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Home Publications Blogs Beat the Press The Continuing Attack on Disability Beneficiaries

The Continuing Attack on Disability Beneficiaries

Wednesday, 11 June 2014 04:23

The media have spent a great deal of time in the last few years highlighting the money paid out to people on Social Security disability. Associated Press was on the job again yesterday with an article that highlighted four administrative judges employed by the Social Security Administration who approve almost all the cases that are brought to them. There are many important facts that are left out of this piece.

First, these judges were deliberately selected by the House Oversight Committee because they were outliers who approve a high percentage of the cases brought to them. The Social Security Administration has almost 1400 administrative judges. Undoubtedly many are also outliers on the other side, denying most of the cases brought to them. A serious news story would have pointed out that these judges are atypical.

The piece was also misleading in telling readers:

"Lifetime benefits average about $300,000, according to the report, so Krafsur's [one of the four judges] cases will lead to nearly $1.8 billion in benefits."

The average disability benefit is roughly $1,150 a month. If the average period for collecting benefits is 15 years (almost certainly an overstatement, since most beneficiaries first become eligible in their 50s), this would imply benefits of $207,000. It is possible that the $300,000 includes Medicare payments. (Disability beneficiaries are eligible for Medicare after two years.)

If so, counting these benefits is seriously misleading for several reasons. First, Medicare is paid out of a separate fund so its does not affect the solvency of the Disability program. Also, most of these people would have low incomes and therefore be eligible for Medicaid, even if they were turned down for disability. This means there is little or no net cost to taxpayers from having them receive Medicare. Finally, most people would likely see this number and think beneficiaries are seeing $300,000 in cash.

It would have been worth pointing out that just over one-third of applicants for disability get approved. The people who appeal their initial denial to a disability judge likely exclude most of the marginal cases, (it takes time and generally lawyers' fees to file an appeal), so it would not be surprising that a high percentage will be approved. A recent study by the University of Michigan examined the work experience of marginal applicants who were denied disability by administrative judges. Of this group, which comprised 25 percent of all applicants, it found that only 28 percent of these people were employed two years after being turned down. Even among this group (7 percent of all applicants)average earnings was only half of what it had been before they had applied for disability. That suggests that the vast majority of this marginal group really are experiencing difficulty in working.

While the piece notes the sharp rise in the share of the workforce on disability it would have been useful to point out that the main reason is the aging of the baby boom cohort into the prime years for receiving disability and the increase in the age for receiving full Social Security benefits from 65 to 66. It would also have been worth noting that the United States ranks near the bottom of wealthy countries in the share of GDP going to disability benefits. Disability benefits comes to 0.9 percent of GDP in the United States, by comparison Germany pays out 1.7 percent of GDP ($290 billion a year in the U.S.) for disability benefits.



Comments (8)Add Comment
It is great that you put this in context
written by cemmcs, June 11, 2014 6:23
It 's very helpful when you put these stories in context. Let's hope the media follows suit. Thanks
written by djb, June 11, 2014 6:49
Not to mention that as jobs become scarcer....

Job performance standards tend to rise... making if more difficult succeed at the job

This will push more marginally disabled people out of the work force
Skewed Benefit Total Includes Health Care Payments
written by Robert Salzberg, June 11, 2014 8:09
Dr. Baker guessed right. The $300,000 figure includes Medicare and Medicaid payments.

From page 3 of the House report:

"The Social Security Administration (SSA) administers two large federal disability programs: the Social Security Disability Insurance program (SSDI) and the Supplemental Security Income program (SSI). There are currently about 19.4 million individuals receiving about $200 billion in benefits through these two programs.1 In addition to the direct cash 2 benefit, individuals enrolled in SSDI for two years are automatically enrolled in Medicare. Medicare currently spends about $80 billion on SSDI beneficiaries.3 Moreover, individuals enrolled in SSI are automatically eligible for Medicaid."

"The average lifetime disability benefit, including the benefit from programs linked to enrollment in a disability program, is estimated at $300,000.7 "

First round effects
written by Tray Bein', June 11, 2014 9:13
The article could also have mentioned that some examiners tend to deny even valid claims, which results in a larger number of successful appeals. Why not cherry pick that? Oh yeah, it doesn't fit the VSP narrative.
written by Last Mover, June 11, 2014 9:34

What? Judges making decisions that should be made by free markets? Who do these people think they are? The 1% who have been effectively paying off judges for decades to decide market outcomes in their favor because they are too cripple to earn what they receive?
These judges are indeed outliers
written by Jim, June 11, 2014 11:25
Thanks a lot for this post. I particularly appreciate the comparison with Germany, so often touted as a paragon of Calvinist virtue despite having a far more generous welfare state than the US or Southern Europe.

I just wanted to note that the Social Security Administration publishes the grant rates for all 1400 of its Administrative Law Judges on its website: http://www.ssa.gov/appeals/Dat...Data.html. This data confirms that the judges selected by the oversight committee are indeed significant outliers. From last September through the end of May, numerous judges rendered far more unfavorable decisions than favorable ones.

written by Floccina, June 11, 2014 3:22
I would seem better to give every adult USA citizen $200/week and get rid of SS disability and SS for that matter, along with food stamps, minimum wage and some other programs. Why are we stuck with government giving some disability who should not get it, and refusing some who should get it. Why does the USA government do things such bad ways?
You forgot the sarcasm tag Floccina
written by AndrewS, June 11, 2014 7:57
Why are we stuck with judges that do not always make perfect decisions? Is that really your question?

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.