Reforming Social Security Disability Insurance Could Save Taxpayers Billions

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Incentivizing Work Key to Comprehensive Change: NCPA Report

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There are so many things wrong with the Disability Insurance program. Besides the recent issues of fraud and improper payments, the structure of the program as a whole provides little incentive for beneficiaries to get back to work.

Despite improvements in health care options and workplace accommodations, the number of individuals receiving disability payments has skyrocketed over previous decades, which will deplete the Disability Trust Fund by 2016, according to a new report by National Center for Policy Analysis Senior Fellow Pam Villarreal.

“There are so many things wrong with the Disability Insurance program,” says Villarreal. “Besides the recent issues of fraud and improper payments, the structure of the program as a whole provides little incentive for beneficiaries to get back to work.”

According to the report, four reforms could slow the depletion of the Disability Trust Fund and improve the functioning of the program:

  •     Account for varying degrees of disability. Varying payments based on degree of disability in a manner similar to the Veterans Disability system could be the greatest cost saving measure for the SSDI, possibly saving the program over $12 billion a year.
  •     Prioritize Continuing Disability Reviews. The Social Security Administration’s Office of the Inspector General found that every dollar spend on Continuing Disability Reviews yields $9 in cost savings. Restoring dedicated funding to ensure the program’s integrity could save tens of millions of dollars.
  •     Eliminate the “Ticket to Work” program. The voluntary “Ticket to Work” program, which allows disability beneficiaries to work for up to three years without losing their benefits, costs the program more than it saves and results in lower annual earnings for participants than for those who leave the disability rolls.
  •     Lift the maximum monthly income limit for work. The monthly maximum on labor income penalizes working and decreases the possible payroll tax revenue used to fund the SSDI program. Lifting the income cap and reducing payments based on degree of disability would encourage able workers to return to the workforce.

“Unfortunately, the Social Security disability program treats all disabilities alike, despite the fact that some conditions can show promising improvement,” said Villarreal. “Significant changes regarding how disability is viewed and rated are essential to successful reform.”

Not All Disabilities Are Alike: Implementing a Rating System for SSDI: http://www.ncpa.org/pub/st366

The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country's most difficult public policy problems — in health care, taxes, retirement, education, energy and the environment. Visit our website today for more information.

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Catherine Daniell
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