Social Security: Disability Programs Lag in Promoting Return to Work
(Letter Report, 03/17/97, GAO/HEHS-97-46).
GAO updated information in previous reports regarding the Social
Security Administration's (SSA) return-to-work program for Disability
Insurance (DI) and Supplemental Security Income (SSI) beneficiaries.
Although GAO did not independently verify the data used in the analysis
of this report, the data cited came from either U.S. government data
systems or issue area experts.
GAO noted that: (1) design and implementation weaknesses in the DI and
SSI programs hinder maximizing beneficiary work potential; (2) the
application process places a heavy emphasis on work incapacity and
presumes that many medical impairments preclude employment; (3) SSA does
little to provide the support and assistance that many people with
disabilities need to work; (4) these and other program weaknesses yield
poor return-to-work outcomes and mean that DI and SSI have not kept pace
with societal trends toward the economic self-sufficiency of people with
disabilities; (5) lessons learned from return-to-work strategies and
practices now used in the U.S. private sector and in other countries may
hold potential for improving federal disability programs by helping
people with disabilities return to productive activity and at the same
time reduce cash benefits; (6) SSA serves a population with a wide range
of disabilities that often may be more severe than the disabilities of
the average person served by U.S. private sector programs; (7) SSA may
face greater difficulty in returning some of its clients to the
workplace; (8) the experiences of the social insurance programs of
Germany and Sweden show that return-to-work strategies are applicable to
government-scale programs serving a broad and diverse population with a
wide range of work histories, job skills, and impairment types; (9)
GAO's analysis of practices advocated and implemented by the U.S.
private sector and by social insurance programs in Germany and Sweden
revealed three common strategies in the design of their return-to-work
programs: (a) intervene as soon as possible after an actual or
potentially disabling event to promote and facilitate return to work;
(b) identify and provide necessary return-to-work assistance and manage
cases to achieve return-to-work goals; and (c) structure cash and health
benefits to encourage people with disabilities to return to work; (10)
disability managers emphasize that these return-to-work strategies are
interrelated and work most effectively when integrated into a
comprehensive return-to-work program; (11) although SSA faces
constraints in applying these strategies, opportunities for better
identifying and providing assistance to enable more of SSA's clients to
engage in work could be created; (12) if an additional 1 percent of the
6.6 million working-age SSI and DI beneficiaries were to leave SSA's di*
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-97-46
TITLE: Social Security: Disability Programs Lag in Promoting
Return to Work
DATE: 03/17/97
SUBJECT: Disability benefits
Income maintenance programs
Persons with disabilities
Vocational rehabilitation
Rehabilitation programs
Foreign governments
Disability insurance
Federal social security programs
Social security benefits
IDENTIFIER: Social Security Disability Insurance Program
Social Security Disability Insurance Trust Fund
Supplemental Security Income Program
Germany
Sweden
Medicare Program
Old Age and Survivors Insurance Trust Fund
Medicaid Program
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Cover
================================================================ COVER
Report to Congressional Committees
March 1997
SOCIAL SECURITY - DISABILITY
PROGRAMS LAG IN PROMOTING RETURN
TO WORK
GAO/HEHS-97-46
Promoting Return to Work
(106520)
Abbreviations
=============================================================== ABBREV
ADA - Americans With Disabilities Act
CDR - continuing disability review
DDS - Disability Determination Service
DI - Disability Insurance
HHS - Department of Health and Human Services
SSA - Social Security Administration
SSI - Supplemental Security Income
VR - vocational rehabilitation
Letter
=============================================================== LETTER
B-275774
March 17, 1997
The Honorable William V. Roth, Jr.
Chairman
The Honorable Daniel Patrick Moynihan
Ranking Minority Member
Committee on Finance
United States Senate
The Honorable Bill Archer
Chairman
The Honorable Charles B. Rangel
Ranking Minority Member
Committee on Ways and Means
House of Representatives
Each week the Social Security Administration (SSA) pays over $1
billion in cash benefits to people with disabilities who are
beneficiaries of Disability Insurance (DI) and Supplemental Security
Income (SSI). The size of the working-age beneficiary population has
grown rapidly over the past decade, increasing by 65 percent.
However, not more than 1 in 500 DI beneficiaries, and few SSI
beneficiaries, have left the rolls to return to work. Therefore,
although they may provide a measure of income security, DI and SSI do
little to enhance work capacities and promote economic independence.
Yet societal attitudes, as reflected in the Americans With
Disabilities Act (ADA), have shifted toward goals of economic
self-sufficiency and the right of people with disabilities to full
participation in society. Moreover, medical advances and new
technologies provide more opportunities than ever for people with
disabilities to work. Although at one time the common business
practice was to encourage someone with a disability to leave the
workforce, today a growing number of private companies have been
focusing on enabling people with disabilities to return to work.
In testimony before the Senate Special Committee on Aging on June 5,
1996, and in two reports to the committee issued in April and July
1996,\1 we discussed why so few DI and SSI adult beneficiaries with
disabilities return to work\2 and how strategies from other
disability systems could help restructure DI and SSI to improve
return-to-work outcomes. This report updates the information in
those previous reports that was based on surveys of private sector
leaders in developing return-to-work programs; interviews with
federal and state agency officials, experts, and advocates and
officials in Germany and Sweden; analysis of SSA's administrative
data; and focus groups with beneficiaries.\3 Although we did not
independently verify the data used in the analysis of this report,
the data cited came from either U.S. government data systems or
issue area experts. Except for this, our work was performed in
accordance with generally accepted government auditing standards in
November and December 1996.
--------------------
\1 Social Security: Disability Programs Lag in Promoting Return to
Work (GAO/T-HEHS-96-147, June 5, 1996); SSA Disability: Program
Redesign Necessary to Encourage Return to Work (GAO/HEHS-96-62, Apr.
24, 1996); and SSA Disability: Return-to-Work Strategies From Other
Systems May Improve Federal Programs (GAO/HEHS-96-133, July 11,
1996).
\2 By return to work, we refer to both the reentry into the labor
force of people with work experience and the initial entry of people
with no work history.
\3 See GAO/HEHS-96-62 and GAO/HEHS-96-133 for a more detailed
discussion of the scope and methodology of these analyses.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Design and implementation weaknesses in the DI and SSI programs
hinder maximizing beneficiary work potential. The application
process places a heavy emphasis on work incapacity and presumes that
many medical impairments preclude employment. And SSA does little to
provide the support and assistance that many people with disabilities
need to work. Not surprisingly, these and other program weaknesses
yield poor return-to-work outcomes and mean that DI and SSI have not
kept pace with societal trends toward the economic self-sufficiency
of people with disabilities.
Lessons learned from return-to-work strategies and practices now used
in the U.S. private sector and in other countries may hold potential
for improving federal disability programs by helping people with
disabilities return to productive activity and at the same time
reduce cash benefits. SSA serves a population with a wide range of
disabilities that often may be more severe than the disabilities of
the average person served by U.S. private sector programs.
Therefore, SSA may face greater difficulty in returning some of its
clients to the workplace. The experiences of the social insurance
programs of Germany and Sweden, however, show that return-to-work
strategies are applicable to government-scale programs serving a
broad and diverse population with a wide range of work histories, job
skills, and impairment types.
Our analysis of practices advocated and implemented by the private
sector in the United States and by social insurance programs in
Germany and Sweden revealed three common strategies in the design of
their return-to-work programs:
-- Intervene as soon as possible after an actual or potentially
disabling event to promote and facilitate return to work.
-- Identify and provide necessary return-to-work assistance and
manage cases to achieve return-to-work goals.
-- Structure cash and health benefits to encourage people with
disabilities to return to work.
Disability managers emphasize that these return-to-work strategies
are interrelated and work most effectively when integrated into a
comprehensive return-to-work program. They spend money on
return-to-work efforts because they believe these efforts are sound
investments that reduce disability-related costs.
Although SSA faces constraints in applying these strategies,
opportunities for better identifying and providing assistance to
enable more of SSA's clients to engage in work could be created. The
portion of DI and SSI beneficiaries that could return to work if
given the appropriate supports and services is unknown. But if an
additional 1 percent of the 6.6 million working-age SSI and DI
beneficiaries were to leave SSA's disability rolls by returning to
work, lifetime cash benefits would be reduced by an estimated $3
billion.\4 These reductions, however, would be offset, at least in
part, by rehabilitation and other costs that may be necessary to
return a person with disabilities to work.
--------------------
\4 Our estimate is based on fiscal year 1995 data provided by SSA's
actuarial staff and represents the discounted present value of the
cash benefits that would have been paid over a lifetime if the
individual had not left the disability rolls by returning to work.
BACKGROUND
------------------------------------------------------------ Letter :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, one of the few states providing
temporary disability insurance, or a workers' compensation program.
Those who do not return to the workplace may seek long-term cash
benefits to replace lost wages.
A worker covered under Social Security and unable to work because of
a severe long-term disability could be eligible for cash benefits
from DI--the country's long-term public disability insurance program.
Workers can supplement DI coverage with cash benefits from private
long-term disability insurance or pensions if their employers provide
such plans or if the workers have purchased supplemental insurance on
their own. Moreover, workers injured on the job can receive cash
benefits through their states' employer-financed workers'
compensation programs. An individual can receive workers'
compensation benefits and DI simultaneously, although the DI cash
benefit generally is reduced by workers' compensation. But a worker
who is ineligible for cash benefits from either private insurance or
workers' compensation\5 and who is unable to be accommodated in the
workplace may discover that DI offers the only potential for wage
replacement.
Long-term cash benefits may also be sought by people with
disabilities who have low income and limited resources, regardless of
their work histories. SSI provides income support at the national
level regardless of work connection for low-income people with
disabilities. Similarly, a veteran with wartime service who has low
income and a disability unrelated to active military duty can be
eligible for a veteran's pension.
DI and SSI are the two largest federal programs providing cash
assistance to people with disabilities. DI, established in 1956, is
an insurance program funded by payroll taxes paid by workers and
their employers into a Social Security trust fund. The program is
designed to insure covered workers against loss of income due to a
disabling condition. Workers who have worked long enough and
recently enough become insured for DI coverage. In addition to cash
assistance, Medicare coverage is provided to DI beneficiaries after
they have received cash benefits for 24 months. In 1995, about 4.2
million working-age people (aged 18 to 64) received DI cash
benefits.\6 DI cash benefits in that year totaled about $36.6
billion, with average monthly cash benefits amounting to $680 per
person.\7 In 1994, the Congress reallocated payroll tax receipts,
estimated to total almost $500 billion by the end of 2016, from the
Social Security Old Age and Survivors Insurance Trust Fund to the DI
Trust Fund to prevent impending insolvency.
In contrast, SSI is a means-tested income assistance program for
disabled, blind, or aged individuals regardless of their prior
participation in the labor force. Established in 1972 for
individuals with low income and limited resources, SSI is financed
from general revenues.\8 In most states, SSI entitlement ensures an
individual's eligibility for Medicaid benefits.\9 In 1995, about 2.4
million working-age people with disabilities and 917,000 children
under 18 received SSI benefits. In the same year, federal SSI cash
benefits paid to SSI beneficiaries with disabilities equaled $20.6
billion, and average monthly SSI cash benefits amounted to about $365
per beneficiary.\10
The DI and SSI programs use the same statutory definition of
disability. To meet this definition, an adult must be determined to
be unable to engage in any substantial gainful activity because of
any medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected to
last at least 1 year.\11 Moreover, the statutory definition further
specifies that, for a person to be determined to be disabled, the
impairment must be of such severity that the person not only is
unable to do his or her previous work, but, considering his or her
age, education, and work experience, is unable to do any other kind
of substantial work that exists in the national economy. (See app.
I for a more complete description of the five-step process used to
determine DI and SSI eligibility.)
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 for one of two reasons: the
beneficiary earns more income than allowed or SSA decides that the
beneficiary's medical condition has improved to the point that he or
she is no longer considered disabled. To make this latter
determination, SSA periodically performs continuing disability
reviews.\12
--------------------
\5 Individuals can also receive compensation for injuries sustained
during active duty with the armed services or for non-job-related
injuries in which another party is at fault.
\6 Included among the 4.2 million DI beneficiaries are about 694,000
beneficiaries who were dually eligible for SSI disability benefits
because of the low level of their income and resources.
\7 The $36.6 billion includes benefits paid to all DI disabled
workers, regardless of age.
\8 References to the SSI program throughout this letter refer to
blind or disabled, not aged, recipients. General revenues include
taxes, customs duties, and miscellaneous receipts collected by the
federal government but not earmarked by law for a specific purpose.
\9 States can opt to use the financial standards and definitions for
disability they had in effect in January 1972 to determine Medicaid
eligibility for their aged, blind, and disabled residents, rather
than making all SSI recipients automatically eligible for Medicaid.
Often the Medicaid financial standards used by states are more
restrictive than SSI's.
\10 The 2.4 million SSI beneficiaries do not include individuals who
were dually eligible for SSI and DI benefits. The $20.6 billion
consists of payments to all SSI blind and disabled beneficiaries
regardless of age.
\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 a medically
determinable physical or mental impairment that results in marked and
severe functional limitations.
\12 SSA is to conduct a continuing disability review (CDR) at least
once every 3 years on DI beneficiaries whose medical improvement is
possible or expected. When medical improvement is not expected, SSA
is to schedule CDRs at least once every 7 years. SSA is to conduct
CDRs on one-third of SSI beneficiaries reaching age 18 and a minimum
of 100,000 additional SSI beneficiaries annually in fiscal years 1996
through 1998. SSA is to conduct CDRs (1) at least every 3 years for
children under age 18 who are likely to improve or, at the option of
the Commissioner, unlikely to improve and (2) on low-birth-weight
babies within their first year of life. Disability eligibility
redeterminations, instead of CDRs, are required for all 18-year-olds
beginning on their 18th birthdays, using adult criteria for
disability. See Social Security Disability: Improvements Needed to
Continuing Disability Review Process (GAO/HEHS-97-1, Oct. 16, 1996)
and Social Security Disability: Alternatives Would Boost
Cost-Effectiveness of Continuing Disability Reviews (GAO/HEHS-97-2,
Oct. 16, 1996).
MULTIPLE FACTORS CONTRIBUTE
TO RAPID PROGRAM GROWTH
---------------------------------------------------------- Letter :2.1
DI and SSI grew rapidly between 1985 and 1995. During this period,
cash benefits to adults and children with disabilities increased from
about $23.1 billion to $57.2 billion, with the inflation-adjusted
cost of cash benefits growing by 75 percent.\13 (See fig. 1.) At the
same time, while the number of working-age beneficiaries who received
disability benefits increased from 4.0 million to 6.6 million, DI and
SSI experienced an increase in the proportion of adult beneficiaries
with the types of impairments that lead to the longest entitlement
periods, signifying lengthy stays on the rolls for some. Individuals
with mental impairments accounted for most of this growth. (See app.
II for an overview of the reasons for program growth.)
Figure 1: Growth in DI and SSI
Cash Benefits, 1985-95
(See figure in printed
edition.)
Note: Includes DI benefits to disabled workers and federal-only SSI
benefits to all SSI blind and disabled beneficiaries regardless of
age.
Source: Annual Statistical Supplement to the Social Security
Bulletin (Sept. 1996).
The number of children receiving SSI has more than tripled since
1990, from about 300,000 to more than 900,000 in 1995.\14 A number of
factors have contributed to the growth in children's awards,
including outreach efforts by SSA and child advocates, rising numbers
of children in poverty, and major changes in the criteria for
determining whether children are disabled. Growth has been
especially rapid in awards to children with mental impairments. SSA
researchers estimate that SSI awardees ages 1 to 17 with mental
impairments will stay on the rolls nearly 27 years on average.\15
--------------------
\13 SSA issued its Report on Rising Cost of Social Security
Disability Insurance Benefits to the Congress on Feb. 14, 1996.
\14 We have issued several products recently on children with
disabilities, including Children Receiving SSI by State
(GAO/HEHS-96-144R, May 15, 1996); SSA Initiatives to Identify
Coaching (GAO/HEHS-96-96R, Mar. 5, 1996); Social Security: New
Functional Assessments for Children Raise Eligibility Questions
(GAO/HEHS-95-66, Mar. 10, 1995); and Social Security: Rapid Rise in
Children on SSI Disability Rolls Follows New Regulations
(GAO/HEHS-94-225, Sept. 9, 1994).
\15 K. Rupp and C.G. Scott, "Determinants of Duration on the
Disability Rolls and Program Trends," a paper presented at SSA's
conference on Disability Programs: Explanations of Recent Growth and
Implications for Disability Policy (Washington, D.C.: July 20,
1995). In an effort to stem the increase in the number of children
receiving SSI, the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (P.L. 104-193) changed initial and
continuing eligibility requirements for children with disabilities.
The effect of these changes on the size of the rolls is as yet
unknown.
STATUTE PROVIDES FOR
RETURNING BENEFICIARIES TO
WORK
---------------------------------------------------------- Letter :2.2
The Social Security Act states that people applying for disability
benefits should be promptly referred to state vocational
rehabilitation (VR) agencies for services so that as many applicants
as possible can return to productive activity. State Disability
Determination Service (DDS) offices, which act for SSA in making
disability evaluations, decide whether to refer applicants to the
state VR agencies.
Furthermore, to reduce the risk a beneficiary faces in trading
guaranteed monthly income and subsidized health coverage for the
uncertainties of competitive employment, the Congress has established
various work incentives intended to safeguard cash and health
benefits while a beneficiary tries to return to work. Nevertheless,
few beneficiaries leave the rolls to return to work.
BENEFICIARIES FACE
RETURN-TO-WORK CHALLENGES,
YET SOME HAVE
CHARACTERISTICS ASSOCIATED
WITH WORK
---------------------------------------------------------- Letter :2.3
Many DI and SSI beneficiaries will be unable to return to work, while
others present challenges to developing effective return-to-work
strategies. Almost half of the people receiving benefits are not
likely to become employed because of their age or because they are
expected to die within several years. For other beneficiaries, the
ability to find and maintain employment may be challenging because
they need to learn basic skills and work habits and build self-esteem
to function in the workplace. Some may lack access to the assistive
technologies that could enhance their work potential. Still others
might face tight labor market conditions, particularly for low-wage
positions, that could constrain employment opportunities. Moreover,
the nature of some disabilities may limit full-time work, while
others may result in logistical obstacles such as transportation
difficulties. And despite antidiscrimination laws, some disabilities
may stigmatize individuals, making them appear less attractive to
employers and less likely to be hired.
While beneficiaries may face many challenges in attempting to return
to work, research suggests that successful transitions to work may be
more likely for younger people with disabilities and for those who
have greater motivation to work and more education.\16
Studies have shown that a significant number of DI and SSI
beneficiaries possess these characteristics. The DI and SSI
disability rolls increasingly are composed of a significant number of
younger individuals. Among working-age DI and SSI beneficiaries, one
out of three is under the age of 40.\17 In addition, in 1993, 35
percent of the 84,000 DI beneficiaries who responded to an SSA
questionnaire in May 1993 expressed an interest in receiving
rehabilitation or other services that could help them return to work,
an indication of motivation. Moreover, a substantial portion--almost
one in two--of a cohort of DI beneficiaries had a high school degree
or some years of education beyond high school.\18
--------------------
\16 For example, 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; R.J. Butler, W.G.
Johnson, and M.L. Baldwin, "Managing Work Disability: Why First
Return to Work Is Not a Measure of Success," Industrial and Labor
Relations Review, Vol. 48, No. 3 (Apr. 1995), pp. 452-67; and
R.V. Burkhauser and M.C. Daly, "Employment and Economic Well-Being
Following the Onset of a Disability: The Role for Public Policy," in
Jerry L. Mashow, Virginia Reno, Richard V. Burkhauser, and Monroe
Berkowitz, eds., Disability, Work, and Cash Benefits (Kalamazoo,
Mich.: W.E. Upjohn Institute for Employment Research, 1996), pp.
59-101.
\17 Annual Statistical Supplement to the Social Security Bulletin
(Sept. 1996).
\18 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.
CHANGES CREATE
RETURN-TO-WORK OPPORTUNITIES
---------------------------------------------------------- Letter :2.4
The percentage of beneficiaries that could return to work if given
the appropriate supports and services is unknown, in part, because
employment depends upon a multitude of complex, interrelated factors.
The data suggest, however, that a meaningful proportion of
beneficiaries could potentially benefit from return-to-work
assistance. In addition, many technological and medical advances
have created more opportunities for some individuals with
disabilities to work. Electronic communications and assistive
technologies--such as scanners, synthetic voice systems, standing
wheelchairs, and modified automobiles and vans--have given greater
independence to people with some disabilities. Advances in the
management of disability--like medication to control mental illness
or computer-aided prosthetic devices--have helped reduce the
functional limitations associated with some disabilities. These
advances may have opened new employment opportunities for people with
disabilities in the growing service sector of the economy.
Social change has also promoted the goals of greater inclusion of and
participation by people with disabilities in the mainstream of
society, including children in school and adults at work. 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. Moreover, the ADA supports the
full participation of people with disabilities in society and fosters
the expectation that people with disabilities can work and have the
right to work. The ADA prohibits employers from discriminating
against qualified individuals with disabilities and requires
employers to make reasonable workplace accommodations unless it would
impose an undue hardship on the business.
CURRENT PROGRAM STRUCTURE
IMPEDES RETURN TO WORK
------------------------------------------------------------ Letter :3
Despite advances in technology and medicine that have increased the
potential for some beneficiaries to work, the DI and SSI disability
programs have remained essentially frozen in time. Weaknesses in the
design and implementation of the DI and SSI programs, summarized in
table 1, have impeded identifying and encouraging the productive
capacities of those who might benefit from reasonable and appropriate
rehabilitation and employment assistance. The cumulative effect of
these weaknesses is to understate beneficiaries' work capacity and
hinder efforts to improve return-to-work outcomes.
Table 1
Summary of Program Design and
Implementation Weaknesses
Program weakness Description of program weakness
-------------------------------- -------------------------------------------------------
Work capacity of DI and SSI Medical conditions alone are generally a poor predictor
beneficiaries may be of work incapacity.
understated.
While impairment has some influence over capacity to
work, other factors--vocational, psychological,
economic, environmental, motivational--are often
considered to be more important determinants of work
capacity.
Disability determination process "All-or-nothing" decision gives incentive to promote
may encourage work incapacity. inabilities and minimize abilities.
Lengthy application process to prove one's disability
can erode motivation and ability to return to work.
Benefit structure can provide The prospect of losing cash and health benefits
disincentive to low-wage work. 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 are ineffective Work incentives are complex, difficult to understand,
in motivating people to work. and poorly implemented.
Few beneficiaries are aware that work incentives
exist.
Work incentives do not overcome the prospect of a drop
in income for those who accept low-wage employment.
Risk of losing health coverage is a major barrier to
returning to work.
VR plays limited role in Access to VR services through DDS referrals is limited:
disability programs. restrictive state VR policies 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); and the success-
based VR reimbursement system is ineffective in
motivating VR agencies to accept beneficiaries as
clients.
Applicants and beneficiaries are generally uninformed
about VR and 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.
-----------------------------------------------------------------------------------------
WORK CAPACITY OF DI AND SSI
BENEFICIARIES MAY BE
UNDERSTATED
---------------------------------------------------------- Letter :3.1
The current disability determination process may understate the work
capacity of DI and SSI beneficiaries, thereby lowering expectations
for return-to-work outcomes. 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.
SSA maintains a Listing of Impairments (usually referred to as "the
listings") for medical conditions that are presumed to be, according
to SSA, ordinarily severe enough in themselves to prevent an
individual from engaging in any gainful activity. About 70 percent
of new awardees are eligible for disability benefits because their
impairments meet or equal the listings.\19 But findings of studies we
reviewed generally agree that medical conditions are a poor predictor
of work incapacity.\20
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 prevent
individuals from engaging in work (for example, people who are
quadriplegic with profound mental retardation), it is less clear that
some other impairments that qualify individuals for disability
benefits prevent individuals from engaging in any substantial gainful
activity (for example, people who are missing both feet). Moreover,
while most medical impairments influence 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 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." Physicians, however,
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 can neither quantify inability to work nor certify that the
impairments render a person unable to work.
Since then, some experts have contended that the scientific community
is unable 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."\21
--------------------
\19 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 impairment.
Applicants whose impairments do not meet or equal the medical
listings are further evaluated on the basis of nonmedical factors,
including residual functional capacity, age, education, and
vocational skills.
\20 For example, 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; and 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.
\21 HHS, Report of the Disability Advisory Council (Washington, D.C.:
HHS, SSA, Mar. 11, 1988).
DISABILITY DETERMINATION
PROCESS MAY ENCOURAGE WORK
INCAPACITY
---------------------------------------------------------- Letter :3.2
The "all-or-nothing" nature of the disability determination process
creates an incentive for applicants to overstate their disabilities
and understate their work capacities. Because the result of the
decision is either full award or denial of benefits, applicants have
a strong incentive to promote their limitations to establish their
inability to work and thus qualify for benefits. Conversely,
applicants have a disincentive to demonstrate any capacity to work
because doing so may disqualify them for benefits. Furthermore, the
documentation involved in establishing one's disability can, many
believe, create a "disability mind-set," which weakens motivation to
work. The effects of this process are compounded by the length of
time required to determine eligibility--from a minimum of several
months to 18 months or longer for individuals who appeal--during
which skills, abilities, and habits necessary to work can erode.
BENEFIT STRUCTURE CAN
PROVIDE A DISINCENTIVE TO
LOW-WAGE WORK
---------------------------------------------------------- Letter :3.3
The prospect of losing cash and health benefits themselves is another
factor that can reduce beneficiaries' motivation to work and their
receptivity to work incentives and VR. The average monthly cash and
health benefit value in 1994 for DI and SSI beneficiaries was about
$1,050 and $930, respectively.\22 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 health 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 obtaining
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, 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.\23
People who have less time available for full-time work may see some
value in part-time work. If part-time work pays less than the value
of lost benefits, however, then a person would actually be
financially better off receiving benefits rather than working.
--------------------
\22 Average monthly health benefit values are based on estimates from
the Health Care Financing Administration, Office of the Actuary.
\23 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
---------------------------------------------------------- Letter :3.4
Work incentive provisions that are complex, difficult to understand,
and poorly implemented further impede return-to-work efforts.
Because SSA does not promote them extensively, few beneficiaries are
aware that work incentives exist. 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.
For example, 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 health 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, causing a precipitous drop in monthly income from full benefits
to no cash benefits.\24 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. Especially for beneficiaries
with low earnings, it may be more financially advantageous to
continue to receive disability payments by not working or by limiting
earnings than to earn more than $500 a month in countable income.
--------------------
\24 For 36 months after the trial work period ends, cash benefits
will be reinstated for any month in which the person does not earn
more than $500 a month in countable income; this is referred to as
the extended period of eligibility.
BENEFICIARIES FEAR LOSING
HEALTH COVERAGE
-------------------------------------------------------- Letter :3.4.1
The work incentive provisions also do not allay the fear of losing
health coverage that beneficiaries who return to work may face.
Studies have identified the risk of losing health coverage as a major
barrier to beneficiaries' returning to work.\25 Beneficiaries who
work and continue to earn countable income above certain amounts will
eventually lose health coverage even though they have not necessarily
improved medically or obtained affordable coverage elsewhere.
DI work incentive provisions provide up to 4 years of 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 this
coverage ends, these individuals may purchase Medicare coverage at
the same monthly premium paid by uninsured retired beneficiaries.
But the monthly premium--exceeding $300 in 1996--may be a hardship
for beneficiaries, especially individuals with low earnings. In a
study of DI beneficiaries' 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."\26
Moreover, SSI beneficiaries who lose health coverage because they
exceed the earnings limit do not have the option of purchasing
Medicaid. Work incentives allow beneficiaries to keep 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.\27 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 coverage exclusions for
preexisting conditions.
--------------------
\25 For example, see the 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).
\26 Hennessey and Muller, "The Effect of Vocational Rehabilitation
and Work Incentives on Helping the Disabled-Worker Beneficiary Back
to Work." These findings should be interpreted with caution, because
SSA gathered retrospective data on event histories over a 10-year
period.
\27 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.
VR PLAYS LIMITED ROLE IN
DISABILITY PROGRAMS
---------------------------------------------------------- Letter :3.5
Access to VR services through the DDS referral process is limited,
because DDSs refer few beneficiaries for VR services and state VR
agencies accept fewer still as clients.\28 DDSs refer for VR
services, on average, only about 8 percent of DI and SSI applicants
awarded benefits. And, although less is known about how many DDS
referrals are accepted by state VR agencies, previously we estimated
that less than 10 percent of beneficiaries referred by DDSs were
accepted as clients.\29 Several factors contribute to limited access,
including restrictive state VR policies that limit categories of
people referred by DDSs, a referral process that is not monitored
(reflecting its low priority and removing the incentive to spend time
on referrals), and a success-based VR reimbursement system that is
ineffective in motivating VR agencies to accept beneficiaries as
clients. In addition, applicants and beneficiaries are generally
uninformed about the availability of VR services and are given little
encouragement to seek them.
Even if a beneficiary is referred for VR services and accepted by a
VR agency, the effectiveness of state VR services in securing
long-term financial gains for rehabilitants has been mixed at best.
In 1993, we evaluated the long-term results of state VR services by
examining the employment status of clients (including SSA
beneficiaries) over an 8-year period following receipt of
services.\30 We found that gains in employment and earnings of
clients who had been successfully rehabilitated--that is, placed in
suitable paid or unpaid employment for at least 60 days--faded after
about 2 years, with earnings for many returning to near or below the
pre-VR program level after 8 years. Clients who had been
successfully rehabilitated had better work and earnings histories
than clients who had dropped out of the VR program. Clients who had
not been rehabilitated, however, but who had received many of the
services that rehabilitated clients had received, did no better in
later employment and earnings than VR dropouts who had received no
services after an initial VR evaluation.
--------------------
\28 Public and private entities, such as educational institutions,
welfare agencies, hospitals, and other health organizations, as well
as DDSs, refer beneficiaries to state VR agencies. In discussing
access to VR services, we have limited our analysis to access through
the DDS referral system. Our findings, therefore, cannot be
generalized to referrals from other sources.
\29 Social Security: Little Success Achieved in Rehabilitating
Disabled Beneficiaries (GAO/HRD-88-11, Dec. 7, 1987). We reviewed
the referral outcomes of DI beneficiaries in 10 states.
Approximately 90 percent of the referrals were not considered
feasible prospects by the agencies, did not respond to the agency
contact, were uninterested in VR, or were already known to the
agencies. These data should be interpreted with caution because they
were collected in 1986, and changes over time in DDS and VR agency
procedures, priorities, and resource levels, and in beneficiary
characteristics, could have altered acceptance patterns.
\30 Vocational Rehabilitation: Evidence for Federal Program's
Effectiveness Is Mixed (GAO/PEMD-93-19, Aug. 27, 1993). We examined
the program's long-term results by computer-matching a database on
nearly 900,000 VR applicants whose cases were closed in 1980 with SSA
wage records on these individuals from 1972 through 1988--both before
and after their VR program experience.
SSA EFFORTS TO IMPROVE
RETURN-TO-WORK OUTCOMES LIKELY
TO HAVE ONLY MARGINAL EFFECT
------------------------------------------------------------ Letter :4
SSA's efforts to improve return-to-work outcomes are focused in the
right direction but are likely to have limited impact. SSA began an
analysis of barriers and disincentives to employment in its
disability programs in 1994 and has undertaken several related
return-to-work efforts. These include publishing regulations
permitting SSA to refer beneficiaries to an alternate provider when
the state VR agency is unable to provide VR services and publishing a
brochure to inform the public about how SSA can help with VR
services. Additionally, SSA has signed an agreement with the
Department of Education's Rehabilitation Services Administration to
provide training on SSA's work incentives to state VR professionals
and contracted for an evaluation of Project NetWork, an SSA research
effort testing different methods to deliver employment and
rehabilitation services.
Although important, these efforts do not constitute a comprehensive
strategy that fundamentally redirects the disability programs'
current focus on an individual's limitations to a focus on
identifying and encouraging the productive capacities of those who
might benefit from employment assistance. For example, expanding VR
opportunities may not facilitate long-term employment among
beneficiaries if people continue to fear that working their way off
the rolls will lead to loss of health insurance. Also, educating
beneficiaries about work incentives and VR services may have little
effect if beneficiaries are better off financially not working than
attempting to work.
RETURN-TO-WORK STRATEGIES FROM
OTHER SYSTEMS CONTRAST SHARPLY
WITH FEDERAL DISABILITY
PROGRAMS
------------------------------------------------------------ Letter :5
In contrast with SSA's disability programs, which have retained their
core design over the years, some firms in the private sector are
developing new approaches to manage their disability caseloads.
Collectively known as disability management, these approaches embody
a proactive strategy for controlling disability costs by helping
employees with disabilities return to work as soon as possible.
Social insurance disability programs in Germany and Sweden also
invest in return-to-work efforts, and their experiences show that
return-to-work strategies can be applied to government-scale programs
that serve people with a wide range of work histories, job skills,
and disabilities.\31
Disability managers in the U.S. private sector spend money on
return-to-work efforts because they believe such efforts are sound
investments that reduce disability-related costs. Studies have
estimated that the full cost of disability to employers ranges from
about 6 to 12 percent of payroll. Such costs include insurance
premiums, cash benefits, rehabilitation benefits, and health benefits
paid through workers' compensation and employer-sponsored disability
insurance programs. Companies may also incur additional expenses for
training and using temporary workers and retraining employees with
disabilities when they return to work. When businesses help workers
with disabilities return to the workplace, they are able to reduce
some of these costs.
Our analysis of practices advocated and implemented by the U.S.
private sector and other countries reveals three common strategies in
the design of their return-to-work programs. These strategies, and
their underlying practices, are summarized in table 2.
Table 2
Strategies and Practices in the Design
of Return-to-Work Programs of the U.S.
Private Sector and Other Countries
Strategy Practices
-------------------------------- -------------------------------------------------------
Intervene as early as possible Address return-to-work goals from the beginning of an
after an actual or potentially emerging disability.
disabling event.
Provide return-to-work services at the earliest
appropriate time.
Maintain communication with workers who are
hospitalized or recovering at home.
Identify and provide necessary Assess each individual's return-to-work potential and
return-to-work assistance needs.
effectively.
Use case management techniques when appropriate to help
workers with disabilities return to work.
Offer transitional work opportunities that enable
workers with disabilities to ease back into the
workplace.
Ensure that medical service providers understand the
essential job functions of workers with disabilities.
Structure cash and health Structure cash benefits to encourage workers with
benefits to encourage return to disabilities to rejoin the workforce.
work.
Maintain health benefits for workers with disabilities
who return to work.
Include a contractual provision that can require the
worker with disabilities to cooperate with return-to-
work efforts.
-----------------------------------------------------------------------------------------
Disability managers emphasized that these return-to-work strategies
are not independent of each other and are most effective when merged
into a comprehensive return-to-work program. Return-to-work
strategies and practices may potentially enhance federal disability
programs by enabling beneficiaries to work and by helping to reduce
program costs.
--------------------
\31 Although rigorous studies demonstrating the cost-effectiveness of
German and Swedish programs generally do not exist, we included these
countries in our analysis because their disability programs apply
principles--such as early intervention and rehabilitation--that have
been identified by the U.S. private sector and other experts as
being key to disability management. Application of these principles
to DI and SSI would need to be tailored to the U.S. political system
and budget realities.
INTERVENE EARLY TO
FACILITATE RETURN-TO-WORK
---------------------------------------------------------- Letter :5.1
Disability managers we surveyed in the private sector stressed the
importance of early intervention in returning workers with
disabilities to the workplace. Advocates of early intervention
believe that the longer an individual stays away from work, the less
likely return to work will be. Studies show that only half the
workers with recently acquired disabilities who are out of work 5
months or more will ever return to work. Disability managers believe
that long absences from the workplace can reduce motivation to
attempt work.
In Germany and Sweden, laws and policies require that an individual's
potential for returning to work be assessed soon after the onset of a
disabling condition. Consequently, people with disabilities are
generally considered for rehabilitation and return to work at
relatively early stages in their contacts with social insurance
offices. For example, everyone applying for a disability pension in
Germany is considered for rehabilitation and return to work before
being determined eligible for permanent benefits.\32
Setting return-to-work goals soon after the onset of disability and
providing timely rehabilitation services are believed to be critical
in encouraging workers with disabilities to return to the workplace
as soon as possible. Moreover, maintaining communication with a
disabled worker is also important. For example, disability managers
believe that contacting a hospitalized worker soon after an injury or
illness, and then continuing to communicate with the worker
recovering at home, helps reassure the worker that there is a job to
return to and that the employer is concerned about his or her
recovery.
--------------------
\32 Disability pensions in Germany are not awarded until it has been
determined that the person's earning capacity cannot be restored
through rehabilitation.
PROVIDE NECESSARY
RETURN-TO-WORK SERVICES,
MANAGE CASES
---------------------------------------------------------- Letter :5.2
In an effort to provide appropriate services, many disability
managers strive to identify the individuals who are likely to be able
to return to work and then identify the specific services they need.
This approach involves investing in services tailored to individual
circumstances that help achieve return-to-work goals for workers with
disabilities while avoiding unnecessary expenditures. As part of
this approach, individuals are functionally evaluated to assess their
potential for returning to work. When appropriate, the private
sector uses case management techniques to coordinate the
identification, evaluation, and delivery of disability-related
services for individuals deemed to need such services to return to
work. Transitional work allows employees to ease back into the
workplace in jobs that better accommodate their disabilities than
their regular jobs.
In Germany and Sweden, return-to-work services and assistance are
fairly extensive and tailored to meet individual needs. An
individual may receive a combination of different benefits and
services--such as medical or vocational rehabilitation, employment or
social assistance--as well as cash assistance while applying for or
participating in rehabilitation. In addition, both countries offer
transitional work opportunities to people with disabilities.
The private sector also stresses the need to ensure that physicians
and other medical service providers understand the essential job
functions of workers with disabilities. Without this understanding,
an individual's return to work could be delayed unnecessarily. Also,
if an employer is willing to provide transitional work opportunities
or other job accommodations, the treating physician must be aware of
and understand these accommodations.
PROVIDE INCENTIVES TO ENGAGE
IN RETURN-TO-WORK EFFORTS
---------------------------------------------------------- Letter :5.3
Finally, disability managers responding to our survey generally
offered incentives through their programs' cash and health benefit
structure to encourage individuals with disabilities to return to
work. These managers believe that a program's incentive structure
can affect return-to-work decisions. As a result, their companies
structure cash benefits to make returning to work more financially
attractive than remaining away from work. Disability managers also
believe retention of health insurance can be an important work
incentive.
Although the structure of benefits plays a role in return-to-work
decisions, disability managers emphasized that well-structured
incentives are not sufficient in themselves for a successful
return-to-work program. Rather, incentives must be integrated with
other return-to-work practices.
CONCLUSIONS
------------------------------------------------------------ Letter :6
Return-to-work strategies used in the U.S. private sector and other
countries reflect the expectation that people with disabilities can
and do return to work. But the DI and SSI programs are not placing
enough priority on tapping the work potential of beneficiaries. We
believe SSA could do this more effectively without jeopardizing the
availability of benefits for people who cannot work.
Compelling reasons exist to try new approaches. In 1994, the
Congress reallocated payroll tax receipts, estimated to total almost
$500 billion by the end of 2016, from the Social Security Old Age and
Survivors Insurance Trust Fund to the DI Trust Fund to prevent
impending insolvency. This financial strain, along with advances in
technology and medicine that could reduce functional limitations
posed by certain impairments, provides ample reason for examining how
strategies from other systems could be applied to improve
return-to-work outcomes. If even an additional 1 percent of the 6.6
million working-age beneficiaries were to leave SSA's disability
rolls by returning to work, lifetime cash benefits would be reduced
by an estimated $3 billion. These reductions, however, would be
offset at least in part by rehabilitation and other costs that may be
necessary to return a person with disabilities to work.
Developing an integrated, comprehensive return-to-work strategy is
likely to extend beyond SSA to include programs in other federal
agencies, such as the Department of Labor and the Department of
Education, the states, and the private sector. But, as the primary
manager of multibillion-dollar programs and as the entity with
fiduciary responsibility for the trust funds, SSA has a critical role
to play as the catalyst in forging the partnerships and cooperation
that will be needed to redesign federal disability programs.
Although SSA faces constraints and challenges in applying the
return-to-work strategies of other programs, opportunities exist for
providing the return-to-work assistance that could enable more of
SSA's beneficiaries to reduce or eliminate their dependence on cash
benefits.
In earlier reports, we recommended that SSA place greater priority on
helping DI and SSI beneficiaries go back to work. We further
recommended that SSA develop a comprehensive return-to-work strategy
integrating, as appropriate, earlier intervention and provision of
return-to-work assistance as well as changes in the structure of cash
and health benefits. Recognizing that new legislation may be
required to implement such a strategy, we also recommended that SSA
identify needed legislative changes to make such a return-to-work
focus a reality. SSA agreed that beneficiaries face a number of
barriers and disincentives that impede entry into the labor force and
that many current beneficiaries have the potential to return to work.
SSA expressed an interest in determining whether the return-to-work
practices of other systems could be useful in improving beneficiary
return-to-work rates and emphasized that making program improvements
would involve input from a myriad of relevant federal, state, and
private sector stakeholders.
AGENCY COMMENTS
------------------------------------------------------------ Letter :7
In commenting on a draft of this report, the Commissioner of Social
Security shared our concern that beneficiaries face a number of
barriers to entering or reentering the workforce and agreed that
compelling reasons exist to try new return-to-work approaches. (See
app. III for the full text of SSA's comments.) SSA is seeking
statutory authority to create a voucher-type system that
beneficiaries could voluntarily use to obtain rehabilitation and
employment services from a participating public or private provider
of their choice. Additionally, provision of extended medical
coverage for beneficiaries who return to work is also being sought.
These initiatives, reflected in the President's 1998 budget, attempt
to place greater emphasis on return to work and to providing
alternatives to the state VR agency structure. Although not
specifically mentioned by SSA in its comments, given this increased
priority we would expect to see SSA set explicit performance measures
under its Government Performance and Results Act strategic plan
regarding its return-to-work efforts.\33
In its proposed initiatives, SSA recognizes that extending medical
coverage can be an important factor in reducing the perceived risks a
beneficiary faces in returning to work. But other weaknesses in the
DI and SSI programs--including a determination process that
concentrates on applicants' incapacities and work incentives that act
as disincentives--remain unchanged, suggesting that the impact of
SSA's initiatives may have a more limited effect than desired. A new
VR service delivery system would be likely to have the greatest
effect if it were integrated into a comprehensive return-to-work
strategy that incorporates earlier intervention, a focus on
developing productive capacity, and changes to the structure of
benefits. Such a strategy would encourage beneficiaries to take
advantage of rehabilitation services and provide incentives for
beneficiaries to return to work.
In addition, while we firmly advocate the critical importance of
evaluation, the proposed 7-year pilot period for the new VR service
delivery system apparently focuses on one system to the exclusion of
other alternatives. If SSA tests only one type of service delivery
system, the agency will forego the opportunity to compare the results
of the proposed outcome-based payment system with those of
alternative systems, such as combining outcome-based payments with
reimbursements to providers based on milestones reached prior to the
beneficiary leaving the rolls.
SSA also made some technical comments, which we incorporated where
appropriate.
--------------------
\33 The Government Performance and Results Act of 1993 created
requirements for agencies to generate the information congressional
and executive branch decisionmakers need in considering ways to
improve government performance and reduce costs. It requires that
agencies consult with the Congress and other stakeholders to clearly
define their missions, establish long-term strategic goals and annual
goals, measure performance against the goals they have set, and
report publicly on how well they are doing.
---------------------------------------------------------- Letter :7.1
We are sending copies of this report to the Commissioner of the
Social Security Administration and other interested parties. Copies
also will be available to others on request. If you or your staff
have any questions concerning this report, please call me at (202)
512-7215 or Cynthia A. Bascetta, Assistant Director, at (202)
512-7207. Other major contributors include Barbara H. Bordelon,
Brett S. Fallavollita, Michele Grgich, Susan Y. Higgins, and Ira B.
Spears, Senior Evaluators; Kenneth F. Daniell, Evaluator; and Carol
Dawn Petersen, Senior Economist.
Jane L. Ross
Director, Income Security Issues
FIVE-STEP SEQUENTIAL EVALUATION
PROCESS FOR DETERMINING DI AND SSI
ELIGIBILITY
=========================================================== Appendix I
To determine whether an applicant qualifies for DI or SSI disability
benefits, SSA uses a five-step sequential evaluation process. In the
first step, an SSA field office determines if an applicant is working
at the level of substantial gainful activity and whether he or she
meets the applicable nonmedical eligibility requirements (for
example, residency, citizenship, Social Security insured status for
DI, and income and resources for SSI). An applicant who is found to
be not working or working but earning less than the substantial
gainful activity level (minus allowable exclusions), and who meets
the nonmedical eligibility requirements, has his or her case
forwarded to a state Disability Determination Service (DDS) office.
Applicants who do not meet these requirements, regardless of medical
condition, are denied benefits.
DDS offices gather medical, vocational, and other necessary evidence
to determine if applicants are disabled under the Social Security
law. In step two, the DDS office determines if the applicant has an
impairment or combination of impairments that is severe and could be
expected to last at least 12 months. According to SSA standards, a
severe impairment is one that significantly limits an applicant's
ability to do "basic work activities," such as standing, walking,
speaking, understanding and carrying out simple instructions, using
judgment, responding appropriately to supervision, and dealing with
change. The DDS office collects all necessary medical evidence,
either from those who have treated the applicant or, if that
information is insufficient, from an examination conducted by an
independent source. Applicants with severe impairments that are
expected to last at least 12 months proceed to the third step in the
disability determination process; applicants without such impairments
are denied benefits.
At step three, the DDS office compares the applicant's condition with
the Listing of Impairments (the "listings") developed by SSA. The
listings contain over 150 categories of medical conditions (examples
of conditions include the loss of both feet or an IQ score below 60)
that, according to SSA, are severe enough ordinarily to prevent an
individual from engaging in substantial gainful activity. An
applicant whose impairment is cited in the listings or whose
impairment is equally as severe or more severe than those impairments
in the listings, and who is not engaging in substantial gainful
activity, is found to be disabled and awarded benefits. An applicant
whose impairment is not cited in the listings or whose impairment is
less severe than those cited in the listings is evaluated further to
determine whether he or she has vocational limitations that, when
combined with the medical impairment(s), prevent work.
In step four, the DDS office uses its physician's assessment of the
applicant's residual functional capacity to determine whether the
applicant can still perform work he or she has done in the past. For
physical impairments, residual functional capacity is expressed in
certain demands of work activity (for example, ability to walk, lift,
carry, push, pull, and so forth); for mental impairments, residual
functional capacity is expressed in psychological terms (for example,
whether a person can follow instructions and handle stress). If the
DDS office finds that a claimant can perform work done in the past,
benefits are denied.
In the fifth and last step, the DDS office determines if an applicant
who cannot perform work done in the past can do other work that
exists in the national economy.\34 Using SSA guidelines, the DDS
considers the applicant's age, education, vocational skills, and
residual functional capacity to determine what other work, if any,
the applicant can perform. Unless the DDS office concludes that the
applicant can perform work that exists in the national economy,
benefits are allowed.
At any point in the sequential evaluation process, an examiner can
deny benefits for reasons relating to insufficient documentation or
lack of cooperation by the applicant. Such reasons can include an
applicant's failure to (1) provide medical or vocational evidence
deemed necessary for a determination by the examiner, (2) submit to a
consultive examination that the examiner believes is necessary to
provide evidence, or (3) follow a prescribed treatment for an
impairment. Benefits are also denied if the applicant asks the DDS
to discontinue processing the case.
--------------------
\34 By definition, work in the national economy must be available in
a significant amount in the region where the applicant lives or in
several regions of the country. It is inconsequential whether (1)
such work exists in the applicant's immediate area, (2) job vacancies
exist, or (3) the applicant would actually be hired.
REASONS FOR PROGRAM GROWTH
========================================================== Appendix II
Although the reasons for growth and their relative effects are not
fully understood, multiple factors contributed to the increase in
SSA's disability 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
-------------------------------------------------------- Appendix II:1
The eligibility standards, especially for mental impairments (which
include mental retardation and mental illness), were expanded in the
mid- to late 1980s largely as a result 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
-------------------------------------------------------- Appendix II: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. In 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.
ECONOMIC FACTORS
-------------------------------------------------------- Appendix II: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.\35
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. But, 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.
--------------------
\35 D.C. Stapleton and others, "Demographic and Economic
Determinants of Recent Application and Award Growth for SSA's
Disability Programs," a paper presented at SSA's conference on
Disability Programs: Explanations of Recent Growth and Implications
for Disability Policy (Washington, D.C.: July 20-21, 1995).
STATE COST-SHIFTING
-------------------------------------------------------- Appendix II:4
Many state and local governments actively encouraged and assisted
disabled recipients of state-funded general assistance to apply for
SSI benefits when general assistance 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
-------------------------------------------------------- Appendix II:5
An increase in the number of people without affordable health
insurance may have affected the size of the DI and SSI program
growth. The uninsured population under age 65 in the United States
grew by 5 million between 1988 and 1992.\36 In addition, limitations
in employment-based health care coverage for chronic conditions may
have prompted some individuals to apply for DI or SSI for health care
protection.
--------------------
\36 The Environment of Disability Income Policy: Programs, People,
History and Context, National Academy of Social Insurance, Disability
Policy Panel Interim Report (Washington, D.C.: 1996), p. 93.
DEMOGRAPHICS
-------------------------------------------------------- Appendix II: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, 880,000 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.\37
--------------------
\37 Supplemental Security Income: Recent Growth in the Rolls Raises
Fundamental Program Concerns (GAO/T-HEHS-95-67, Jan. 27, 1995).
Under the Personal Responsibility and Work Opportunity Reconciliation
Act of 1996, the income and resources of an immigrant's sponsor and
an immigrant's spouse are counted in determining eligibility for SSI
benefits. The effect on future growth in the rolls of SSI by
provision is unknown.
DI TERMINATION RATE DECREASED;
SSI RATE REMAINED STABLE
-------------------------------------------------------- Appendix II: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 percent in 1985 to 10 percent in 1993 (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, at below 0.5 percent, were at an all time
low from 1991 to 1993--may have been the reduction in the number of
continuing disability reviews (CDR) performed by SSA.\38
In the early 1990s, because of SSA resource constraints and
increasing initial claims workloads, the number of DI CDRs declined
dramatically. In fiscal year 1996, about 4.3 million DI and SSI
beneficiaries were due or overdue for CDRs.\39
(See figure in printed edition.)Appendix III
--------------------
\38 The Environment of Disability Income Policy: Programs, People,
History and Context, p. 65.
\39 Social Security Disability: Improvements Needed to Continuing
Disability Review Process (GAO/HEHS-97-1, Oct. 16, 1996).
COMMENTS FROM THE SOCIAL SECURITY
ADMINISTRATION
========================================================== Appendix II
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
RELATED GAO PRODUCTS
=========================================================== Appendix 0
Social Security Disability: Improvements Needed to Continuing
Disability Review Process (GAO/HEHS-97-1, Oct. 16, 1996).
SSA Disability: Return-to-Work Strategies From Other Systems May
Improve Federal Programs (GAO/HEHS-96-133, July 11, 1996).
Social Security: Disability Programs Lag in Promoting Return-to-Work
(GAO/T-HEHS-96-147, June 5, 1996).
SSA Disability: Program Redesign Necessary to Encourage Return to
Work (GAO/HEHS-96-62, Apr. 24, 1996).
PASS Program: SSA Work Incentive for Disabled Beneficiaries Poorly
Managed (GAO/HEHS-96-51, Feb. 28, 1996).
Social Security Disability: Management Action and Program Redesign
Needed to Address Long-Standing Problems (GAO/T-HEHS-95-233, Aug. 3,
1995).
Disability Insurance: Broader Management Focus Needed to Better
Control Caseload (GAO/T-HEHS-95-164, May 23, 1995).
Supplemental Security Income: Recipient Population Has Changed as
Caseloads Have Burgeoned (GAO/T-HEHS-95-120, Mar. 27, 1995).
Social Security: New Functional Assessments for Children Raise
Eligibility Questions (GAO/HEHS-95-66, Mar. 10, 1995).
Social Security: Federal Disability Programs Face Major Issues
(GAO/T-HEHS-95-97, Mar. 2, 1995).
Supplemental Security Income: Recent Growth in the Rolls Raises
Fundamental Program Concerns (GAO/T-HEHS-95-67, Jan. 27, 1995).
Social Security: Rapid Rise in Children on SSI Disability Rolls
Follows New Regulations (GAO/HEHS-94-225, Sept. 9, 1994).
Social Security: Disability Rolls Keep Growing, While Explanations
Remain Elusive (GAO/HEHS-94-34, Feb. 8, 1994).
Vocational Rehabilitation: Evidence for Federal Program's
Effectiveness Is Mixed (GAO/PEMD-93-19, Aug. 27, 1993).
*** End of document. ***