engage in work while
on the rolls and fewer still leave the rolls to return to work. In a
recent month, for example, about 8 percent of SSI recipients aged 18
to 64 reported any earnings, and about 1 percent of DI beneficiaries
reported earning $500 or more. Moreover, during each of the past
several years, about 6,000 of the more than 3 million DI
beneficiaries have been terminated from the rolls because they
returned to work. Although SSA does not count the number of SSI
beneficiaries terminated because of return to work, it has estimated
that few are terminated for this reason.
The proportion of beneficiaries who return to work (1 in 500 for DI)
would be higher if candidates unlikely to obtain gainful employment
were excluded from the equation. Such candidates include, for
example, beneficiaries who are expected to die or to reach retirement
age within a few years following benefit award. SSA research
findings provide some estimate of the size of these groups. Among a
cohort of beneficiaries who entered DI in 1988, 28 percent died and
17 percent reached 65 within 5-1/2 years. Also, among cohorts of
recipients who entered SSI between 1974 and 1982, 28 percent died or
reached 65 within 10 years. Moreover, 46 percent of all working-aged
DI and SSI beneficiaries are 50 or older.\14 While age alone may be
neither an accurate nor appropriate predictor of return-to-work
potential, older workers who become disabled generally are less
likely to recover functioning and return to work than younger
workers.
--------------------
\13 The trial work period allows beneficiaries to work for 9 months
(not necessarily consecutively) within a 60-month rolling period and
earn any amount without affecting benefits. After the trial work
period, cash benefits continue for 3 months and then stop if
countable earnings are greater than $500 a month.
\14 Annual Statistical Supplement to the Social Security Bulletin,
multiple years.
OBJECTIVES, SCOPE, AND
METHODOLOGY
---------------------------------------------------------- Chapter 1:4
The Chairman of the Senate Special Committee on Aging asked us to
examine trends in the DI and SSI programs and determine why few
beneficiaries are returned to substantial gainful employment. On the
basis of subsequent discussions with his office, we designed our
study to do the following:
-- describe changes in the number and characteristics of DI and SSI
program beneficiaries over time and the implications of these
changes for returning beneficiaries to work;
-- analyze the disability determination process to assess whether
it can accurately distinguish between applicants who can work
and those who cannot; and
-- evaluate the effect of the disability determination process,
work incentives, and vocational rehabilitation on returning DI
and SSI beneficiaries to work.
To do this work, we reviewed the extant literature and synthesized
our prior work and reports published by SSA, the Congressional
Research Service (CRS), and others; analyzed information from SSA;
interviewed federal and state agency officials, experts, and
advocates; observed DDS operations; and conducted six focus groups
around the country with people receiving federal disability benefits.
We also convened a panel of disability experts (see app. III) to
review our findings and comment on the report's accuracy,
completeness, objectivity, and soundness. A bibliography of the
literature we used in our analysis and a list of related GAO products
are presented at the end of this report.
We did not independently verify the accuracy of the data used in the
analysis of this report. Our work was performed between February
1994 and December 1995 in accordance with generally accepted
government auditing standards.
CURRENT CASELOAD POSES CHALLENGES
YET ADVANCEMENTS INCREASE
POTENTIAL FOR RETURN TO WORK
============================================================ Chapter 2
The number of beneficiaries and the cost of program benefits have
grown rapidly since the mid-1980s. Program growth is attributed to
factors that increased the number of people coming onto the rolls and
decreased the number leaving. As the beneficiary population has
grown, a greater portion of beneficiaries now have
impairments--especially mental impairments--that are likely to keep
them on the rolls for longer periods than in the past. Also, the
beneficiary population has proportionately more middle-aged adults
and fewer older beneficiaries, although trends in recent years
suggest that the relative numbers of older beneficiaries may increase
in the years ahead.
For the current beneficiary population, there are challenges to
develop effective return-to-work strategies that will recognize and
flexibly respond to individual differences. However, while economic
changes may have had a mixed impact on work opportunities for people
with disabilities, technological and medical advances--along with a
trend toward inclusion of and participation by people with
disabilities in mainstream society--have created more potential for
some people with disabilities to engage in gainful work.
CASELOADS HAVE GROWN RAPIDLY
AND CHANGED SINCE THE MID-1980S
---------------------------------------------------------- Chapter 2:1
Between 1985 and 1994, the combined DI and SSI beneficiary population
increased 70 percent and the inflation-adjusted cost of cash benefits
grew 66 percent. Although the reasons for growth are not fully
understood, a number of factors are believed to have increased the
number of people who entered the programs and decreased the number
who were terminated. These factors include eligibility expansion;
program outreach; fewer continuing disability reviews; and
occurrences external to the programs, for example, a downturn in the
business cycle and demographic changes.
At the same time, the portion of the adult beneficiary population
with longer-lasting impairments has increased since the mid-1980s.
This trend has been driven especially by increases in the proportion
of beneficiaries with mental impairments. In 1994, more people
qualified for disability benefits because of mental retardation and
mental illness than any other impairment category. Compared with
beneficiaries with shorter-term impairments, a lower proportion of
beneficiaries with longer-term impairments are terminated from the
rolls each year because of death. The growing proportion of
beneficiaries with longer-lasting impairments means that the
beneficiary population, on average, is likely to spend more time on
the rolls before reaching age 65.
In addition, the beneficiary population has become, on average,
modestly but steadily younger since the mid-1980s. The proportion of
adult beneficiaries who are middle-aged has steadily increased as the
proportion who are older has declined. However, this trend reversed
slightly between 1992 and 1994. Coupled with the aging of the "baby
boom" cohort, this suggests that the age of the beneficiary
population may increase in the years ahead.
SIZE AND COSTS OF CASELOADS
ARE RISING
-------------------------------------------------------- Chapter 2:1.1
DI and SSI caseloads and expenditures increased dramatically between
1985 and 1994, and the pace of this growth accelerated in the early
1990s. As a result of this rapid growth, concern arose regarding the
adequacy of the DI Trust Fund. Responding to estimates that the DI
Trust Fund would be depleted in 1995, the Congress reallocated
payroll tax receipts in 1994 from the Social Security Old Age and
Survivors Trust Fund into the DI Trust Fund. SSA has estimated that
by the end of 2016 this measure will have transferred $499 billion
from the Old Age and Survivors Insurance Trust Fund into the DI Trust
Fund.
In 1985, 4.2 million blind and disabled persons under age 65 received
DI or SSI benefits: 2.3 million received DI benefits, 1.6 million
blind and disabled adults and children received SSI, and about
324,000 people received both DI and SSI benefits. By 1994, the
number of blind and disabled people under age 65 receiving DI or SSI
benefits reached 7.2 million. The DI beneficiary population
increased 41 percent, the SSI beneficiary population increased 105
percent, and the number of people receiving both DI and SSI increased
107 percent. (See table 2.1.) Moreover, 37 percent of the growth
between 1985 and 1994 in the overall size of the disability rolls
occurred between 1992 and 1994 (see fig. 2.1). Appendix IV presents
information on the entire 1985 to 1994 period.
Table 2.1
Increase in Number of Beneficiaries and
Cash Benefits, 1985-94
Beneficiary Percent
categories 1985 1994 increase
------------------ ---------- ---------- --------------
Number of beneficiaries (in thousands)
----------------------------------------------------------
DI\a 2,332 3,292 41
SSI adults\b (aged 1,333 2,362 77
18 to 64)
SSI children\b 227 841 270
(under age 18)
DI/SSI (dual 324 671 107
eligibility)
==========================================================
Total 4,216 7,166 70
Cash benefits (in billions, percent increase adjusted for
----------------------------------------------------------
DI\a $16.5 $33.7 49
SSI\c 6.6 18.9 109
==========================================================
Total $23.1 $52.6 66
----------------------------------------------------------
\a Includes only disabled workers aged 18 to 64.
\b Includes people with a federal SSI payment and/or federally
administered state supplementation.
\c Includes federal-only (not state supplementation) SSI payments to
SSI adults aged 18 to 64; SSI children under age 18; and people
dually eligible for SSI and DI payments who are disabled workers.
Also includes federal-only SSI payments to SSI beneficiaries aged 65
or older and people dually eligible for SSI and DI who are not
disabled workers.
Source: Annual Statistical Supplement to the Social Security
Bulletin, multiple years.
Figure 2.1: Growth in the DI
and SSI Programs, 1985-94
(See figure in printed
edition.)
Note: SSI beneficiaries include all people with a federal SSI
payment or a federally administered state supplementation. DI
beneficiaries include disabled workers aged 18 to 64.
Source: Annual Statistical Supplement to the Social Security
Bulletin, multiple years.
As the number of DI and SSI beneficiaries increased, so did the
amount paid in cash benefits. In 1985, SSA paid $17 billion in DI
cash benefits and $7 billion in SSI cash benefits. By 1994, cash
benefits reached $34 billion for DI and $19 billion for SSI.
Overall, the combined DI and SSI cash benefits increased from $23
billion to $53 billion in 10 years (adjusted for inflation, the
increase in the value of cash benefits was 66 percent). Moreover,
the cost of DI and SSI benefits nearly doubles when including the
cost of health care coverage. In 1994, the cost of providing
Medicare and Medicaid to beneficiaries was about $48 billion,\15
bringing the federal cost of cash benefits and health care coverage
for disabled beneficiaries in that year to about $101 billion.
--------------------
\15 The $48 billion includes $19.7 billion in Medicare disbursements
for 4.3 million disabled Medicare enrollees during 1994, according to
Health Care Financing Administration (HCFA) Office of the Actuary
estimates. Disabled enrollees include disabled workers who are DI
beneficiaries; disabled railroad retirement system annuitants; people
suffering from end-stage renal disease; and federal, state, and local
employees receiving Medicare benefits who are not DI beneficiaries.
Although HCFA told us they could not identify the specific amount of
this disbursement made on behalf of DI beneficiaries, according to
SSA, there were about 4 million DI beneficiaries (including 671,000
disabled workers dually eligible for DI and SSI benefits) in 1994, or
about 93 percent of disabled Medicare enrollees during that year.
The $48 billion figure also includes $28.4 billion in Medicaid vendor
payments, premiums, and other capitation payments made on behalf of
SSI blind and disabled beneficiaries in 1994, as estimated by the
HCFA Office of the Actuary.
MORE PEOPLE ENTERED THE
PROGRAMS AND FEWER LEFT
-------------------------------------------------------- Chapter 2:1.2
Although the reasons for growth and their relative effects are not
fully understood, multiple factors contributed to the increase in
program growth. The following factors affected program growth by
bringing more people into the programs and lowering the rate at which
some beneficiaries left the programs.
ELIGIBILITY EXPANSION
------------------------------------------------------ Chapter 2:1.2.1
The eligibility standards, especially for mental impairments (which
include mental retardation and mental illness), were expanded in the
mid- to late 1980s. Standards expanded largely because of the
effects of legislative, regulatory, and judicial action. For
example, additions were made to the listing of medical criteria used
by SSA to determine program eligibility, which gave greater weight to
evidence gathered from an applicant's own physician, and more
consideration was granted to pain and functional deficits in social
relations and in concentration.
PROGRAM OUTREACH
------------------------------------------------------ Chapter 2:1.2.2
The purpose of SSA's outreach efforts has been to reduce the barriers
that prevented or discouraged potentially eligible individuals from
applying for SSI benefits. SSA has conducted several outreach
efforts since program authorization in 1972. Around the late 1980s,
congressional and agency actions were taken to ensure that all
segments of the potential SSI population were made aware of their
potential eligibility. For instance, a permanent outreach program
for disabled and blind children was established by the Omnibus Budget
Reconciliation Act of 1989; SSA made SSI outreach an ongoing agency
priority in 1989; and, in 1990, the Congress mandated that SSA expand
the scope of its SSI outreach efforts. Since 1990, the Congress has
appropriated $33 million for SSA to complete a series of outreach
demonstration projects.
ECONOMIC FACTORS
------------------------------------------------------ Chapter 2:1.2.3
Economic factors play an important role in the decisions of people
with disabilities to seek disability benefits, particularly DI
benefits, according to an SSA-sponsored study on the demographic and
economic determinants of growth in SSA disability programs.\16
Factors that reduce the rewards of participating in the labor force
for people with disabilities, such as downturns in the business
cycle, make leaving the labor force and applying for benefits more
attractive to people with disabilities. However, while economic
downturns contribute to program growth, no evidence exists that there
has been a concomitant exit from the DI rolls when the economy has
improved.
--------------------
\16 D.C. Stapleton and others, "Demographic and Economic
Determinants of Recent Application and Award Growth for SSA's
Disability Programs," a paper presented at the Social Security
Administration's conference on Disability Programs: Explanations of
Recent Growth and Implications for Disability Policy (Washington,
D.C.: July 20-21, 1995).
STATE COST SHIFTING
------------------------------------------------------ Chapter 2:1.2.4
Many state and local governments actively encouraged and assisted
disabled recipients of state-funded general assistance (GA) to apply
for SSI benefits when GA was cut in these jurisdictions. These state
and local efforts to shift public assistance recipients with
disabilities onto the SSI rolls appeared to increase the number of
SSI (and, to a lesser extent, DI) applications and awards, according
to the SSA-sponsored study on growth in the disability programs.
LACK OF AFFORDABLE HEALTH
INSURANCE
------------------------------------------------------ Chapter 2:1.2.5
An increase in the number of people without affordable health
insurance may have affected the size of DI and SSI. The uninsured
population under age 65 in the United States grew by 5 million
persons between 1988 and 1992. Coupled with this growth, limitations
in employer-based health care coverage for chronic conditions may
have prompted some individuals to apply for DI or SSI for health care
protection.
DEMOGRAPHICS
------------------------------------------------------ Chapter 2:1.2.6
Demographic changes have played a role in program growth. For
example, the aging baby boom cohort born between 1946 and 1964 (which
increased the number of people in middle age during the late 1980s
and early 1990s), greater labor force participation among women
(which increased the number of women insured for disability
benefits), and declines in marriage rates (which may have limited the
income support provided by spouses of people with disabilities) have
been associated with increases in program applications and awards.
Also, the growing number of immigrants admitted annually for legal
residence in the United States may have contributed to SSI growth.
In 1993, 880,00 immigrants were admitted to the United States,
compared with 570,000 in 1985. In addition, nearly 3 million
formerly illegal immigrants attained legal residence status under the
Immigration Reform and Control Act of 1986. This increased immigrant
population is likely to have contributed to the rising portion of
disabled immigrants on SSI, which increased from less than 2 percent
of the SSI disabled population in 1982 to about 6 percent in 1993.
DI TERMINATION RATE
DECREASED; SSI RATE
REMAINED STABLE
------------------------------------------------------ Chapter 2:1.2.7
As more people were enrolled, the DI termination rate decreased and
the SSI termination rate remained stable, thereby resulting in a net
increase in DI and SSI program size. The DI termination rate
decreased from 13.1 percent in 1985 to 10.8 percent in 1992 (between
1970 and 1984, the DI termination rate fluctuated between 14 and 19
percent). The termination rate for each of the major reasons for
exiting DI--conversion to retirement benefits at age 65, death,
failure to meet medical criteria, and return to work--decreased
during this period (reaching age 65 and dying accounted for the vast
majority of instances of termination from 1985 to 1992). Between
1988 and 1993, the SSI termination rate for adults with disabilities
remained around 16 percent.
A factor contributing to the decrease in DI terminations due to
medical recovery (which was relatively low from 1985 to 1992) may
have been the reduction in the number of continuing disability
reviews (CDR) performed by SSA.\17 In the early 1990s, because of SSA
resource constraints and increasing initial claims workloads, the
number of DI CDRs declined dramatically. In 1995, the backlog of
CDRs for DI beneficiaries was about 1.5 million cases, with about
500,000 additional cases coming due each year.\18
--------------------
\17 The purpose of a CDR is to verify that an individual on the rolls
still has a disability that prevents that person from working. The
Social Security Independence Act (1994) 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. Conducting the appropriate number of CDRs has significant
implications for expenditures. For example, in 1994, SSA determined
that 17,000 DI beneficiaries were no longer eligible for benefits on
the basis of information gathered from CDRs. These results are
subject to appeal; SSA estimates that 65 percent of the
ineligibilities will be upheld and that terminations will save an
average of $90,000 in lifetime DI and Medicare benefits costs per
person. As a result, total savings from these CDRs could be almost
$1 billion.
\18 Social Security Disability: Management Action and Program
Redesign Needed to Address Long-Standing Problems (GAO/HEHS-95-233,
Aug. 3, 1995).
PROPORTION OF BENEFICIARIES
WITH LONGER-LASTING
IMPAIRMENTS GREW
-------------------------------------------------------- Chapter 2:1.3
SSA researchers have found that the types of impairments that qualify
people for benefits are associated with different lengths of
entitlement.\19 The researchers calculated average length of stay on
the disability rolls for DI and SSI cohorts who were awarded benefits
("awardees") from 1975 through 1993. For DI awardees, on average,
mental impairments (16 years); diseases of the nervous system (13
years); and musculoskeletal impairments (10 years) lead to the
longest entitlement periods. Between 1986 and 1994, the proportion
of DI beneficiaries with any one of these three impairment types
increased from 54 percent to 62 percent (see table 2.2). Most of
this growth occurred within the category of mental impairment, which
increased from 24 percent of the DI beneficiary population in 1986 to
31 percent in 1994. The trend toward a greater portion of
beneficiaries with longer-lasting impairments signifies lengthy stays
on the rolls for some.
Table 2.2
Percentage Distribution of DI
Beneficiaries With Diagnosis Available
by Selected Impairment Categories, 1986-
94
Mental Disease of
impairment nervous Musculoskeletal
Year \a system\b condition Total
------ ---------- ---------- ---------------- ========
1986 24.4 11.0 18.2 53.6
1987 26.1 11.0 18.2 55.3
1988 26.7 11.0 18.5 56.2
1989 27.7 10.9 18.9 57.5
1990 28.5 10.7 19.1 58.3
1991 29.2 10.6 19.4 59.2
1992 29.8 10.4 20.0 60.2
1993 30.6 10.2 20.5 61.3
1994 30.9 10.0 20.9 61.8
----------------------------------------------------------
\a Includes mental illness and mental retardation.
\b Includes diseases of the nervous system and sense organs.
Source: Annual Statistical Supplement to the Social Security
Bulletin, multiple years.
For SSI adult awardees, on average, mental impairments and diseases
of the nervous system also lead to the longest entitlement
periods.\20 \21 The proportion of adult SSI beneficiaries with either
of these impairment types increased from 60 percent in 1986 to 65
percent in 1994. In 1994, about 57 percent of adult SSI
beneficiaries had a mental impairment, up from 50 percent in 1986.
(See table 2.3.)
Table 2.3
Percentage Distribution of SSI Adult
Disabled Beneficiaries by Selected
Impairment Categories, 1986-94
Disease of
Mental nervous
Year impairment\b system\c Total
---------------- ------------ -------------- ==========
1986 49.7 10.4 60.1
1987 51.4 10.2 61.6
1988 52.2 10.0 62.3
1989 53.1 9.9 63.0
1990 53.7 9.5 63.2
1991 54.2 9.2 63.4
1992 54.7 8.7 63.5
1993 55.9 8.7 64.6
1994 56.7 8.5 65.2
----------------------------------------------------------
\a Includes people receiving federally administered payments;
excludes people transferred from prior state programs.
\b Includes psychiatric impairments and mental retardation.
\c Includes diseases of the nervous system and sense organs.
Source: Annual Statistical Supplement to the Social Security
Bulletin, multiple years.
--------------------
\19 K. Rupp and C.G. Scott, "Determinants of Duration on the
Disability Rolls and Program Trends," a paper presented at the Social
Security Administration's conference on Disability Programs:
Explanations of Recent Growth and Implications for Disability Policy
(Washington, D.C.: July 20-21, 1995). We exclude congenital disease
(14 years' average length of entitlement) because of this category's
low prevalence among the DI population (0.4 percent).
\20 Although musculoskeletal conditions lead to one of the longest
entitlement periods for DI, these conditions are associated, on
average, with moderate lengths of entitlement for the SSI population.
While congenital diseases lead, on average, to the longest
entitlement periods for SSI, we excluded this condition from our
analysis because of its low prevalence (2 percent) among the SSI
population under age 65.
\21 According to SSA researchers, the mean duration on the rolls for
SSI awardees with a psychiatric impairment is 20 years for adults
aged 18 to 34, 14 years for adults aged 35 to 49, and 6 years for
adults aged 50 to 61 years. The mean duration on the SSI rolls for
beneficiaries with mental retardation is 23 years for adults aged 18
to 34, 15 years for adults aged 35 to 49, and 7 years for adults aged
50 to 61 years.
PROPORTION OF MIDDLE-AGED
BENEFICIARIES GREW WHILE
PROPORTION OF OLDER
BENEFICIARIES DECLINED
-------------------------------------------------------- Chapter 2:1.4
Between 1986 and 1994, the proportion of adult beneficiaries who were
middle aged steadily increased as the proportion who were older than
middle aged declined. Although this trend signified that the
beneficiary population had become younger, it did not signify that
the population was young, as only 10 percent of the adult DI/SSI
disability rolls consisted of persons aged 18 to 29 in 1994.
Moreover, the proportion of older new awardees increased slightly in
recent years, suggesting that the beneficiary population will become
older in the years ahead if this trend persists.
Among the DI population, the proportion of beneficiaries aged 30 to
49 steadily increased from 30 percent in 1986 to 40 percent in 1994.
While the proportion of DI beneficiaries who were younger remained
around 4 percent during this time, the proportion of older DI
beneficiaries steadily decreased from 66 percent in 1986 to 56
percent in 1994. Likewise, within SSI, the proportion of
beneficiaries who were middle aged increased as the proportions of
beneficiaries who were older or younger decreased. The proportion of
SSI beneficiaries aged 30 to 49 increased from 36 percent in 1986 to
46 percent in 1994. During this time, the proportion of
beneficiaries who were older decreased from 40 percent to 35 percent,
and the proportion of beneficiaries who were younger decreased from
23 percent to 19 percent. (See table 2.4.)
Table 2.4
Percentage Distribution of Adult DI and
SSI Beneficiaries by Age Group, 1986-94
Year DI SSI\a,b DI SSI\b DI SSI\b
---------- ---- -------- ---- -------- ---- --------
1986 4.4 23.4 29.5 36.3 66.0 40.3
1987 4.3 23.1 31.4 37.7 64.3 39.2
1988 4.2 22.6 32.7 38.9 63.1 38.5
1989 4.1 21.9 34.2 40.2 61.6 37.9
1990 4.3 21.2 35.8 41.6 60.0 37.2
1991 4.4 20.2 37.2 43.1 58.4 36.8
1992 4.6 19.3 38.6 44.5 56.8 36.2
1993 4.6 19.8 39.2 45.0 56.2 35.3
1994 4.2 19.2 39.8 45.9 56.0 34.9
----------------------------------------------------------
\a Excludes blind and disabled children aged 18 to 21 as defined by
the program.
\b Includes all people receiving federally administered payments.
Source: Annual Statistical Supplement to the Social Security
Bulletin, multiple years.
The trend toward serving a greater proportion of beneficiaries who
were middle aged was also generally evident among new awardees.
While the proportion of DI awardees who were under 35 fluctuated
somewhere around 17 percent between 1986 and 1994, the proportion of
DI awardees who were middle aged steadily increased from 25 percent
to 31 percent; the proportion of DI awardees who were older than
middle aged steadily decreased, except in 1994, from 55 percent to 51
percent. Between 1993 and 1994, however, the proportion of DI
awardees who were between 50 and 64 increased nearly 3 percentage
points (an increasing proportion of DI awardees who are older may
continue into the future as the baby boom cohort turns 50 and older).
Likewise, the proportion of SSI middle-aged awardees increased
modestly between 1986 and 1992; between 1992 and 1993, the proportion
of middle-aged awardees decreased as the proportion of older awardees
and, to a lesser extent, younger awardees increased. Overall, the
proportions of younger, middle-aged, and older SSI awardees in 1993
were roughly equal. (See table 2.5.)
Table 2.5
Percentage Distribution of Adult DI and
SSI Awardees by Age Group, 1986-94
Year DI SSI DI SSI DI SSI
---------- ---- -------- ---- -------- ---- --------
1986 19.8 33.5 25.4 26.9 54.8 39.7
1987 17.9 31.4 26.5 28.0 55.6 40.6
1988 17.6 30.3 27.1 31.0 55.3 38.7
1989 16.6 30.3 28.0 30.7 55.4 39.0
1990 17.3 29.0 28.7 31.8 54.0 39.2
1991 17.4 29.1 30.2 33.2 52.4 37.7
1992 18.5 30.9 30.7 34.3 50.8 34.8
1993 17.5 31.9 31.7 32.1 50.8 36.0
1994 15.8 \a 30.5 \a 53.7 \a
----------------------------------------------------------
\a 1994 data not reported in source document.
Source: DI figures from SSA, Annual Statistical Supplement to the
Social Security Bulletin, multiple years; SSI figures from Rupp and
Scott, "Determinants of Duration on the Disability Rolls and Program
Trends."
BENEFICIARY POPULATION PRESENTS
RETURN-TO-WORK CHALLENGES
---------------------------------------------------------- Chapter 2:2
Developing effective return-to-work strategies for people with
disabilities presents challenges to policymakers. For example,
strategies need to recognize individual differences and abilities and
should have the flexibility and capacity to provide varying levels
and types of assistance. Some people may require a one-time medical
intervention, while others may need ongoing and changing levels of
medical support; some individuals may require remedial retraining,
and others may need education and job coaching.
Moreover, beneficiaries with limited work histories present
particular challenges in finding and maintaining employment.\22
In addition to needing to learn basic skills and work habits, some
beneficiaries, for example, may need to overcome social isolation and
low self-esteem in order to function at the workplace. Also, even
jobs that pay low wages may not be widely available for some
beneficiaries and may become more scarce in the future. Real wages
for the least skilled workers have declined since the late 1970s.
Current welfare reform proposals call for sending low-skilled people
into the labor market, so competition for low-wage jobs may
increase.\23 Also, the U.S. economy may be moving toward more
temporary or part-time work (which generally offers little if any
health care coverage and other benefits). While this trend would
match the needs of some beneficiaries who cannot or do not want to
work full-time, it would also make the road to economic
self-sufficiency more difficult and less attractive than public
support for others, particularly for those who earn low wages.
In addition, employment may be more easily disrupted for some people
with disabilities, thereby creating additional challenges to
developing successful return-to-work mechanisms. For instance,
people with visual impairments who work in office settings may
undergo more adjustment than other workers if an office converts from
a text- to a graphics-mode of communication. At a more basic level,
some people with disabilities may experience difficulty in getting to
work in the event of inclement weather or changes in public
transportation schedules. Moreover, the nature of some disabilities
may make it difficult for some workers to engage in full-time work
while other disabilities may stigmatize individuals and perhaps make
them appear less attractive to employers. Finally, a shift in the
U.S. economy from labor/manufacturing to skill/service-based jobs
may have had a negative impact on the job opportunities for some
people with mental impairments.
--------------------
\22 SSI beneficiaries do not need to have any work history to qualify
for benefits. 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. SSA found that 42 percent of applicants for SSI benefits
reportedly left their last job more than 12 months before applying
for benefits; 27 percent said they did not know when they left their
last job. See Associate Commissioner for Research and Statistics,
SSA, memo to Associate Commissioner for Disability regarding results
of the 1994 2-day field office survey of disability applicants (Mar.
22, 1994).
\23 Some similarities exist between the return to work of people on
disability rolls and employment of people on welfare rolls. For a
discussion of GAO's work on the latter, see JOBS and JTPA: Tracking
Spending, Outcomes, and Program Performance (GAO/HEHS-94-177, July
15, 1994) and Self-Sufficiency: Opportunities and Disincentives on
the Road to Economic Independence (GAO/HRD-93-23, Aug. 6, 1993).
ADVANCES INCREASE
RETURN-TO-WORK POTENTIAL
---------------------------------------------------------- Chapter 2:3
Although efforts to maximize the work potential of people currently
on the disability rolls face many challenges, numerous technological
and medical advances and economic changes have created more potential
for some people with disabilities to engage in work. Electronic
communications and assistive technologies--such as synthetic voice
systems, standing wheelchairs, and modified automobiles and
vans--have given greater independence and more work potential to some
people with disabilities. Advances in the management of
disability--like medication to control mental illness or
computer-aided prosthetic devices that return some functioning to the
impaired--have helped reduce the severity of some disabilities.
Also, the shift in the U.S. economy toward the service industry may
have opened new opportunities for some people with physical
impairments.
Moreover, over the last several decades, there has been a trend
toward greater inclusion of and participation by people with
disabilities in the mainstream of society. For instance, over the
past 2 decades people with disabilities have sought to remove
environmental barriers that impede them from fully participating in
their communities. Additionally, the ADA supports the full
participation of people with disabilities in society and fosters the
expectation that people with disabilities can work. The ADA
prohibits employers from discriminating against qualified individuals
with disabilities and requires employers--without undue hardship--to
make reasonable workplace accommodations.
CURRENT DI AND SSI PROGRAM
STRUCTURE IMPEDES RETURN TO WORK
============================================================ Chapter 3
The Social Security Act requires that the assessment of an
applicant's work incapacity be based on the presence of medically
determinable physical and mental impairments. The findings of the
studies we reviewed generally agree that difficult measurement and
conceptual issues complicate the use of medical conditions as the
basis for decisions on work incapacity. Indeed, making valid
decisions about who can work and who cannot is very difficult. While
decisions may be more clear cut in the case of people whose
impairments inherently and permanently prevent work, disability
determinations may be much more difficult concerning people who may
have a reasonable chance of work if they receive appropriate
assistance and support. Nonmedical factors may play a crucial role
in determining the extent to which people in this latter group can
engage in substantial gainful activity.
Compounding decision-making difficulties are program features that,
taken together, can undermine the incentive to attempt work. First,
the "either/or" focus of the disability determination process
encourages applicants to concentrate on their inabilities. Moreover,
people who have successfully established their disability to SSA
staff may have little reason or desire to attempt rehabilitation and
competitive work. Second, the benefit structure can provide
disincentives to low-wage workers. Third, work incentives, which few
beneficiaries take advantage of, are generally ineffective in
encouraging return to work. Finally, VR plays a limited role in the
disability programs because beneficiaries have poor and untimely
access to services, and the long-term gains for people who receive VR
services are generally lacking. As a result, the design and
implementation of DI and SSI undermine the ability of SSA to identify
and expand work capacities of beneficiaries and return them to
substantial gainful employment. Table 3.1 summarizes these program
weaknesses.
Table 3.1
Summary of DI and SSI Program Design and
Implementation Weaknesses
Program area Weakness
---------------------------- -----------------------------------------------------------
Disability determination "Either/or" decision gives incentive to promote inabilities
and minimize abilities.
Lengthy application process to prove one's disability can
erode motivation and ability to return to work.
Benefit structure Cash and medical benefits themselves can reduce motivation
to work and receptivity to VR and work incentives,
especially when low-wage jobs are the likely outcome.
People with disabilities may be more likely to have less
time available for work, further influencing a decision to
opt for benefits over work.
Work incentives "All-or-nothing" nature of DI cash benefits can make work
at low wages financially unattractive.
Risk of losing medical coverage when returning to work is
high for many beneficiaries.
Loss of other federal and state assistance is a risk for
some beneficiaries who return to work.
Few beneficiaries are aware that work incentives exist.
Work incentives are not well understood by beneficiaries
and program staff alike.
VR Access to VR services through DDS referrals is limited:
restrictive state policies severely limit categories of
people referred by DDSs; the referral process is not
monitored, reflecting its low priority and removing
incentive to spend time on referrals; VR counselors
perceive beneficiaries as less attractive VR candidates
than other people with disabilities, making them less
willing to accept beneficiaries as clients; and the
success-based reimbursement system is ineffective in
motivating VR agencies to accept beneficiaries as clients.
Applicants are generally uninformed about VR and
beneficiaries are not encouraged to seek VR, affording
little opportunity to opt for rehabilitation and
employment.
Studies have questioned the effectiveness of state VR
agency services, since long-term, gainful work is not
necessarily the focus of VR agency services.
Delayed VR intervention can cause a decline in
receptiveness to participate in rehabilitation and job
placement activities, as well as a decline in skills and
abilities.
The monopolistic state VR structure can contribute to lower
quality service at higher prices, and recent regulations
allowing alternative VR providers may not be effective in
expanding private sector VR participation.
-----------------------------------------------------------------------------------------
DETERMINING WHO CAN AND WHO
CANNOT WORK ON THE BASIS OF
MEDICAL CONDITION IS IMPRECISE
---------------------------------------------------------- Chapter 3:1
The Social Security Act defines disability as the inability to engage
in any SGA 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. A physical or mental
impairment is one that results from anatomical, physiological, or
psychological abnormalities that are demonstrable by medically
acceptable clinical and laboratory diagnostic techniques. The
statutory requirement for disability presumes that some medical
conditions are sufficient, in themselves, to prevent individuals from
engaging in substantial gainful employment. The presumed link
between inability to work and presence of a medical condition
establishes the basis for SSA's award of disability benefits.
SSA maintains a Listing of Impairments containing medical conditions
that are, according to SSA, ordinarily severe enough in themselves to
prevent an individual from engaging in any SGA. About 70 percent of
new awardees are eligible for disability because their impairments
meet or equal the listings.\24 Applicants whose impairments do not
meet or equal the medical listings are further evaluated on the basis
of nonmedical factors, including residual functional capacity (RFC),
age, education, and vocational skills.\25
--------------------
\24 An impairment or combination of impairments is said to "equal the
listings" if the medical findings for the impairment are at least
equivalent in severity and duration to the listed findings of a
listed impairment.
\25 SSA reports that "some, but not all, of the Listings consider
functional consequences of an impairment; however, functional
considerations vary significantly among the Listings. Additionally,
in assessing an individual's functional abilities at the later steps
in the sequential evaluation, adjudicators collect and analyze
evidence from a multitude of different, and often conflicting,
sources including: objective clinical and laboratory findings;
treating source opinions and other third-party statements considered
to be consistent with the objective evidence; and the individual's
descriptions of his or her limitations." See HHS, Plan for a New
Disability Claim Process (Washington, D.C.: HHS, SSA, Sept. 1994,
p. 11).
WEAK SCIENTIFIC BASIS MAKES
DISABILITY DETERMINATIONS
INHERENTLY DIFFICULT
-------------------------------------------------------- Chapter 3:1.1
Relevant studies indicate that the scientific link between work
incapacity and medical condition is a weak one. While it is
reasonable to expect that some medical impairments can completely
prevent individuals from engaging in any minimal work activity (for
example, people 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 SGA (for example, people 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.
Concerns about the relationship between medical status and work
incapacity were raised before the DI program was implemented. In
deliberations leading up to the establishment of the DI program, the
1948 Advisory Council on Social Security recommended that compensable
disabilities be restricted to those that can be "objectively
determined by medical examination or tests." However, physicians
testified before the Congress that disability determination is
inherently subjective and they could not provide the kind of
objective determination that policymakers desired. According to this
view, physicians can attest to the existence of medical impairments
but they cannot quantify inability to work, and they cannot certify
that the impairments render a person unable to work.
Since then, experts have contended that the scientific community
lacks the empirical data and quantitative models to reliably predict
the work capacity of people with disabilities. The 1988 Disability
Advisory Council to the Department of Health and Human Services
(HHS), citing testimony by medical experts, researchers,
rehabilitation providers, advocacy groups and beneficiaries,
concluded that
"information about a claimant's medical condition and vocational
background cannot conclusively demonstrate that he or she cannot
work. Except in the case of very severe disabilities and
relatively minor disabilities, the current state of knowledge
and technology does not enable the quantification of
disabilities or the definition of categories of disability which
reliably correlate an impairment with a particular individual's
capacity to work."\26
--------------------
\26 HHS, Report of the Disability Advisory Council (Washington, D.C.:
HHS, SSA, Mar. 11, 1988).
STUDIES SHOW DIFFICULTIES IN
ACCURATELY DETERMINING WHO
CAN AND WHO CANNOT WORK
-------------------------------------------------------- Chapter 3:1.2
Studies we reviewed show that sorting people into two mutually
exclusive categories--either not having the ability to engage in SGA
or having the capacity to do so--can lead to questionable decisions.
Many people with disabilities may have some capacity to work,
especially if given appropriate treatment and support, and these
cases are likely to be the ones that result in different decisions by
different decisionmakers. Using medical criteria as the basis for
these decisions attempts to impose precision on an imprecise process.
Decision-making as implemented under current law involves significant
judgment, which may result in some applicants' receiving benefits
while others with similar limitations in their capacities are denied
benefits. Such a disparity illustrates the inherent subjectivity of
making disability determinations; it does not imply that DDSs could
make more accurate decisions under current decision-making
procedures.
Two of the studies we reviewed compared disability decisions made by
DDS/SSA with nonbinding decisions on the same cases made by
independent decisionmakers. In one study, a team of vocational and
health care professionals reached decisions opposite from those
reached by DDS/SSA in 30 percent of cases: DDS/SSA approved 37
percent of the cases denied by the teams and denied 27 percent of the
cases approved by the teams.\27 The other study found that a team of
mental health workers could not agree on a disability decision in 47
percent of DI/SSI cases involving people with mental impairments.
Among the cases allowed by the team, 88 percent were also allowed by
the DDS; but of the cases denied by the team, 55 percent were allowed
by the DDS (overall, the team reached conclusions opposite from those
of the DDS in about one out of every four cases).\28
The findings of one other study and a survey we conducted suggest
that disability decisions are not accurate predictors of work
capacity. The study found that, among a sample of people who had
physical impairments that met or equaled the listings but who were
not enrolled in DI or SSI, about 61 percent of men and 32 percent of
women were employed 2 years after being diagnosed with their physical
impairment.\29 The survey we conducted showed that about 58 percent
of DI applicants who were denied benefits in 1984 and who were not
receiving DI benefits as of 1987 reported that they were not working
(over two-thirds of these nonworking applicants had been out of the
workforce for at least 3 years).\30
Moreover, the self-reported functional and health status of the
nonworking denied group was nearly indistinguishable from the status
of a sample of DI beneficiaries accepted into the program in 1984.
Appendix V contains more details on the studies cited.
--------------------
\27 S.Z. Nagi, Disability and Rehabilitation: Legal, Clinical, and
Self-Concepts and Measurement (Columbus: Ohio State University
Press, 1969).
\28 S.O. Okpaku and others, "Disability Determinations for Adults
with Mental Disorders: Social Security Administration vs.
Independent Judgments," American Journal of Public Health, Vol. 84,
No. 11 (Nov. 1994), pp. 1791-95.
\29 H.P. Brehm and T.V. Rush, "Disability Analysis of Longitudinal
Health Data: Policy Implications for Social Security Disability
Insurance," Journal of Aging Studies, Vol. 2, No. 4 (1988), pp.
379-99. Employment figures exclude the 27 percent of adults who died
during the 2-year period.
\30 Social Security Disability: Denied Applicants' Health and
Financial Status Compared With Beneficiaries' (GAO/HRD-90-2, Nov. 6,
1989).
DISABILITY DETERMINATION
PROCESS ENCOURAGES WORK
INCAPACITY
---------------------------------------------------------- Chapter 3:2
Two aspects of the disability determination process--the disability
decision itself and the application process--may promote inability to
work. Eligibility for disability benefits is an "either/or"
decision. The Social Security Act characterizes individuals as
either unable to engage in any substantial gainful employment or
having the capacity to work. Because the decision is a
dichotomy--the result is either full award of benefits or denial of
benefits--applicants have a strong incentive to promote their
limitations in order to establish their inability to work and thus
qualify for benefits. Conversely, applicants have a disincentive to
demonstrate any capacity to work at all.
Moreover, the process of applying for disability benefits has been
characterized in the literature we reviewed as long, cumbersome, and
possibly debilitating in itself because of the certification and
labeling of the individual as disabled. The length of the
determination process ranges from a minimum of several months to 18
months or longer for individuals who are initially denied benefits
and appeal. During this time, an applicant meets with his or her
physician, SSA staff, and others in an attempt to establish
disability. Some individuals completing the process may become
entrenched in their perceived inability to work, which can possibly
lead to a gradual decrease in actual work ability.
SSA survey results indicate that nearly one-half of DI and SSI
applicants with a work history reported being out of the workforce
for more than 6 months in the period immediately preceding
application for benefits.\31 Consequently, their skills and work
habits may have declined prior to application. And, since these
individuals are unlikely to participate in any substantial gainful
employment during the application process, the erosion of skills may
be exacerbated, further contributing to a decline in their motivation
or ability to work.
Applicants who successfully meet the programs' definition of disabled
may be poor candidates for attempting a return to work. They have
been through a lengthy process that required them to prove an
inability to work. They have provided information about their
disabilities before program officials and the health care community,
and family and friends may have helped to demonstrate their work
incapacity. Moreover, being out of the workforce may have degraded
their marketability. The literature suggests that these factors can
reduce receptivity to VR and work incentives as well as the
motivation to develop or regain the ability to engage in gainful
employment. The degree to which this may occur, however, will vary
among beneficiaries. A small portion of people do, in fact, leave
the rolls by returning to work.
--------------------
\31 Memo from SSA's Associate Commissioner for Research and
Statistics to the Associate Commissioner for Disability, March 22,
1994.
BENEFIT STRUCTURE PROVIDES
DISINCENTIVE TO LOW-WAGE WORK
---------------------------------------------------------- Chapter 3:3
Cash and medical benefits themselves are another factor that can
reduce beneficiaries' motivation to work and receptivity to work
incentives and VR. The average monthly benefit value in 1994 for DI
and SSI beneficiaries was about $1,050 and $930, respectively.\32 As
part of their consideration of whether to undergo rehabilitation,
attempt work, or both, beneficiaries may weigh the financial gains of
working against the value of their monthly cash and medical benefits.
On the one hand, rehabilitation and work require significant time
commitment and the chance of success is unknown; on the other hand,
program benefits are secure and free individuals from having to
devote time to secure economic stability. Some people may opt to
live at a lower income level rather than at a marginally higher
income level if the latter requires a major commitment of time and
energy.
Some people with disabilities commit significant amounts of time to
performing daily activities (bathing, dressing, and eating),
self-managing their impairments or receiving medical treatment, or
meeting their transportation needs. The time required to perform
these and other activities can reduce the time available for work and
influence an individual's decision to opt for benefits over work.\33
People who have less time available for full-time work may see some
value in part-time work. However, if part-time work pays less than
the value of lost benefits, then a person would actually be
financially better off to receive benefits rather than to work.
--------------------
\32 Average monthly medical benefit values are based on estimates
from HCFA, Office of the Actuary.
\33 W.Y. Oi, "Disability and a Workfare-Welfare Dilemma," in C.L.
Weaver, ed., Disability and Work: Incentives, Rights, and
Opportunities (Washington, D.C.: American Enterprise Institute for
Public Policy Research, 1991), pp. 31-45.
WORK INCENTIVES INEFFECTIVE IN
MOTIVATING PEOPLE TO WORK
---------------------------------------------------------- Chapter 3:4
From our fieldwork and analysis of several studies, we identified
weaknesses in the design and implementation of work incentive
provisions. While some provisions effectively reduce the risk of
returning to work, others do little to remove work disincentives.
Studies conducted by SSA researchers and others have questioned the
effectiveness of the work incentive provisions and have cited many of
the same design and implementation problems raised during our
discussions with disability advocates and program and rehabilitation
officials.
DI AND SSI WORK INCENTIVES
PROVIDE DIFFERENT BENEFIT
PROTECTIONS
-------------------------------------------------------- Chapter 3:4.1
The DI and SSI programs offer a number of work incentives to
encourage beneficiaries to return to work. For both populations,
work incentive provisions safeguard cash and medical benefits and
retain beneficiaries' program eligibility during work attempts.
However, work incentive provisions differ significantly between the
two programs, providing differing levels of benefit protection for DI
and SSI beneficiaries. One significant difference between the two
programs is that a DI beneficiary's cash benefit stops completely
after the trial work period (if it is determined that work is at the
SGA level), while an SSI recipient's cash benefit is gradually
reduced to ease the transition back to work. Another difference is
that a DI beneficiary can purchase Medicare coverage as an
ex-beneficiary, although it is expensive for lower-wage earners to do
so, but an SSI recipient may lose Medicaid coverage once he or she
exceeds a certain income level.\34
A number of work incentive provisions exist within each program, and,
depending upon an individual's particular situation, certain
provisions may be more useful than others. If, for example, a DI
beneficiary engages in work and earns more than $500 a month but
needs a wheelchair and special transportation in order to work, the
beneficiary may use the Impairment-Related Work Expenses (IRWE)
provision to maintain eligibility while working. This provision
allows a DI or SSI beneficiary to deduct work expenses that are
related to the impairment from gross earnings, which are used to
determine continuing eligibility. Without this provision, someone
with high disability-related work expenses could be financially
harmed by returning to work. On the other hand, a beneficiary such
as a construction worker who became eligible due to blindness may
need to acquire new skills in order to return to work. The Plan for
Achieving Self-Support (PASS) provision allows DI beneficiaries to
become eligible for SSI, or SSI beneficiaries to increase the amount
of their monthly cash benefits, by excluding from the SSI eligibility
and benefit calculations income or resources set aside to pursue a
work goal.\35 Table 3.2 highlights each program's work incentive
provisions.
Table 3.2
Highlights of DI and SSI Work Incentive
Provisions
Program Provision
---------------------------- -----------------------------------------------------------
Income safeguards
-----------------------------------------------------------------------------------------
DI Trial work period: Allows beneficiaries to work for 9
months (not necessarily consecutively) within a 60-month
rolling period during which they may earn any amount
without affecting benefits. After the trial work period,
cash benefits continue for 3 months, then stop if countable
earnings are greater than $500 a month.
Extended period of eligibility: Allows for a consecutive
36-month period after the trial work period in which cash
benefits are reinstated for any month countable earnings
are $500 or less. This period begins the month following
the end of the trial work period.
SSI Earned income exclusion: Allows recipients to exclude more
than half of earned income when determining the SSI payment
amount.
Section 1619 (a): Allows recipients to continue to receive
SSI cash payments even when earnings exceed $500 a month.
However, as earnings increase the payment decreases.
Plan for Achieving Self-Support (PASS): Allows recipients
to exclude from their SSI eligibility and benefit
calculation any income or resources used to achieve a work
goal.
DI and SSI Impairment-related work expenses: Allows the costs of
certain impairment-related items and services needed to
work to be deducted from gross earnings in figuring SGA and
cash payment amount. For example, attendant care services
received in the work setting are deductible while nonwork-
related attendant care services performed at home are not.
Subsidies: Allows the value of the support a person
receives on the job to be deducted from earnings to
determine SGA. An example of such support is the value of
supervision provided to a worker with a disability that is
in addition to that provided to other workers receiving the
same pay.
Medical coverage safeguards
-----------------------------------------------------------------------------------------
DI Continued Medicare coverage: Allows for continued Medicare
coverage for at least 39 months following a trial work
period as long as one continues to be medically disabled.
Medicare buy-in: Allows beneficiaries to purchase Medicare
coverage after the 39-month premium-free coverage ends.
Beneficiaries pay the same monthly cost as uninsured
retired beneficiaries pay.
SSI Section 1619 (b): Allows recipients to continue receiving
Medicaid coverage when earnings become too high to allow a
cash benefit. Coverage continues until earnings reach a
threshold amount, which varies in every state. For example,
the threshold amount in 1994 was $17,480 in Pennsylvania
and $22,268 in California.
Eligibility safeguards
DI Reentitlement to cash benefits and Medicare: After a period
of disability ends, allows beneficiaries who become
disabled again within 5 years (7 years for widow(ers) and
disabled adult children) to be reentitled to cash and
medical benefits without another 5-month waiting period.
SSI Property essential to self-support: Allows recipients to
exclude from consideration in determining SSI eligibility
the value of property that is used in a trade or business
or for work. Examples include the value of tools or
equipment.
DI and SSI Continued benefit while in an approved vocational
rehabilitation program: Allows a person actively
participating in a vocational rehabilitation program to
remain eligible for cash and medical benefits even if he or
she medically improves and is no longer considered disabled
by SSA.
-----------------------------------------------------------------------------------------
--------------------
\34 The earned income threshold is the first item considered in
determining whether eligibility for Medicaid should continue. If an
individual's earnings exceed the threshold level, SSA performs an
individualized calculation to determine if the earnings are
sufficient to replace SSI, Medicaid, and publicly funded attendant
care that would otherwise be lost due to earnings. Also, the
individual must continue to meet all other SSI disability and
nondisability requirements to continue Medicaid coverage.
\35 PASS Program: SSA Work Incentive for Disabled Beneficiaries
Poorly Managed (GAO/HEHS-96-51, Feb. 28, 1996).
WORK INCENTIVES' DESIGN
WEAKNESSES DIMINISH THEIR
EFFECTIVENESS
-------------------------------------------------------- Chapter 3:4.2
Despite the ways in which work incentive provisions can provide some
financial protection for those who want to return to work, work
incentive provisions do not appear to be appropriately designed to
motivate beneficiaries to work. In fact, from an SSA survey of DI
beneficiaries, it was found that only about 2 percent said that their
decision to attempt work was influenced by the work incentive
provisions.\36 Our review, as well as other studies, identified a
number of design weaknesses that diminish the work incentives'
intended benefit safeguards.
--------------------
\36 J.C. Hennessey and L.S. Muller, "Work Efforts of
Disabled-Worker Beneficiaries: Preliminary Findings From the New
Beneficiary Followup Survey," Social Security Bulletin, Vol. 57, No.
3 (fall 1994), pp. 42-51. These findings should be interpreted with
caution, since SSA gathered retrospective data on event histories
over a 10-year period.
"ALL-OR-NOTHING" NATURE
OF CASH BENEFITS FOR DI
BENEFICIARIES MAKES WORK
FINANCIALLY UNATTRACTIVE
------------------------------------------------------ Chapter 3:4.2.1
Research conducted by SSA researchers and others suggests that DI
work incentive provisions are actually disincentives. DI work
incentives provide for a trial work period in which a beneficiary may
earn any amount for 9 months (which need not be consecutive) within a
60-month period and still receive full cash and medical benefits. At
the end of the trial work period, if a beneficiary's countable
earnings are more than $500 a month, cash benefits continue for an
additional 3-month grace period and then stop. For 36 months after
the trial work period ends, referred to as the extended period of
eligibility, cash benefits will be reinstated for any month in which
the person does not earn more than $500 a month in countable income.
After the completion of the trial work period, a beneficiary's
countable earnings in excess of $500 a month cause a precipitous drop
in monthly income--from full benefits to no cash benefit. SSA
researchers have noted that such a drop in income is a considerable
disincentive to finishing the trial work period as well as to
beginning work.\37
Cash and medical benefits continue indefinitely for a DI beneficiary
as long as the beneficiary does not earn more than $500 a month in
countable income or does not medically recover. Especially for
beneficiaries with low earnings, it may be more financially
advantageous to quit work, or work part time, and continue to receive
disability payments than to earn more than $500 a month in countable
income. As illustrated in table 3.3, some beneficiaries would be
making a rational economic decision to limit work in order to
continue receiving benefits.
Table 3.3
The Impact of Benefit Cessation for Some
DI Beneficiaries
Total
Cash monthly
Earnings benefit income
---------------------------- -------- -------- --------
Beneficiary earning no more $500 $660 $1,160
than $500 a month
Beneficiary earning more 501 0 501
than $500 a month
----------------------------------------------------------
Table 3.3 presents a simplified scenario illustrating the financial
disincentive to work for some DI beneficiaries. If a beneficiary
works and earns $500 a month in countable income and continues to
receive the average DI cash benefit, his or her total monthly income
would be $1,160. At minimum wage ($4.25 an hour), the beneficiary
would need to work 27 hours a week to earn $500. But, if that same
beneficiary earned $1 more, so that earnings were greater than $500 a
month, cash benefits would stop, and the $1 additional earnings would
cost the beneficiary $659 in monthly income. To maintain a monthly
income of $1,160, the beneficiary would have to work 63 hours each
week in a minimum-wage-paying job.
A review of the effectiveness of DI work incentive provisions
performed by the Office of Inspector General (OIG) at HHS found that
some beneficiaries who had completed a trial work period subsequently
reduced their earnings so they could continue to receive the full
cash benefit amount, causing their total monthly income (wages plus
cash benefit) to be higher than it would have been from earnings
alone.\38 The OIG observed that these beneficiaries were making
"financially correct decisions," a conclusion that table 3.3
supports. Of 63 cases reviewed, 9 beneficiaries--or 14 percent--had
reduced their earnings in order to continue to receive cash benefits.
Although it is uncertain whether this behavior is widespread, data
from a study of beneficiary participation in DI work incentive
provisions indicate that only 6 percent of the beneficiaries
successfully completed a trial work period, and more than half of
those never left the program.\39
--------------------
\37 J.C. Hennessey and L.S. Muller, "The Effect of Vocational
Rehabilitation and Work Incentives on Helping the Disabled-Worker
Beneficiary Back to Work," Social Security Bulletin, Vol. 58, No. 1
(spring 1995), pp. 15-28. These findings should be interpreted with
caution, since SSA gathered retrospective data on event histories
over a 10-year period.
\38 HHS, Audit of the Effectiveness of Title II Disability Work
Incentives, A-13-92-00223 (Washington, D.C.: HHS, OIG, Feb. 1993).
\39 L.S. Muller, "Disability Beneficiaries Who Work and Their
Experience Under Program Work Incentives," Social Security Bulletin,
Vol. 55, No. 2 (summer 1992), pp. 2-19.
BENEFICIARIES FEAR LOSING
MEDICAL COVERAGE
------------------------------------------------------ Chapter 3:4.2.2
In addition to losing cash benefits, beneficiaries who work and
continue to earn countable income above certain amounts will
eventually lose medical coverage even though they have not
necessarily medically improved or obtained affordable coverage
elsewhere. Disability advocates and VR counselors that we spoke with
believe that the fear of losing medical coverage is one of the most
significant barriers to the participation of SSI and DI beneficiaries
in a VR program, their return to work, or both.
DI work incentive provisions provide up to 4 years of premium-free
Medicare coverage when a person who continues to be medically
disabled goes to work and earns more than $500 a month in countable
income. When premium-free coverage ends, these individuals may
purchase Medicare coverage at the same monthly premium paid by
uninsured retired beneficiaries. However, the monthly
premium--exceeding $300 for full coverage in 1996--may be a hardship
for some beneficiaries, especially individuals with low earnings. In
a study of DI beneficiary work attempts, SSA researchers noted that
"the eventual loss of Medicare coverage which, for some
beneficiaries, is worth as much as cash benefits, adds to a feeling
of future financial insecurity and discourages work."\40
SSI beneficiaries who lose medical coverage because they exceed the
earnings limit do not have the option of purchasing Medicaid. In
most states, section 1619 work incentives allow beneficiaries to keep
Medicaid coverage even when earnings exceed $500 a month. SSI
beneficiaries may keep their Medicaid coverage until earnings
increase to a point--referred to as the threshold amount--that SSA
considers high enough to replace SSI cash and Medicaid benefits.\41
Beneficiaries who lose Medicaid could be uninsurable or face
prohibitively high premiums. It may matter little how much a
beneficiary can earn by returning to work if he or she cannot buy
health insurance because of a disabling condition. Even if a
beneficiary is able to obtain health insurance, he or she may still
be subject to a waiting period and exclusion for preexisting
conditions.
Other studies have also identified the risk of losing medical
coverage as a major barrier to beneficiaries' returning to work. For
example, the fear of losing Medicaid and Medicare was identified as
perhaps the single greatest barrier to employment by the President's
Committee on Employment of People With Disabilities. Its study
reportedly included the views of more than 1,200 leaders of every
major disability constituency in every state.\42 In a recent OIG/HHS
survey of disability program applicants, 75 percent of the DI
applicants and 79 percent of the SSI applicants rated continued
medical coverage as very important to encouraging work.\43
--------------------
\40 Hennessey and Muller, "The Effect of Vocational Rehabilitation
and Work Incentives on Helping the Disabled-Worker Beneficiary Back
to Work."
\41 The threshold amount is based on the amount of earnings that
would cause cash payments to stop in the person's state of residence
and the annual per capita Medicaid expenditure for that state. As
discussed earlier, the earned income threshold is followed by an
individualized assessment to determine whether eligibility for
Medicaid should continue.
\42 President's Committee on Employment of People With Disabilities
1993 teleconference project report, Operation People First: Toward a
National Disability Policy, (Washington, D.C.: President's Committee
on Employment of People With Disabilities, Mar. 28, 1994).
\43 HHS, Disability Applicants' Responses to Vocational
Rehabilitation Issues: A Mail Survey (draft report) OEI-07-90-00830
(HHS, OIG, Mar. 1995). The OIG selected a random sample of 600
applicants whose claims had been adjudicated. SSA awarded benefits
to half the applicants and denied benefits to the other half.
BENEFICIARIES WHO RETURN
TO WORK RISK LOSING OTHER
FEDERAL AND STATE
ASSISTANCE
------------------------------------------------------ Chapter 3:4.2.3
Beneficiaries with low income may be receiving benefits from other
programs--for example, food stamps, housing assistance, and energy
assistance. SSI and DI work incentives do not protect beneficiaries
from losing benefits from other programs. During our visits with
disability advocates and rehabilitation counselors, we were told of
instances in which beneficiaries had little option other than to quit
work because they could not afford to lose their housing assistance.
Thus, beneficiaries faced with losing their medical benefits and
benefits from other programs if they return to work have an incentive
to forgo work in order to continue receiving cash, medical, and other
types of assistance.
WORK INCENTIVES ARE POORLY
IMPLEMENTED
-------------------------------------------------------- Chapter 3:4.3
Implementation problems further limit the effectiveness of work
incentive provisions in two ways. First, beneficiaries are generally
unaware of the work incentive provisions. Second, if beneficiaries
are aware of the provisions, they generally do not understand their
complexities.