Wednesday, August 01, 2012

Social Security Disability - Incentives vs. Job Opportunities

Charles Lane is troubled by Social Security Disability Insurance, the benefit that goes to a person who has a history of employment but who becomes disabled. As presently funded, there is an actual problem with the sustainability of SSDI, and the CBO has observed,
A number of changes could be implemented to address the trust funds projected exhaustion. Some would increase revenues dedicated to the program; others would reduce outlays. One approach to reducing expenditures on DI benefits would be to establish policies that would make work a more viable option for people with disabilities. However, little evidence is available on the effectiveness of such policies, and their costs might more than offset any savings from reductions in DI benefits.
So we have a bit of a conundrum: it may be possible to help more SSDI recipients return to the workforce, but that positive step could increase the cost of the program.

Charles Lane appears to be confused the entire concept of disability insurance,
Social Security Disability Insurance, however, pays people who can show that they are too mentally or physically impaired to remain in the labor force. In short, for many workers, SSDI creates a quasi-right not to work.
I'm not sure how to respond to that. Yes, if you are disabled from work to the point that you qualify for disability insurance, public or private, you can receive those benefits in lieu of the salary you're no longer able to earn. But if you're not able to work, to call that a "quasi-right not to work" is to completely miss the point.1 Also, as Lane notes, the benefits are far from generous,
The average monthly benefit is $1,100, slightly less than the average Social Security retirement check, but after two years on SSDI, beneficiaries also get Medicare. Indeed, SSDI added $80 billion to the cost of Medicare in fiscal 2011.
Recall, we're talking about people with sufficient work histories and credits to qualify for the program. How many adult workers does Lane believe look at an average $1,100 per month benefit, an amount that may actually be as low as $500 per month depending on their work history, and conclude, "That's a sweet deal."

Lane observes that after two years of disability an injured worker can qualify for Medicare. If he wants to argue that Medicare is not free, agreed, Medicare is not free. But what does he propose as the alternative? Leaving a significant population of disabled adults uninsured? Does he imagine that being unable to get the treatment and medication they need will render disabled more employable over time?

As is the wont of a certain class of Social Security reform advocates, Lane believes that the history of the Social Security program is "haphazard" and did not properly consider the consequences of giving disability benefits to workers. His evidence for that contention? The program initially treated disability benefits as "an early-retirement program for people with cancer, heart disease and other grave physical conditions", but in the 1960's the program was modified to include all adults with a sufficient work history who "suffered from a condition rendering them unable to 'engage in substantial gainful activity' for a year or more".

You'll note at this point that there is nothing "haphazard" about that history. Congress simply found that the need for disability insurance was greater than it first thought, and expanded the program to a larger pool of working adults. And this happened half a century ago.

Lane suggests that this resulted in "undeserving"2 adults obtaining disability benefits, emphasizing at various points in his editorial, "mental and musculoskeletal ailments"3 and "people claiming crippling back aches and depression". He complains,
Both the Carter and Reagan administrations tried to cull undeserving cases, but the resulting backlash was so strong that Congress actually liberalized the rules in 1984.
The short version, in the midst of one of the worst recessions in U.S. history, realizing that the number of workers signing up for disability insurance had reached new heights, President Carter became concerned about removing people who are capable of working from SSDI, and Reagan continued that push. They pushed back, and Congress took the side of the disabled worker. Perhaps that's what Lane sees as "haphazard", that Congress would actually side with disabled workers? Perhaps he believes that any time Congress rejects a President's preferred policy, even after years of back-and-forth, the outcome is "haphazard"? Because once again the process of reform does not appear to have been haphazard.

The changes Lane describes occurred as part of a deliberate process over a period of decades. If Lane wants to argue that they were unwise, he should work on making that case.

Lane notes something that is in no way surprising, and is in fact a repeat of the phenomenon that inspired Carter to suggest reform:
Applications spike during serious recessions, as laid-off workers turn to SSDI when unemployment benefits run out. Thanks to the Great Recession, applications spiked in 2010 to an all-time high of 2.94 million, before declining slightly last year.
Let's note that the percentage of adult workers who self-describe as having a disability has not changed. What changes during a prolonged recession is that larger numbers of disabled workers apply for SSDI benefits. In relation to those workers, Lane won't even endorse the arguments of the Presidents Carter and Reagan Administrations, that a significant population of disabled workers should be booted off of SSDI. If he agrees with the outcome, it's difficult to see why Lane devoted a third of his column to a clumsy clumsy criticism of the program's evolution.
I don’t mean to imply that all, or even most, SSDI beneficiaries are malingering. Indeed, some of the recent increase in enrollment would have occurred anyway due to the aging of the population.
Lne previously argued, "There’s no evidence that workers in general are substantially less healthy than they used to be", but now he's asserting that's not actually the issue. He's arguing that older workers with genuine disabilities, unable to find work, will apply for SSDI benefits when their unemployment runs out. That's consistent with Lane's apparent belief that SSDI should primarily serve as "an early-retirement program for" disabled workers.
  1. "Employers pay nothing when their workers go on SSDI." - I commented on this when Peter Orszag wrote a weak argument for turning SSDI into some sort of private insurance program. Within the context of Lane's argument, if the problem is that people who actually have qualifying disabilities seek SSDI after years of unemployment, when their UI benefits run out, it would be an odd sort of employer-sponsored disability insurance plan that would remain available to them.

    If the goal is to turn SSDI into a form of worker's compensation, or to roll it into worker's compensation, you would create an incentive for workers to seek benefits when faced with job discipline or immediately upon losing their jobs, and would likely impose a massive cost on employers who employ marginal workers. Lane can talk all he wants about how "Under the ADA, employers who refuse to hire or promote the disabled may be liable for money damages in federal court", but employers already find ways to screen disabled workers out of the candidate pool.4 If you make them pay a percentage of a disabled worker's future disability benefit, without regard to whether the worker's disability has any relation to their job, you can expect to significantly shrink the number of job opportunities for workers who are suspected to have present or future disabilities, and can pretty much give up on the idea of getting present SSDI recipients back into the work force - if things don't work out, why would the employer want to bear the cost? ("We didn't reject the applicant because of his disability. We rejected him because he had a hole in his employment history.")

  2. "[F]or many workers... the alternative to a steady SSDI check (and, often, Medicare) would be a minimum-wage job, possibly one without insurance." - Given that SSDI benefits are low, as Lane points out on average only $1,100 per month, for a great many recipients a minimum wage job would be a step up. For those whose work histories entitle them to benefits at the higher end of the scale, it seems quite unlikely that they see SSDI as a desirable alternative to their former salaries.

    I'm not sure what Lane is trying to suggest in relation to Medicare. I expect he understands both why people with physical and mental disabilities benefit from being able to access adequate medical care, and why it is generally more difficult for somebody to return to work if they have unaddressed medical needs.

    If Lane is arguing that we should give continued benefits to workers during a transition period, let them try to return to work without losing their benefits or Medicare if things don't work out, well... guess what.

  3. "The program has no training or rehabilitation component." - The program does include some components designed to help or encourage recipients to transition back into the workforce. But as the CBO noted, there's scant evidence that programs meant to transition disabled workers back into the workforce are effective, and they can easily cost more than simply continuing their benefits.

    If Lane is taking the position that it's worth it - even if it requires raising taxes and paying for programs, the human benefit of helping injured workers get back to work with decent wages justifies the expenditure, it's unlikely that he'll get any push back from the community of disabled workers. What's he waiting for?

Lane's attempt to soft-pedal his views on SSDI are, perhaps, betrayed by his rhetorical questions,
More than 6 percent of the U.S. working-age population is on SSDI. Does that statistic represent laudable social solidarity, a scandalous excess of the welfare state, or a tragic but unavoidable idling of human resources? Or is it an expression of this country’s understandable ambivalence about exactly what we should expect from the disabled, in an age when we know that depression really does disable some people — and that a man with two prosthetic legs can run in the Olympics?
If somebody is actually disabled by depression, the analogy is not to "a man with two prosthetic legs [who] can run in the Olympics". A better analogy would be to that same guy trying to run the same race without his prosthetic legs.5 I would like to think that buried somewhere in that thought process is the idea that we should provide people with mental illness with the support, treatment and medication they need to avoid leaving the workplace, or get back to work, but somehow I don't think that's what Lane has in mind.

Lane suggests that we have "conflicting goals and sentiments" about SSDI that must be balanced. But if you are of the position that SSDI represents "laudable social solidarity" (whatever that means) or "a tragic but unavoidable idling of human resources", what's to balance? In the former case it's a net positive, and in the latter case it's in Lane's own words "unavoidable". By "balance", Lane means that those who view SSDI as a good thing or those who believe we can't do better, need to compromise by agreeing to somehow pare the program back, to make it smaller and more affordable. It's fine to argue that if you believe that SSDI is "a scandalous excess of the welfare state" or if you take a step back from any of Lane's conflicting sentiments and simply note that the present system is not financially sustainable, but if you don't believe the system is on the whole a negative, and the budgetary issue doesn't even make your list of "conflicting goals and sentiments", it's difficult to see why you would be pushing reform as an absolute necessity. You might argue, "Let's raise taxes," or "Let's cut somewhere else."

Lane suggests at the end of his column that our society should provide "a sufficient safety net for everyone who needs it", but given that he has already told us that SSDI provides a very low benefit, how much less does he propose it can pay while remaining "sufficient"? Lane argues that SSDI needs to be administered "in a more cost-effective way", but his only proposed improvement, providing better support and services to help disabled workers return to employment, is likely at best cost-neutral and is likely to require increased expenditure. And while Lane speaks of "SSDI’s growth", let's be clear that he has conceded that the present "growth" principally results from the early entry of some disabled persons into the system because of the economic downturn. The percentage of disabled workers who receive SSDI may rise during a prolonged recession, but the percentage of disable workers remains constant.

If Lane wants to reduce spending, he pretty much rules out programs that will attempt to maintain employment and facilitate return to work for people who might otherwise enroll or continue collecting SSDI. If Lane wants to provide "a sufficient safety net", it's difficult to see how reducing benefits would be acceptable to him. If we are to believe that he actually believes most SSDI beneficiaries have bona fide disabilities, seeking out and cutting off the few who don't doesn't seem like a significant money-saver. So, what does Lane have in mind?
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1. Lane gets sick days at work, I assume - if he contracts gastroenteritis, does taking a sick day constitute... a queasy-right not to work? Seriously, what's the difference? A vacation day might be a quasi-right not to work (on that day), but a sick day is driven by physical incapacity.

2. The question of who is "undeserving" is, at heart, quite political. Then, as now, the primary impetus for defining who is or is not "undeserving" and trying to get them off of SSDI seems driven primarily by the desire to cut program costs. If Lane has a proposed redefinition of "disability" that he believes will protect disabled workers while making it easier to identify those who could resume work without additional assistance, what's he waiting for?

3. Lane appears to believe that "mental and musculoskeletal ailments" didn't qualify workers for SSDI prior to 1965. In fact, if such conditions were permanent, workers could qualify for SSDI on their basis from the program's inception. The change to the program was that workers could become eligible for SSDI even if their conditions weren't permanent.

4. Lane also argues that "The Americans With Disabilities Act... enshrines the notion that every American can and should hold a job regardless of physical or mental limitations." The ADA, of course, does nothing of the sort. The purpose of the ADA, in simple terms, is to reduce barriers that keep disabled persons out of places of public accommodation and impede employment and that, when it's not unduly burdensome to do so, employers must offer "reasonable accommodation" to workers who suffer from a covered disability. If the disability genuinely prevents an applicant or employee from performing a necessary job task, an employer faces no liability concerns for declining to hire or promote a disabled person into that job.

5. It would also be appropriate to acknowledge that in both cases we're talking about exceptions - most SSDI recipients are not receiving benefits due to being diagnosed with major depression, and most people with two prosthetic legs are not running in the Olympics.

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