I'll jump in with a very rough estimate, $457,000. Let me explain my methodology. The amount of benefits paid last year to all Social Security disability recipients was $145,470 million. The number of people approved for Social Security disability benefits last year was 671,952. Divide $145,470 million by 671,952 and you get about $249,000. That's what I'm coming up with as a rough estimate of the value of the cash benefits. The amount of Medicare benefits paid for Social Security disability recipients was $139,996 million in 2021. Divide that by the 671,952 who were approved for benefits last year and you get $208,000 as an average value for the Medicare. Total that with the cash benefits and you get $457,000.
I don't expect you to say QED!
Why divide the gross benefits paid in a year by the number added to benefits in that year? My reasoning is that the average length of time that a person stays on disability benefits is the total number of people drawing benefits divided by the number approved per year. The total benefits paid in a year is the summation of the amounts paid to claimants still on benefits who were approved over the years. That number is effectively the amount for one year's cohort of claimants going on benefits multiplied by the average length of time they stay on benefits. I told you that my method was crude but try coming up with a better formula yourself!
Let me list some objections that I can think of for my methodology and my response:
- Those benefits aren't all being paid in one year. You need to reduce the amount to a current value by discounting it. That's what actuaries do based upon imputed interest rates. Right, but the problem is that reducing the value of an income stream to a current value only works if it's a steady income stream. Both the cash benefits and the Medicare benefits go up over time due to inflation in unpredictable ways. If you factor in the inflation protection, does it really matter that I'm not trying to reduce to current value?
- At best, you're only figuring the value of Disability Insurance Benefits. SSI only claims are worth a lot less. True, but many claimants receive both Disability Insurance Benefits and SSI so those cases are worth more. Don't these two factors roughly offset each other if you're trying to come up with an average?
- You're not figuring numbers for Disabled Widows and Widowers Benefits or for Disabled Adult Child Benefits. Yes, but those are a fairly small part of the picture. The value of Disabled Widows and Widowers benefits would be lower because of the age of these claimants. On the other hand, the value of Disabled Adult Child Benefits would have to be quite high because of the youth of those claimants.
- The number of people approved for Social Security disability benefits in 2021 was below the number approved in prior years due to Covid and other reasons. This means that the average length of time on benefits may be lower than the number on benefits divided by the number approved in 2021. In my mind, this is the most valid of the objections but I'm just trying to come up with a ballpark number.
- The value of a claim approved by an ALJ is of more interest to most people reading this blog than a general number for all claims approved. The numbers would have to be significantly higher for cases approved by ALJs since those claimants are younger on average that those approved at the Initial and Reconsideration levels. They're also less likely to have illnesses that are quickly terminal. Yes, but I have no idea how to compute a number specific to claims approved by ALJs.
- At best, you're only coming up with a dollar figure. The disability benefits approved prevent homelessness in many cases. Disability benefits recipients are able to live in greater dignity. Try living as the uninvited house guest of a relative who doesn't want you in their home but doesn't want to throw you out on the street if you think dignity doesn't matter. Maybe more importantly, approved claimants have medical treatment that allows them to live longer. All I can say to that objection is “Amen.” Social Security disability benefits have a huge value that cannot be expressed in dollars and cents.
As I said above, if you don't like my methodology try coming up with something better. If you do, please share it with us.
Also, start to think about the process used to adjudicate Social Security disability claims. Is the process commensurate with the value of what's at stake for the claimants and the taxpayers?
6 comments:
The average disability benefit is about $1,241.00 per month.
So the $249,000.00 lifetime amount would average out to receiving benefits for roughly 17 years (excluding the Medicare).
That may actually be close since most people on average aren’t found disabled until after age 50 and then the disability benefits end when they reach FRA.
The DACs and Widows/ers probably cancel out.
Part of the problem with coming up with a number is that these cases aren't decided in a "vacuum." If the claimant is denied, what are their "options?" For those like me, returning to "work" just wasn't a realistic option. Even part-time, work when you "can" was unrealistic. You have to have realistic expectations of some ability to function on a given day in order to schedule for it. So, what other options are there? Rent subsidies, SNAP benefits and Medicaid... If available, and you can qualify for them where you live. Frankly, those can be HIGHER than SSDI/Medicare benefits. When I had Medicaid, ALL medications, tests, doctor's visits were FULLY paid for by the government. Physical therapy, water therapy, hand therapy, MRIs... Even cortisone shots and high priced drugs that had no discernible effect on pain... NONE of this had any real impact on pain and didn't remotely increase my chances to return to work. While I didn't get the money the government was paying out, I can say with certainty that the government is spending LESS on me than it was before I was approved (at least in the short term).
Not the government 8:40, the working taxpayer, the "government" doesnt get the money out of thin air from a money treee orchard in DC, it gets it from our paychecks.
Despite the quibbles, I think your estimate is correct and similar to ones I have seen in the past. I like to contrast the work of representatives in these cases to that of personal injury attorneys with cases of similar value. The PI attorney looking at a claim worth almost half a million dollars puts in so much more work and effort than the representatives who appear before the Agency. To those who cry "not fair, the PI attorney will earn 1/3 of the award," I ask whether the rules of professional responsibility suggest an attorney's work product can vary with the size of her fee.
You do realize that SSDI...the I is INSURANCE. The point I was making is, denying disabled people doesn't mean "they go back to work." Some do. Most either re-apply, find other "means of support," etc. In many cases, it's largely just a matter of accounting. Medicaid often pays for far more than Medicare, without the payments from SSDI. So the true cost of denial needs to be subtracted from the "cost of approval" to get a "true" number.
The true number still comes from the working taxpayer pocket.
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