October 28, 2013
Recently, 60 Minutes ran a report titled “Disability, USA” that depicted Social Security’s disability program as wasteful and rife with fraud and abuse. This came soon after a report on NPR’s Planet Money made similar charges, both of which were quickly denounced as misleading and missing essential facts. The real story is that the disability program has high standards, low fraud rates, and very modest benefit rates. In fact, award rates at all levels of the process fell by approximately six percent during the recent recession, and award rates at the administrative law judge level have fallen even more dramatically – by more than 10 percent.
Over 177,541 disabled South Carolina workers, many with families and children, depend on federal disability benefits to meet their living expenses. Each year over $13.67 billion in Social Security retirement, survivors, and disability benefits flow into South Carolina. The disability program constitutes approximately 17.7 percent of that amount – over $2.41 billion annually. Each year, another $711.5 million flows into the state for disabled SSI beneficiaries. These are not insignificant amounts for a state whose GDP is approximately $176 billion.
The disability program will be subject to intensive scrutiny in Washington over the coming months, and major changes will have significant consequences for the disabled and our economy. Consider these facts:
1. The Social Security disability standard is the strictest in the developed world – and most applications are denied. According to the OECD (the Organisation for Economic Co-Operation and Development), the U.S. disability benefit system is the most restrictive and least generous of all member countries, excluding Korea. Fewer than four in ten applicants are approved, even after all stages of appeal.
2. Social Security’s disability programs are highly efficient and experience little fraud. The Social Security Disability Trust Fund’s administrative budget is equal to just about 2.1 percent of benefits paid out each year – much lower than that of private sector disability insurance companies. The agency’s payment accuracy rates are very high. After making program integrity a top mission, former Social Security Commissioner Michael Astrue, a George W. Bush appointee, estimated that fraud amounts to less than one percent of the disability program. The agency’s watchdog agrees that fraud is extremely rare.
3. Recent growth in the number of Americans on disability was expected and is primarily due to demographics. The recent growth in the number approved for disability was predicted in the mid 1990s. According to Social Security’s actuaries, most of the growth is due to demographics, including baby boomers aging into high disability years, the number of women who became eligible for disability insurance when they entered the workforce in greater numbers during the 1970s and 80s, and the increase in the Social Security retirement age passed under President Reagan.
4. Growth in the program has little to do with the recession. The claim that disability rolls have exploded as a result of unemployment from the Great Recession is a popular but inaccurate assumption. According to the chief actuary of Social Security, the economic downturn was responsible for only five percent of the disability program’s growth.
5. Disability benefits are very modest. Disability insurance benefits average $1,130 a month, just over the federal poverty level for a single person, or about $37 per day. Disability insurance typically replaces less than half of an individual’s previous earnings. Supplemental Social Security income benefits average just over $500 per month, about half the federal poverty level and less than $17 per day. For most beneficiaries, disability benefits make up most or all of their income.
6. Private long term disability insurance coverage is not available to most workers. According to the Bureau of Labor Statistics, just one in three private sector workers has access to employer-provided long-term disability insurance, and plans are often less adequate than Social Security. Access is especially limited for low-wage workers—only seven percent of workers making under $12 an hour have employer-provided plans. By contrast, over 68% of all women and 74% of all men aged 20 to 64 are covered under the federal Social Security disability program. By contrast, over 68% of all women and 74% of all men aged 20 to 64 are covered under the federal Social Security disability program.
7. We can ensure Social Security’s long-term solvency without cutting benefits. As the baby boomers age into retirement, the increase in federal disability rolls has begun to level off and is projected to decline further in the coming years. The fact that the Disability Insurance Trust Fund is currently projected to be exhausted in 2016 is not a new development nor unprecedented. Congress has “reallocated” payroll tax revenues between the retirement and disability trust funds nearly a dozen times to account for demographic shifts. The last time reallocation was performed (in 1994), actuaries accurately projected that reallocation would again be necessary in 2016. As it has in the past, Congress could reallocate payroll taxes across the two trust funds to ensure that both funds would remain solvent until 2033.
Reform of our federal public benefit systems will be at the forefront of budget negotiations in Congress, and public opinion, particularly that of the business community will play a major role in that process. It would be a great disservice to the well-being of our disabled citizens and our economy for that debate to be driven by emotion and media hype rather than careful and objective evaluation of the facts.
Robertson H. Wendt, Jr., a Charleston attorney, is a board certified Social Security disability specialist and one of just two in the state. He can be reached at firstname.lastname@example.org or 843-723-6555.