Social Security Disability Insurance Costs Increasing

August 16, 2013

Spending on monthly Social Security Disability Insurance (SSDI) payments is exploding as the number of recipients has skyrocketed in the last 30 years, even though medical advances during the same period allow many more people to remain on the job longer than ever before. Discrimination against the disabled in the workplace has also been banned by new laws in recent years, but the dramatic rise in SSDI claims has pushed the program's insolvency date to 2016, says Veronique de Rugy, a senior research fellow of the Mercatus Center at George Mason University.

Cash payments for disabled former workers currently exceed the amount the federal government spends on food stamps and all other welfare programs combined. Spending on the SSDI program has more than doubled in the past decade, and disability payments now account for almost 20 percent of Social Security's budget.

  • Over the past 40 years, the number of Americans claiming disability benefits has increased by more than six times.
  • During that period, the average disability benefit payment rose from about $560 per month to about $1,050 per month in 2010 dollars.
  • According to a new study by Cato Institute's Tad DeHaven, the program will spend $144 billion in 2013. In real (inflation-adjusted) dollars, expenditures will have roughly doubled since 2000.

There are other troubling components to this trend:

  • As the number of disability claimants increases, the number of workers supporting them decreases. In 2012, there were 6.6 people on disability for every 100 people actively working.
  • That's double the ratio from 20 years ago and almost three times what it was in 1972. The amount of time individuals receive disability benefits is also increasing.

A 2012 study by the Richmond Federal Reserve notes that "since the economic recovery started, more than 8 million have applied for disability benefits. If recent history is any guide, more than a third of those who apply will get on the program within months."

How did we get here? As MIT economist David Autor and University of Maryland economist Mark Duggan characterized it, the purpose of SSDI was to provide early retirement benefits for those who were "totally and permanently disabled." But eligibility standards have long since changed.

Among other factors, Autor and Duggan trace the rise in benefits to loosening of eligibility rules in 1984, which "substantially liberalized the disability screening program." These changes shifted screening rules from a list of specific impairments to a process that put more weight on an applicant's reported pain or discomfort, even in the absence of a clear medical diagnosis.

Source: Veronique de Rugy "Social Security Disability Insurance Costs Are Exploding," Washington Examiner, August 7, 2013.

 

Browse more articles on Tax and Spending Issues