Another U.S. 'problem' which has yet to be resolved.  Interesting the fund is set to run out of funds near the 2016 Presidential election.  You can almost hear the chants from the campaign trail.  Want to take any bets that Congress will lift a finger to reform the current program before then?  They have known for over 10 years the fund would run out of funds.  Once again they've drug their heels........and will ultimately let the (healthcare and  big pharma) lobbyist lawyers do the job as usual.  How do YOU feel the system could be repaired?

Social-Security-Disability-Trust-Fund-Chart.png?width=300Few Americans know that the tax they pay to finance Social Security gets split into two unequal parts. The larger part goes to a trust fund that supports pensions for retirees and survivors. The smaller part goes into another trust fund that finances benefits for the disabled. Usually they have no reason to care about such technicalities. That is about to change because the trust fund that supports benefits for the disabled is set to run out of money at the end of 2016. If Congress were to do nothing, benefits for just over 11 million people eligible for disability benefits would have to be cut 20 percent. The fact that those cuts would hit just about when voters go to the polls to elect the next president and a new Congress is of more than passing relevance.

Why did this problem arise? What should be done about it? What will be done about it?

The problem has arisen largely because disability rolls have grown even faster than anticipated in 1983 when Congress last enacted major Social Security legislation. Some increase was expected as the population aged and as women had enough work experience to qualify for benefits. Some occurred because the Great Recession caused a bulge in applications from would-be workers who couldn't find employment. And some occurred for reasons that are still not well understood. In any event, the payroll tax revenues dedicated to disability benefits have proved inadequate to cover costs and reserves in the disability trust fund will soon be exhausted.

Whether out of compassion or an instinct for political survival, Congress is quite unlikely to cut benefits for disabled Americans, a group that contains some of the neediest of our fellow citizens. It is quite likely to do what it has done in the past when a similar challenge arose-move to the disability insurance trust fund some of the payroll tax revenue now allocated to pay for retiree and survivors benefits.

Simply reallocating payroll taxes is not acceptable to many members of Congress in both parties. A consensus has arisen that both the design and administration of disability benefits are flawed. Critics of the program have promised to insist on reforms as a condition for agreeing to shift taxes around. Alas, agreement on just what the flaws are and what to do about them is elusive. Even worse, we lack information to undergird well-considered reforms.

The root problem is that no one is able to accurately identify who is disabled. The problem starts with the definition of disability. Under U.S. law, disability means being incapable of engaging in ‘substantial gainful activity because of an illness or physical condition expected to last at least a year or to result in death.'

(Note from Kos:  Having assisted a few friends in obtaining disability benefits, it would seem if a person can perform some form of work and earn $1000/month, you will not be considered "disabled" under the current program.  Isn't it odd that someone working for minimum wage actually earns less than this threshold?)

Physicians and others can measure impairments-the inability to see, to stand, or to lift heavy weights. They can identify skeletal abnormalities and various physical and even mental conditions. Even here, pinpoint accuracy is impossible. But linking such impairments reliably to incapacity to work is impossible. One might suppose that someone who is both deaf and blind or who is a quadruple amputee is disabled. But some people with such conditions can work, as Helen Keller and former senator Max Cleland proved. On the other hand, a series of what might seem to others to be minor impairments can render some people incapable of dealing with the demands of the workplace.

Quite simply, some people with any given set of measurable characteristics can work and some can't. Of course, the incentives people face matter as well. But whatever definition of disability Congress writes into law, there will be some people who meet the standard and work and some who do not meet the standard and don't work. Inevitably critics of the program will be able to point to slackers and malingerers who are awarded benefits and defenders of the program will be able to adduce heart-rending cases that are denied aid. The challenge for society is to choose a definition that best balances its willingness to award benefits to some people who do not ‘deserve' them and to deny benefits to some who do. The challenge is also to design incentives that encourage work but are also compassionate. Yet, whatever the rules and incentives, subjectivity and error in determining eligibility are inescapable. This fact means, in turn, that any measure that awards benefits to some who are judged undeserving of help is almost certain to deny benefits to some who genuinely need it.

Dissatisfaction with the current definition of disability is widespread. Some critics want to expand benefits. They would provide limited financial support to those with partial limitations or services that extend the duration of economic activity to those whose conditions are progressive. Such expansions would initially boost expenditures and the number of beneficiaries. Advocates claim that such services might well pay for themselves by keeping workers in the labor force or increasing their earnings capacity. The record of past interventions is not encouraging on that score.

Still others chant fraud and abuse of the system. 

Pointed out by Inquisitr the Office of Inspector General claims the SSA receives more than 150,000 fraud allegations every year, but in 2013, only around 10,000 cases were actually prosecuted. If you go by data provided by the SSA, then there were 2,640,100 applications in 2013. If we assume that the 150,000 allegations of fraud are true, then that would mean around 5.7 percent of all disability benefits applications made in 2013 would be fraudulent. But if we go only by the number of prosecutions then the fraud rate was around 0.4 percent.

Others claim that reducing disability benefits gradually as earnings increase, rather than abruptly, as is now done, would encourage current beneficiaries to return to work. Once again, the basis for such hopes is slim based on the work experience of those who have applied for and been denied disability benefits, few of whom ever work.

Dissatisfaction with the current program extends to how the program is administered. In a word, the determination process takes much too long. Just under 40 percent of the 2.5 million people who applied for benefits in 2008 were awarded benefits after an average wait of about 110 days. But roughly one third of those who are initially denied benefits go through an appeal process that takes an average of 14 months and often much longer. Roughly 750,000 people are queued waiting for their appeals to be heard. Whether one's appeal will succeed seems to depend, in some measure at least, on who hears one's case, as some judges deny most appeals, while other approve most.

The delays in determining eligibility wreak havoc. During these waits, people are discouraged from working, as significant earnings prove the earner is ineligible for benefits. Idleness erodes whatever skills they may retain. Meanwhile, those who cannot work are without sustenance, other than whatever savings they may have or the largesse of family or friends. They risk defaulting on mortgages, becoming homeless, or going bankrupt.

The reasons for administrative delay are so diverse as to cripple reform efforts. Computer software used to transfer information between states and the federal government is outmoded, hardly a surprise after the travails of Healthcare.Gov. Not all staff have adequate training. Administrative law judges who handle appeals complain about inadequate staff. Administrative and legal procedures are sloppy and delay adjudication. The number of administrative law judges is insufficient to eliminate the backlog. While some allege that administrative funding is adequate but poorly used, it is inarguable that administrative budgets have shrunk even as workloads have swelled.

In the end, there can be little doubt that benefit checks will continue to flow to those now on the disability insurance rolls. That means payroll taxes will have to be reallocated. But the debate over whether to attach conditions to such a reallocation and, if so, what conditions should be set will be a chaotic mess, based on a stunning lack of good information about what will work. If ever there were a situation in which it would be prudent to carry out demonstrations and experiments before far-reaching programmatic changes are instituted, this would be it. If ever there were a situation in which the false economy of underfunding administration was apparent, this would be it too.

Courtesy of BrookingsInstitute

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