MOST WARNINGS about skyrocketing entitlement spending come accompanied by a day of reckoning far off in the future (though that day is coming closer). Not so in a little-noticed but fast-growing corner of Social Security: coverage for those with disabilities. The latest report from the Social Security trustees found that the costs of the disability insurance program, which provides coverage to 11 million disabled workers and dependents, would exceed the amount coming in from payroll taxes by the beginning of next year. The disability insurance trust fund is on track to run out of money completely in 2016.
This is not necessarily an imminent crisis; Congress, as it has in the past, can replenish the trust fund by rejiggering the share of payroll taxes that flow to the Social Security retirement and disability accounts. But the report illustrates the disturbing growth trajectory of the disability insurance program, which paid out about $130 billion last year, or more than 20 percent of all Social Security benefits, retirement and disability combined. The accompanying cost of Medicare for these beneficiaries, who are entitled to health coverage after two years of disability, was another $90 billion.
The number of workers with disabilities has nearly tripled since 1990, growing far faster than the working-age population as a whole. A significant part of the growth is due to the aging of the population and the entrance of women into the workforce, making women who become disabled entitled to benefits. Another, likely temporary, cause is the economic downturn, during which disability claims have spiked 25 percent.
The rise in program costs is troubling, especially in an era when work has become less physically taxing, the population has become healthier and technology to allow people with disabilities to work has improved. David Autor and Mark Duggan noted in a paper for the Brookings Institution’s Hamilton Project that “one of the most common and rapidly expanding diagnoses for individuals receiving [disability] awards is mental illness,” which accounted for 20 percent of awards in the past decade, although the prevalence of mental disorders in that time has not changed.
Because of the entwined nature of the Social Security retirement and disability systems, the best approach would be to tackle both problems together and ensure that both are on a sustainable fiscal footing. The disability program is badly in need of updating, with a system designed to encourage those with disabilities to find work rather than penalizing them for doing so. Currently employers have no incentive — beyond requirements of the Americans With Disabilities Act — to accommodate workers with disabilities. Under the current either/or approach of disability determinations, workers are effectively required to give up on efforts to stay in the labor force even to be eligible to obtain benefits. The lengthy wait time for a final determination can consume years while applicants’ ability to reenter the workforce if the claim is denied diminishes. Meanwhile, those who are awarded benefits are discouraged by the rules from finding suitable work.
Still, it’s important to keep in mind: This is a needy population. Benefits are modest, averaging about $1,100 a month. Sixty percent of those receiving them have a high school education or less. Almost one-fourth live below the poverty level. This piece of the safety net needs to be bolstered and modernized, not allowed to unravel.