Social Security Disability

The Disability Insurance (DI) and Supplemental Security Income (SSI) programs paid 7.6 million disabled beneficiaries cash benefits totaling about $61.3 billion in 1998. Fewer than one percent of DI and few SSI beneficiaries leave the rolls to return to work each year. If an additional one percent were to return to work, lifetime cash benefits would be reduced by an estimated $3 billion. The work capacity of DI and SSI beneficiaries may be understated because medical condition is a poor predictor of work incapacity, and nonmedical factors may play a crucial role in determining the extent to which people with appropriate assistance and support can work. Yet the programs' eligibility requirements and the application process encourage people to focus on their inabilities. The programs' work incentives do not overcome many beneficiaries' risk of returning to work and their complexities are difficult to understand and implement. Also, rehabilitation services are relatively inaccessible. Some proposed reforms would allow working beneficiaries to keep more of their earnings, safeguard their medical coverage, and provide tickets for vocational rehabilitation. However, because of the complex interactions between earnings and disability benefits, some types of work incentive changes may help some beneficiaries more than others. Allowing people to keep more of their earnings might cause people who are not currently in the programs to enter them and could keep some in the programs who might otherwise leave. Accurately estimating the costs of proposed reforms requires empirical analysis of entry and exit effects that is now lacking.

GAO noted that: (1) program eligibility requirements and the application process encourage people to focus on their inabilities, not their abilities; (2) moreover, work incentives offered by the programs do not overcome the risk of returning to work for many beneficiaries, and the complexities of work incentives can make them difficult to understand and challenging to implement; (3) also, there is little encouragement to use rehabilitation services, which are relatively inaccessible to beneficiaries seeking them; (4) some DI beneficiaries who work despite these program weaknesses cited improved ability to function in the work place, resulting from successful health care, and encouragement from family, friends, health care providers, and coworkers as the most important factors helping them find and maintain work; (5) GAO's analysis of some of the proposed changes to work incentives--such as gradually reducing the DI cash benefit level as earnings increase--indicates that there will be difficult trade-offs in any attempt to change work incentives; and (6) moreover, determining the effectiveness of any of these proposed policies in increasing work effort and reducing caseloads would require that major gaps in existing research be filled.