Incentives needed to retain disabled workers to slow Social Security costs, report says

By Michael A. Fletcher
Washington Post Staff Writer
Friday, November 26, 2010; 11:06 PM

The government should create incentives for employers to retain disabled workers on their payrolls as a way of slowing unsustainable increases in the number of people receiving Social Security disability benefits, according to a new report.

Adding a "front end" of benefits to keep the disabled in their jobs could arrest the rapidly growing expense of the federal disability program, a problem that has largely escaped the scrutiny of policymakers, according to the report's authors at the Brookings Institution's Hamilton Project and the left-leaning Center for American Progress.

Their proposal would require workers and employers to share the cost of a modest private disability insurance package, which is between $150 and $250 a year, according to the report, which is to be officially unveiled at a Dec. 3 event in Washington.

Workers seeking to go onto the federal disability program would first have to be approved for benefits from the private policy. Those benefits would go toward rehabilitation services, partial income support and other related services, the researchers said.

After receiving private payments for two years, workers would be eligible to apply for Social Security Disability Insurance (SSDI) benefits if they believe their disabilities are too severe for them to remain in the workplace, the report says.

Currently, about 8.1 million former workers receive Social Security disability benefits, and the number of new applicants has risen sharpy with the nation's continuing economic problems.

Between 1989 and 2009 , the share of working-age adults receiving SSDI has doubled to 4.6 percent, and the cost of the program has more than tripled from $40 billion to $121 billion in the same time period, the report said.

Strikingly, the enrollment increases have not coincided with an increase in disabilities; roughly 10 percent of adults have reported disabilities in both 1989 and 2009. Instead, the enrollment increases reflect "a rising rate of dependency and a declining rate of labor force participation among adults with disabilities," the report stated.

The increase in disability rolls is especially sharp during times of high unemployment, when employers appear to have less tolerance for workers struggling with disabilities. Long term, researchers say, the increases in the disability rolls also reflect the declining rewards for low-skilled workers, whose pay has been shrinking in recent decades.

As low-income workers lose their jobs, they are increasingly turning to SSDI as a safety net. Although the government subjects them to a long and arduous qualification process, about half of applicants eventually end up in the program.

Once they are accepted into the program, which comes with Medicare benefits, 99 percent never return to work, according to government statistics.

The report contends that the pervasiveness of computers and other technology has made for fewer backbreaking jobs, and that there is no reason for disability and employability to be viewed as "mutually exclusive states," the report said.

David Autor, a Massachusetts Institute of Technology researcher who co-authored the study, acknowledged that the overall proposal would likely face huge hurdles in a political environment that is growing increasingly hostile to new government mandates.

Still, he said, "it would save money. This would be a cost-effective way of dealing with the growth" in the Social Security disability program.

With the Obama administration and members of Congress talking about the need to rein in entitlement costs, researchers are hoping that reforming the disability program will become part of that discussion.

"People have not telescoped in on disability programs," said Mark Duggan, a University of Maryland researcher and the report's other co-author. "Past proposals to address problems with Social Security have tended not to touch SSDI. But the program has been growing really rapidly, which has coincided with a deteriorating employment situation for individuals with disabilities."

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