Social Security: Disability Programs Lag in Promoting Return to Work
(Testimony, 05/23/96, GAO/T-HEHS-96-147).

GAO discussed Social Security Disability Insurance (DI) and Supplemental
Security Income (SSI) program weaknesses that impede the Social Security
Administration (SSA) from requiring beneficiaries to work. GAO noted
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) these increases were due to eligibility expansion, program
outreach, fewer continuing disability reviews, economic factors, and
demographic changes; (3) the beneficiary population is 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 require various levels
of support, remedial training, and education; (5) technological and
medical advances and economic and social changes have created more
potential for some individuals with disabilities to return to work; (6)
the SSI and DI benefit structure further complicates disability and work
capability determinations; and (7) although SSI and DI 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:  T-HEHS-96-147
     TITLE:  Social Security: Disability Programs Lag in Promoting 
             Return to Work
      DATE:  05/23/96
   SUBJECT:  Disability insurance
             Vocational rehabilitation
             Eligibility determinations
             Social security benefits
             Handicapped persons
             Federal social security programs
             Income maintenance programs
             Education or training
             Disability benefits
             Beneficiaries
IDENTIFIER:  Social Security Disability Insurance Program
             Supplemental Security Income Program
             Social Security Trust Fund
             
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Cover
================================================================ COVER


Before the Special Committee on Aging, U.S.  Senate

For Release on Delivery
Expected at
9:00 a.m.  EDT,
Wednesday,
June 5, 1996

SOCIAL SECURITY - DISABILITY
PROGRAMS LAG IN PROMOTING RETURN
TO WORK

Statement of Jane L.  Ross, Director,
Income Security Issues
Health, Education, and Human Services Division

GAO/T-HEHS-96-147

GAO/HEHS-96-147T


(106514)


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

  ADA - Americans With Disabilities Act
  DDS - Disability Determination Service
  DI - Disability Insurance
  SSA - Social Security Administration
  SSI - Supplemental Security Income
  VR - vocational rehabilitation

SOCIAL SECURITY:  DISABILITY
PROGRAMS LAG IN PROMOTING RETURN
TO WORK
============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

You asked us to discuss today ways to improve the Disability
Insurance (DI) and Supplemental Security Income (SSI) programs by
helping people with disabilities return to work.  Each week the
Social Security Administration (SSA) pays over $1 billion in cash
payments to people with disabilities on DI and SSI.  While providing
a measure of income security, these payments for the most part do
little to enhance the work capacities and promote the economic
independence of these DI and SSI recipients.  Yet societal attitudes
have shifted toward goals, as embodied in the Americans With
Disabilities Act (ADA), of economic self-sufficiency and the right of
people with disabilities to full participation in society. 

At one time, the common business practice was to encourage someone
with a disability to leave the workforce.  Today, however, a growing
number of private companies have been focusing on enabling people
with disabilities to return to work.  Moreover, medical advances and
new technologies provide more opportunities than ever for people with
disabilities to work. 

We found that the DI and SSI programs are out of sync with these
trends.  The application process places a heavy emphasis on work
incapacity, and it presumes that medical impairments preclude
employment.  And SSA does little to provide the support and
assistance that many people with disabilities need to work.  Our
April 1996 report shows, in fact, that program design and
implementation weaknesses hinder maximizing beneficiary work
potential.\1 Not surprisingly, these weaknesses also yield poor
return-to-work outcomes.  Other work we are doing for you highlights
strategies from the private sector and other countries that SSA could
use to develop administrative and legislative solutions to improve
return-to-work outcomes.  Indeed, if an additional 1 percent of the
6.3 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 $2.9 billion.\2

With this in mind, today I would like to focus on how the current
program structure impedes return to work and how strategies from
other disability systems could help restructure DI and SSI to improve
return-to-work outcomes.  To develop this information, we surveyed
people in the private sector generally recognized as leaders in
developing disability management programs that focus on
return-to-work efforts.  We also interviewed officials in Germany and
Sweden because the experiences of their social insurance programs
show that return-to-work strategies are applicable to a broad and
diverse population with a wide range of work histories, job skills,
and disabilities.  We also conducted focus groups with people
receiving disability benefits and convened a panel of disability
experts. 


--------------------
\1 This testimony is based on SSA Disability:  Program Redesign
Necessary to Encourage Return to Work (GAO/HEHS-96-62, Apr.  24,
1996) and a forthcoming GAO report on return-to-work strategies in
the U.S.  private sector, Germany, and Sweden. 

\2 The estimated reductions are based on fiscal year 1994 data
provided by SSA's actuarial staff and represent the discounted
present value of the cash benefits that would have been paid over a
lifetime if the individual had not left the disability rolls by
returning to work. 


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

DI and SSI--the two largest federal programs providing cash and
medical assistance to people with disabilities--grew rapidly between
1985 and 1994, with the enrollment of working-age people increasing
59 percent, from 4 million to 6.3 million, and the inflation-adjusted
cost of cash benefits growing by 66 percent.  Administered by SSA, DI
and SSI paid over $50 billion in cash benefits to people with
disabilities in 1994.  To be considered disabled by either program,
an adult must 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.  Moreover, 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 do any other kind of substantial work that
exists in the national economy. 

Both programs use the same definition of disability but differ in
important ways.  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 for workers who, having
worked long enough and recently enough to become insured under DI,
have lost their source of income because of disability.  Medicare
coverage is provided to DI beneficiaries after they have received
cash benefits for 24 months.  Almost 4 million working-age people
(aged 18 to 64) received about $34 billion in DI cash benefits in
1994.\3

In contrast, SSI is a means-tested income assistance program for
disabled, blind, or aged individuals regardless of their
participation in the labor force.  Established in 1972 for
individuals with low income and limited resources, SSI is financed
from general revenues.\4 In most states, SSI entitlement ensures an
individual's eligibility for Medicaid benefits.  In 1994, about 2.36
million working-age people with disabilities received SSI benefits. 
Federal SSI benefits paid to SSI beneficiaries with disabilities in
1994 equaled $18.9 billion.\5


--------------------
\3 Included among the 3.96 million DI beneficiaries are 671,000 who
were dually eligible for SSI disability benefits because of the low
level of their income and resources. 

\4 Reference to the SSI program throughout this testimony addresses
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. 

\5 The 2.36 million SSI beneficiaries do not include individuals who
were dually eligible for SSI and DI benefits.  The $18.9 billion
consists of payments to all SSI blind and disabled beneficiaries
regardless of age. 


      CASELOADS HAVE CHANGED SINCE
      THE MID-1980S
-------------------------------------------------------- Chapter 0:1.1

The composition of the DI and SSI caseloads has undergone many
changes during the last decade.  Between 1985 and 1994, DI and SSI
experienced an increase in the proportion of beneficiaries with
impairments--especially mental impairments--that keep them on the
rolls longer than in the past.  By 1994, 31 percent of DI
beneficiaries and 57 percent of SSI working-age beneficiaries had
mental impairments--conditions that have one of the longest
anticipated entitlement periods (about 16 years for DI).  In
addition, the beneficiary population has become, on average, modestly
but steadily younger since the mid-1980s.  The proportion of
working-age beneficiaries who are middle aged (aged 30 to 49) has
steadily increased--from 30 to 40 percent for DI, and from 36 to 46
percent for SSI--as the proportion who are older has declined. 


      STATUTE PROVIDES FOR
      RETURNING BENEFICIARIES TO
      WORK
-------------------------------------------------------- Chapter 0:1.2

The Social Security Act states that as many individuals applying for
disability benefits as possible should be rehabilitated into
productive activity.  To this end, people applying for disability
benefits are to be promptly referred to state vocational
rehabilitation (VR) agencies for services intended to prepare them
for work opportunities.  To reduce the risk a beneficiary faces in
trading guaranteed monthly income and premium-free medical coverage
for the uncertainties of competitive employment, the Congress also
established various work incentives to safeguard cash and medical
benefits while a beneficiary tries to return to work. 

Despite congressional attention to employment as a way to reduce
dependence, few beneficiaries leave the rolls to return to work. 
During each of the past several years, not more than 1 of every 500
DI beneficiaries has been terminated from the rolls because they
returned to work. 


      TECHNOLOGICAL ADVANCES AND
      SOCIAL CHANGE FOSTER RETURN
      TO WORK
-------------------------------------------------------- Chapter 0:1.3

While DI and SSI return-to-work outcomes have been poor, many
technological and medical advances have created more opportunities
for some individuals with disabilities to engage in work.  Electronic
communications and assistive technologies--such as scanners,
synthetic voice systems, standing wheelchairs, and modified
automobiles and vans--have given greater independence to some people
with disabilities, allowing them to tap their work potential. 
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 opportunities, particularly for
some people with physical impairments, in the growing service sector
of the economy. 

Social change has promoted greater inclusion of and participation by
some 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, ADA supports the full participation of people
with disabilities in society and fosters the expectation that people
with disabilities can and have the right to work.  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
---------------------------------------------------------- Chapter 0:2

The cumulative impact of weaknesses in the design and implementation
of the disability programs is to understate beneficiaries' work
capacity and impede efforts to improve return-to-work outcomes. 
Despite a changing beneficiary population and advances in technology
and medicine that have increased the potential for some beneficiaries
to work, the 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
rehabilitation and employment assistance. 



                          Table 1
          
               Summary of Program Design and
                 Implementation Weaknesses

Program area  Weakness
------------  --------------------------------------------
Disability    "Either/or" decision gives incentive to
determinatio  promote inabilities and minimize abilities.
n
              Lengthy application process to prove one's
              disability can erode motivation and ability
              to return to work.

Benefit       Cash and medical benefits themselves can
structure     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          "All-or-nothing" nature of DI cash benefits
incentives    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 Disability
              Determination Service (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.
----------------------------------------------------------

      WORK CAPACITY OF DI AND SSI
      BENEFICIARIES MAY BE
      UNDERSTATED
-------------------------------------------------------- Chapter 0:2.1

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 for medical conditions that are, 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 because their impairments meet
or equal the listings.  But findings of studies we reviewed generally
agree that medical conditions are a poor predictor of work
incapacity.\6 As a result, the work capacity of DI and SSI
beneficiaries may be understated. 

While disability decisions may be more clear-cut in the case of
people whose impairments inherently and permanently prevent them from
working, disability determinations may be much more difficult for
those 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 work. 


--------------------
\6 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. 


      PROGRAM WEAKNESSES IMPEDE
      EFFORTS TO IMPROVE
      RETURN-TO-WORK OUTCOMES
-------------------------------------------------------- Chapter 0:2.2

The "either/or" 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 of benefits 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.  Compounding this negative process, the
length of time required to determine eligibility can erode skills,
abilities, and habits necessary to work. 

In addition, work incentive provisions are complex, difficult to
understand, and poorly implemented.  SSA does not promote them
extensively, and as a result, 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.  Neither do they allay the fear of losing
medical coverage and other federal and state assistance that
beneficiaries who return to work may face.  Studies have identified
the risk of losing medical coverage as a major barrier to
beneficiaries' returning to work.  Beneficiaries who work and
continue to earn countable income above certain amounts will
eventually lose medical coverage even though they have not
necessarily improved medically or obtained affordable coverage
elsewhere. 

Finally, VR has played a limited role in the DI and SSI programs, in
part because of restrictive state VR policies and limits on
alternatives to providers in the state VR system.  Beneficiaries are
generally uninformed about the availability of VR services and are
given little encouragement to seek them.  Moreover, the effectiveness
of state VR services in securing long-term financial gains has been
mixed at best. 


   RETURN-TO-WORK STRATEGIES FROM
   OTHER SYSTEMS CONTRAST SHARPLY
   WITH FEDERAL DISABILITY
   PROGRAMS
---------------------------------------------------------- Chapter 0:3

In contrast to SSA's disability programs, which have changed little
over the years, some firms in the private sector are developing new
approaches to manage the size and composition of their caseloads. 
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. 

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 medical
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. 

Social insurance programs in Germany and Sweden also invest in
return-to-work efforts, and their experiences show that the utility
of return-to-work strategies is not limited to the private sector. 
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: 

  -- Intervene as soon as possible after a disabling event;

  -- Identify and provide necessary return-to-work services and
     manage cases; and

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

The practices underlying these strategies are summarized in table 2. 

Disability managers we interviewed emphasized that these
return-to-work strategies are not independent of each other and work
most effectively when integrated into a comprehensive return-to-work
program.  Return-to-work strategies and practices may hold potential
both for improving federal disability programs by helping people with
disabilities return to productive activity in the workplace and, at
the same time, for reducing program costs. 



                          Table 2
          
           Strategies and Practices in the Design
           of Return-to-Work Programs of the U.S.
             Private Sector and Other Countries

Strategies          Practices
------------------  --------------------------------------
Intervene as early  Address return-to-work goals from the
as possible after   beginning of an emerging disability.
an actual or
potentially         Provide return-to-work services at the
disabling event.    earliest appropriate time.

                    Maintain communication with workers
                    who are hospitalized or recovering at
                    home.

Identify and        Assess each individual's return-to-
provide necessary   work potential and needs.
return-to-work
assistance          Use case management techniques when
effectively.        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  Structure cash benefits to encourage
medical benefits    workers with disabilities to rejoin
to encourage        the workforce.
return to work.
                    Maintain medical 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.
----------------------------------------------------------

      EARLY INTERVENTION CRITICAL
      TO RETURN TO WORK
-------------------------------------------------------- Chapter 0:3.1

Disability managers we surveyed 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 one in two 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. 

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.  Contacting a hospitalized worker soon after an
injury or illness and then continuing to communicate with the worker
recovering at home, for instance, helps reassure the worker that
there is a job to return to and that the employer is concerned about
his or her recovery. 


      IDENTIFYING AND PROVIDING
      RETURN-TO-WORK SERVICES
      EFFECTIVELY
-------------------------------------------------------- Chapter 0:3.2

Another common strategy is to effectively identify and provide
return-to-work services.  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. 

In an effort to provide appropriate services, many in the private
sector strive to identify the individuals who are likely to be able
to return to work and then identify the specific services they need. 
In doing so, each individual should be functionally evaluated after
his or her medical condition has stabilized to assess 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 to individuals deemed to
need such services to return to work.  Transitional work allows
workers with disabilities to ease back into the workplace in jobs
that are less physically or mentally demanding than their regular
jobs. 

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,
the worker's return to work could be delayed unnecessarily.  Also, if
an employer is willing to provide transitional work opportunities or
other job accommodations, the treating physician must be aware of and
understand these accommodations. 


      WORK INCENTIVES FACILITATE
      RETURN TO WORK
-------------------------------------------------------- Chapter 0:3.3

Finally, disability managers responding to our survey generally
offered incentives through their programs' cash and medical benefit
structure to encourage workers with disabilities to return to work. 
Disability managers believe that a program's incentive structure can
affect return-to-work decisions.  The level of cash benefits paid to
workers with disabilities can affect their attitudes toward returning
to work because, if disability benefits are too generous, the
benefits can create a disincentive for participating in
return-to-work efforts.  Disability managers also believe
employer-sponsored medical benefits can provide an incentive to
return to work if returning is the way that workers with disabilities
in the private sector can best ensure that they retain medical
benefits. 

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


   RETURN-TO-WORK OUTCOMES COULD
   BE IMPROVED THROUGH
   RESTRUCTURING
---------------------------------------------------------- Chapter 0:4

Return-to-work strategies used in the U.S.  private sector and other
countries reflect expectations that people with disabilities can and
do return to work.  The DI and SSI programs, however, are out of sync
with this return-to-work focus.  Improving the DI and SSI
return-to-work outcomes requires restructuring these programs to
better identify and enhance beneficiary return-to-work capacities. 
While there is opportunity for improvement, it should be acknowledged
that many beneficiaries will be unable to return to work.  In fact,
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 others, work potential is unknown; but
research suggests that successful transitions to work may be more
likely for younger people with disabilities and for those who have
greater motivation and more education.\7

Studies have shown that a meaningful portion of DI and SSI
beneficiaries possess such characteristics.  The DI and SSI
disability rolls have been increasingly composed of a significant
number of younger individuals.  Among working-age SSI and DI
beneficiaries, one out of three is under the age of 40.\8 In
addition, in 1993, 35 percent of 84,000 DI beneficiaries 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.\9 The literature also suggests that lack of work
experience is a significant barrier to employability.\10 A promising
sign is that about one-half of DI and one-third of SSI working-age
beneficiaries had some attachment to the labor force during the 5
years immediately preceding the year of benefit award.\11

Even those who may be able to return to work will face challenges. 
For example, some may need to learn basic skills and work habits and
build self-esteem to function in the workplace.  Moreover, the nature
of some disabilities may limit full-time work, while others may cause
logistical obstacles, such as transportation difficulties.  Finally,
employer resistance to hiring people with disabilities and tight
labor market conditions, particularly for low-wage positions, could
constrain employment opportunities. 

Nevertheless, there are compelling reasons to try new approaches.  As
mentioned, our review of the disability determination process shows
that the work capacity of an individual found eligible for DI and SSI
benefits may be understated.  And this country has experienced
medical, technological, and societal advances over the past several
years that foster return to work.  But weaknesses in the design and
implementation of the DI and SSI programs mean that little has been
done to identify and encourage the productive capacities of
beneficiaries who might be able to benefit from these advances. 

Restructuring of the DI and SSI programs should consider the
return-to-work strategies employed by the U.S.  private sector and
social insurance programs in Germany and Sweden.  Lessons from these
other disability programs argue for placing greater priority on
assessing return-to-work potential soon after individuals apply for
disability benefits.  The priority in the DI and SSI programs,
however, is to determine the eligibility of applicants to receive
cash benefits, not to assess their return-to-work potential.  In
conjunction with making an early assessment of return-to-work
potential, the programs should place greater priority on identifying
and providing, at the earliest appropriate time, the medical and
vocational rehabilitation services needed to return to work.  But
under the current program design, medical and vocational
rehabilitation services are provided too late in the process. 
Finally, the programs should be designed to ensure that cash and
medical benefits encourage beneficiaries to return to work. 
Presently, however, cash and medical benefits can make it financially
advantageous to remain on the disability rolls, and many
beneficiaries fear losing their premium-free Medicare or Medicaid
benefits if they return to work. 

Although SSA faces constraints in applying the return-to-work
strategies of other disability programs, opportunities exist for
better identifying and providing the return-to-work assistance that
could enable more of SSA's beneficiaries to return to work.  Even
relatively small gains in return-to-work successes offer the
potential for significant savings in program outlays. 


--------------------
\7 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,"
paper presented at the National Academy of Social Insurance and the
National Institute for Disability and Rehabilitation Research
Workshop on Disability, Work, and Cash Benefits (Santa Monica,
Calif.:  Dec.  1994). 

\8 Annual Statistical Supplement, 1995 to the Social Security
Bulletin (Aug.  1995). 

\9 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. 

\10 Berkeley Planning Associates and Harold Russell Associates,
"Private Sector Rehabilitation:  Lessons and Options for Public
Policy," prepared for the U.S.  Department of Education, Office of
Planning, Budget, and Evaluation (Dec.  31, 1987). 

\11 M.C.  Daly, "Characteristics of SSI and SSDI Recipients in the
Years Prior to Receiving Benefits:  Evidence From the PSID,"
presented at SSA's conference on Disability Programs:  Explanations
of Recent Growth and Implications for Disability Policy (Sept. 
1995). 


   CONCLUSIONS
---------------------------------------------------------- Chapter 0:5

In our April 1996 report, we recommended that the Commissioner take
immediate action to place greater priority on return to work,
including designing a more effective means to identify and expand
beneficiaries' work capacities and better implementing existing
return-to-work mechanisms.  In line with placing greater emphasis on
return to work, we believe that the Commissioner needs to develop a
comprehensive return-to-work strategy that integrates, as
appropriate, earlier intervention, earlier identification and
provision of necessary return-to-work assistance for applicants and
beneficiaries, and changes in the structure of cash and medical
benefits.  As part of that strategy, the Commissioner needs to
identify legislative changes that would be required to implement such
a program. 


-------------------------------------------------------- Chapter 0:5.1

Mr.  Chairman, this concludes my formal remarks.  I would be happy to
answer any questions from you and other Members of the Committee. 
Thank you. 


   CONTRIBUTORS
---------------------------------------------------------- Chapter 0:6

For more information on this testimony, please call Cynthia Bascetta,
Assistant Director, at (202) 512-7207.  Other major contributors
included Carol Dawn Petersen, Senior Economist; Barbara Bordelon,
Brett Fallavollita, and Ira Spears, Senior Evaluators; and Kenneth
Daniell and Ellen Habenicht, Evaluators. 




RELATED GAO PRODUCTS
=========================================================== Appendix 1

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

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

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

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

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

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

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

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

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

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

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

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

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

Social Security:  State Vocational Rehabilitation Agencies'
Reimbursement for the Disabled (GAO/HRD-87-36BR, Feb.  3, 1987). 


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