NCPA - National Center for Policy Analysis

Federal Disability Insurance Nears Collapse

June 20, 2012

For years, members of Congress have dithered over how to shore up the rapidly dwindling coffers of Social Security and Medicare.  Yet chances are you haven't heard any dire warnings about another massive entitlement program that will soon go insolvent if Congress doesn't act -- disability insurance, says BusinessWeek.

Lawmakers have studiously avoided this issue and aren't likely to address it during an election year.  This is especially troubling given the financial woes of disability insurance.  The program is currently facing a record number of enrollees and has little additional revenue with which to cover them.

  • The pot of money that funds the program is projected to be empty by 2016.
  • While federal funding from other sources covers 79 percent of disability insurance payments, this leaves 21 percent uncovered after the disability insurance fund is empty.
  • Neither President Obama nor House Budget Committee Chairman Paul Ryan (R-Wis.) addressed this issue in their proposed national budgets.

Senator Tom Coburn (R-Okla.) argues that the underlying problem is the bad economy.

  • The disability rolls have swollen 23 percent since 2007.
  • Disability benefits pay an average of $1,111 a month per worker.
  • In West Virginia, 9 percent of residents from the ages of 18 to 64 received the aid in 2010, the most of any state.
  • Last year the program cost taxpayers $132 billion -- more than the annual budgets of the Departments of Agriculture, Homeland Security, Commerce, Labor, the Interior, and Justice combined.

One of the greatest concerns regarding disability insurance is dependency.  This is especially important because it is believed that many participating in the program might not belong there.

  • Because disability recipients become enrolled in Medicare automatically after a two-year waiting period, the prospect of returning to work becomes more attractive.
  • Less than 1 percent of those who begin collecting disability go back to work, government statistics show.
  • Furthermore, periodic reviews meant to ensure that people drawing government checks actually are entitled to them aren't getting done; the Social Security Administration says it doesn't have the funds to clear a backlog of 1.4 million reviews.

Source: Brian Faler, "Federal Disability Insurance Nears Collapse," BusinessWeek, May 31, 2012.


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