A plan to ensure disability insurance isn’t abused has been introduced in Congress. The program could save taxpayers a substantial amount of money and maintain the proper level of funding for the truly needy.
The Social Security Disability Insurance program is intended to provide financial assistance for Americans with a work history that have experienced a disabling condition preventing them from re-entering the workforce. And yet, the program also serves many individuals who, with recovery time, treatment, adaptive technology, and training, could return to work, but never do.
The Social Security Disability Insurance Return to Work Act attempts to change this problem by instituting temporary benefits and work incentives for individuals with conditions that are likely to improve.
The bill introduced as S. 3037 by Sen. Tom Cotton, R-Ark., and Sen. Mike Lee, R-Utah, and as H.R. 5409 by Rep. French Hill, R-Ark. (co-sponsored by Reps. Glenn Grothman, R-Wis.; Robert Pittenger, R-N.C.; and Rick Allen, R-Ga.), addresses a long-standing and well-known issue. The disability insurance program as currently structured sends individuals down a dead end; too few beneficiaries ever return to work.
Current program design sets no clear expectations that individuals with marginal and temporary disabilities should return to work. With a lifetime of cash benefits and free health care benefits at stake, the incentives are further stacked against any serious return-to-work effort by beneficiaries. The Social Security Disability Insurance Return to Work Act would address both of these shortcomings.
A little background for context: To qualify for disability insurance, individuals have to prove that they are unable “to engage in any substantial gainful activity [defined as earnings of $1,130/month; $1,820/month for blind individuals] because of a medically-determinable physical or mental impairment(s) that is expected to result in death, or that has lasted or is expected to last for a continuous period of at least 12 months.”
The Social Security Administration groups beneficiaries by the likelihood that their qualifying condition(s) may improve for the purpose of reviewing beneficiaries for continued eligibility. The classifications are: 1) medical improvement expected; 2) medical improvement possible; 3) medical improvement not expected. The category determines the frequency of statutorily required continuing disability reviews to assess whether beneficiaries still meet the disability requirements of the Social Security Act.
But those reviews are generally ineffective. For starters, the Social Security Administration has fallen far behind in its responsibilities to review beneficiaries to ensure that only those who still qualify receive benefits. The agency reported a backlog of 900,000 continuing disability reviews in fiscal year 2014.
Furthermore, the Social Security Administration is required to apply a different standard when evaluating individuals for continued eligibility (Medical Improvement Review Standard) than when assessing individuals for initial disability (Initial Disability Standard). The Medical Improvement Review Standard does not assess whether the individual is considered disabled under the Social Security Act, but only whether medical improvement has occurred.
And finally, many reviews consist of nothing more than mailing beneficiaries a “check-the-box” postcard to confirm that they are still disabled. The backlog, medical improvement standard requirement, and lack of actual evaluations all contribute to keeping some individuals on the rolls that could return to work.
The Security Disability Insurance Return to Work Act would introduce a fourth disability classification. It would add a category for individuals with conditions that are likely to improve, in between those whose recovery is expected and those whose recovery is possible, but neither expected nor likely.
The act would then target temporary benefits for individuals in the first two categories, with conditions that are either expected to or likely to improve. Individuals could re-apply using an expedited process to continue benefits if they were needed for longer than the initial needs-based period called for.
The act would couple these temporary benefits with a pilot project that would allow beneficiaries to have earnings from work above the substantial gainful activity level without losing all of their temporary benefits during their needs-based benefit period. Instead, every dollar earned through work above the substantial gainful activity level would reduce a benefit dollar by 50 cents.
Whether this 50 percent marginal tax rate on every dollar of earnings above the substantial gainful activity level acts as a strong deterrent for work when coupled with temporary benefits will need to be assessed.
Jagadeesh Gokhale, a Social Security Advisory Board member, devised an inframarginal generalized benefit offset to address disincentives to work from cash cliffs, such as the one posed in this proposal. Congress may want to test out different benefit offset structures to see which one works best to accomplish congressional intent.
The Social Security Disability Insurance Return to Work Act sets the firm expectation that individuals with temporary or marginal conditions that are expected to, or likely to improve will return to work, and it allows them to re-enter the workforce before their benefits expire, enabling a smooth transition out of the program.
Congress should seriously consider this proposal. It promises to be a win-win for beneficiaries and taxpayers, by providing benefits when they are needed without encouraging permanent dependency. Congress should act soon to improve the Social Security Disability Insurance program for its beneficiaries and taxpayers, instead of waiting until a crisis demands drastic action when the program’s trust fund will be exhausted again in just seven short years.