Last week, we spent some time discussing a recent "This American Life" segment on the extraordinary growth of federal disability insurance, which now costs $260 billion per year. There are now roughly 8.8 million Americans receiving disability benefits, a number that has doubled since 1995.
Three big demographic factors are at work here. First, as the U.S. population ages, people are more likely to become physically disabled, especially if they're working in manual labor. Second, Congress has hiked the retirement age for Social Security over the years — in fact, about 5 percent of current disability recipients would simply be on ordinary Social Security had Congress not changed the rules.
Third, many more women have been qualifying for disability insurance since the 1980s because there are many more women in the workforce, period.
If one controls for those three demographic factors, the rise looks somewhat more gradual, with the percentage of workers on disability going from 3.5 percent in 1995 to 4.6 percent in 2012:
And these three factors won't continue forever: Ruffing writes that the disability program is currently at "its peak demographic stress," with the rolls expected to shrink in the coming years as many current beneficiaries age into Social Security and Medicare.
That said, demographics aren't the whole story. The program is still growing even after controlling for age and gender dynamics. In her recent testimony to Congress, Ruffing runs through some of the other possible factors. For instance, the changing economy has made it harder for older workers with less education to find jobs. (States with lower education levels tend to have far more workers on disability.) And the surging cost of health insurance over the years has pushed more people with ailments to seek out federal disability insurance in order to get care.
Interestingly, however, Ruffing is skeptical that the current recession created a surge of beneficiaries. "[E]conomists generally find that while a sour economy significantly boosts applications to the program, it has a much smaller effect on awards," she notes. "The implication is that economic downturns tend to attract more marginal, partially disabled applicants, but their applications are more likely to be denied."
Now, that still leaves a pressing policy issue here. The disability insurance program is underfunded and is expected to exhaust its trust fund by 2016. At that point, benefits will get cut sharply unless Congress makes alterations. But, says Ruffing, lawmakers have known about this issue for more than a decade and it "should not be considered evidence that the program is out of control." She offers some recommendations for fixing disability insurance here.
— Ezra Klein interviewed Chana Joffe-Walt on her story about disability insurance.
— I talked to Harold Pollack of the University of Chicago about some of the things "This American Life" missed. In particular, the recent rise in children receiving supplemental disability insurance appears to be closely tied to the rise in child poverty.
— Dylan Matthews looked at five proposals for reforming disability insurance.