Social Security Disability Insurance: Too Much Through the Cracks?



The Social Security Administration’s Disability Insurance program is, according to the organization, the nation’s largest cash assistance program for workers with disabilities. In fiscal 2011, the most recent year for which there is complete data, the SSA paid out $128 billion in disability benefits to more than 10 million Americans who had either terminal or long-term illnesses or disabilities that prevented them from being gainfully employed.

The program is an enormously important safety net for millions of Americans. Monthly payments to those who qualify usually fall within a range between $700 and $1,400 per month. In order to qualify for disability insurance, applicants must have “worked some part of five of the last ten years before you became disabled.” Applicants must go through a five-month waiting period during which monthly income cannot exceed $1,000 — any more than this, and the applicant is considered gainfully employed. After qualifying, if a recipient finds work, he or she begins a nine-month trial period. If that person works for longer than nine months, he or she is disqualified.

Enforcement of these conditions by the SSA is fairly rigorous, but a recently released report from the Government Accountability Office reveals that there may be more improper payments slipping through the cracks than previously thought.

From the GAO report:

“On the basis of analyzing Social Security Administration (SSA) data on individuals who were Disability Insurance (DI) beneficiaries as of December 2010 and earnings data from the National Directory of New Hires (NDNH), GAO estimates that SSA made $1.29 billion in potential cash benefit overpayments to about 36,000 individuals as of January 2013. … These DI beneficiaries represent an estimated 0.4 percent of all primary DI beneficiaries as of December 2010.”

The news is a small black eye for the program. The amount of money supposedly overpaid is enormous, but small in comparison to the size of the program, which makes the scale of the problem awkward to diagnose.

All told, at the end of 2012, the Federal Old-Age and Survivors Insurance and Federal Disability Insurance program was providing benefit payments to approximately 57 million people. This group consisted of 40 million retired workers, 6 million survivors of retired workers, 11 million disabled workers, and all their dependents. Total expenditures for the year were $786 billion.

Earlier this year, the board of trustees of the OASDI trust funds delivered its 2013 annual report to Congress, in which it said there is a problem facing the Social Security Program.

Total income — i.e., taxes collected that are appropriated for the OASDI program — was $840 billion, consisting of $731 billion in non-interest income, and $109 billion in interest earnings. This meant that the program was running at a pre-interest deficit of $169 billion, largely due to a temporary reduction in the Social Security payroll tax in 2011 and 2012 (the program ran a pre-interest deficit in 2011, as well). In 2013, with more revenue coming in, the program is expected to run a pre-interest deficit of $79 billion.

The future from here is not too hard to predict. Baby boomers are aging and life expectancy is increasing — there will be more people retired for longer in the future, and Social Security expenditures will increase at a faster rate than the program can be funded.

“Beginning in 2021,” reads the report, “annual cost exceeds total income, and therefore reserves begin to decline. … The dollar level of the combined trust fund reserves declines beginning in 2021 until reserves are depleted in 2033.”

The disability trust fund could hit trouble much earlier — as soon as 2016 — if corrective or emergency measures are not taken.

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