SSA Thinks This OIG Report Is Out Of Bounds -- I Agree

      From a recent report by Social Security's Office of Inspector General (OIG)(emphasis added):

Beneficiaries may elect to receive reduced retirement benefits as young as age 62. When beneficiaries begin receiving retirement benefits before full retirement age (FRA), the Social Security Administration (SSA) generally permanently reduces the payment amount based on the number of months before FRA they begin receiving payments.  

When disability beneficiaries elect to receive reduced retirement benefits, the reduction is not permanent, as it is for non-disability beneficiaries. Specifically, for beneficiaries who (1) were entitled to both disability and retirement benefits and (2) elected to receive reduced retirement benefits, section 202(q)(7)(F) requires that SSA pay a higher benefit amount when the beneficiary reaches FRA. 

From the Master Beneficiary Record, we identified 32,474 beneficiaries who, as of September 5, 2019, (1) had reached FRA, (2) had been entitled to disability benefits and elected to receive reduced retirement benefits, (3) were in current payment status, and (4) were entitled to a higher benefit amount at FRA. We reviewed a random sample of 100 beneficiaries from this population. 

Section 202(q)(7)(F) of the Act gave a financial advantage to 89 of 100 beneficiaries in our sample. By electing reduced retirement benefits, they received higher payments than they would have had they continued receiving disability benefits. Of the 89 beneficiaries,

70 avoided a reduction because they were receiving workers’ compensation or public disability payments;

11 increased total payments for their families; and

8 avoided a reduction because they returned to work.  

When they reached FRA, the Act provided them a financial advantage because it required that SSA remove the age-based reduction for any months the individual was entitled to both disability and reduced retirement benefits and begin paying higher retirement benefits.Because section 202(q)(7)(F) of the Act gave them an advantage, these 89 beneficiaries have already received approximately $1.8 million more in benefits since FRA. Further, 86 of the 89 beneficiaries will receive an estimated $2.4 million more in benefits because this advantage continues through the rest of their lives. We estimate this provision will result in approximately 29,000 beneficiaries receiving almost $1.4 billion in additional lifetime benefits.

We recommend SSA determine whether it should propose a change to section 202(q)(7)(F) of the Act to eliminate the financial advantage it gives to certain disability beneficiaries. SSA disagreed with our recommendation and deferred to Congress to determine whether a legislative change is necessary. ...

     OIG didn't even bother to give a justification for asking for a legislative change. The fact that the provision in question helps some beneficiaries was enough for OIG. 

     In my opinion there is nothing about the provision that OIG objects to that is abusive or that results in unreasonable results or results that Congress didn't intend.

     This OIG report apparently seemed out of bounds to Social Security. I agree with them. I don't think it's the job of OIG to second guess Congress.

I'm Not Buying It

     Workers comp insurers are trying to dispute the widely held belief that they've been increasingly successful in shifting the costs of workplace injuries on to Social Security and Medicare. I'm not buying it. It's obvious at ground level that they're able to settle cases for vastly less than the true costs of lost wages and future medical care.

Comp Cuts Causing Increase In Social Security Disablity Costs?

     The Center for Economic and Policy Research has done a study on Rising Disability Payments: Are Cuts to Workers' Compensation Part of the Story? The charts below, extracted from the report, suggest that the answer is "yes."

Workers Comp Changes Costing Social Security

     From National Public Radio (emphasis added):

Ten ranking Democrats on key Senate and House committees are urging the Labor Department to respond to a "pattern of detrimental changes in state workers' compensation laws" that have reduced protections and benefits for injured workers over the past decade. ...

The letter also referred to NPR/ProPublica stories last week that detailed an emerging trend that permits employers to dump out of state-regulated workers' comp programs, write their own injury plans and limit benefits on their own. ...

The Center for Economic and Policy Research is releasing a study Wednesday that estimates that more than 20 percent of the increase in federal disability cases is due to cuts in workers' comp programs. ...

A 2007 study by J. Paul Leigh, a health economist at the University of California, Davis, estimated that workplace injuries not covered by workers' comp cost government programs about $30 billion a year.

Federal intervention may also come as the result of the "opt out" movement in Texas and Oklahoma, in which employers shun heavily-regulated workers' comp and are permitted to write and administer their own largely-unregulated workplace injury plans. South Carolina and Tennessee are considering opt-out laws now and proponents are aiming for a dozen states by the end of the decade. ...

NCSSMA Proposals On Comp Offset

     The National Council of Social Security Management Associations (NCSSMA), an organization of Social Security management personnel, has been kind enough to send me a copy of their draft position paper on simplifying the workers compensation offset which is applied when a claimant receives both Social Security Disability Insurance Benefits and workers compensation at the same time. I've posted their position paper on the Social Security Perspectives blog (which I rarely use).

     I think everyone who has to deal with the workers compensation offset wishes it could be made simpler but, so far, there's been no consensus on how to do that. NCSSMA recommends either simplifying the offset by applying a uniform offset amount regardless of the amount of workers compensation benefits paid or somehow forcing reverse offsets on the states. 

     Applying a uniform offset amount would simplify matters some but it still leaves plenty of complexity. In some cases, Disability Insurance Benefits will be reduced by considerably more than the claimant is receiving in workers compensation. Probably the biggest problem is how to apply a uniform offset when a claimant receives a lump sum settlement of workers compensation benefits. Current law allows lump sum payments to be considered as spread over the claimant's remaining life expectancy. This has been a bit controversial but if the lump sum payment is for the claimant's disability over the claimant's remaining life expectancy what's wrong with spreading the lump sum amount over the remaining life expectancy? However, applying a flat rate reduction for the rest of a claimant's entire life would clearly be unfair. 

     Some states now reduce workers compensation benefits as a result of the receipt of Disability Insurance Benefits. Social Security does not apply an offset when the state has applied an offset. Current law limits the reverse offset to 15 states who had a reverse offset before a certain date in the past. This limitation could be removed but there is no way to force states to implement reverse offsets. Also, the NCSSMA plan would require a reverse offset for public disability benefits. That's applied to foreign social security benefits under contributory plans so you'd need to get every country in the world with a contributory social security scheme to adopt a reverse offset to eliminate thatt offset. Nationwide reverse offsets would cost the Disability Insurance Trust Fund a fair amount of money. International reverse offset would cost a little more. I'm pretty sure the reverse offset idea is going nowhere.

Social Security Not Doing Data Match With Federal Workers Comp

     The Government Accountability Office (GAO) has done a study on whether Social Security is properly reducing Disability Insurance Benefits by workers compensation benefits paid to former federal employees and found problems. GAO found that the agency was not detecting 13% of the cases where there should have been an offset and that there were probably more cases but GAO could not say for sure due to limitations in Social Security's data. The underlying cause of this problem is Social Security's failure to do a data match with federal workers compensation records. Social Security has felt that such a match would not be cost effective. I was under the impression that the agency was already doing data matches with state workers compensation records. I don't understand why they wouldn't do the same with the federal workers compensation records.

Workers Comp Cuts Costing Social Security

     From Linda DePillis writing for the Washington Post's Wonkblog:

There’s a good news/bad news situation for occupational injuries in the United States: Fewer people are getting hurt on the job. But those who do are getting less help. ...

“The cutbacks [in workers compensation] have been so drastic in some places that they virtually guarantee injured workers will plummet into poverty,” write authors Henry Grabell and Howard Berkes. “Workers often battle insurance companies for years to get the surgeries, prescriptions and basic help their doctors recommend.” ...

Somebody ends up paying for those injuries, though: taxpayers. When a worker ends up unable to work because of an injury, he or she can be covered by Social Security Disability Insurance, a program that has steadily increased in cost over the past two decades. The rise has many demographic factors behind it, but it looks like the abdication of responsibility by employers may have played a role as well.

CRS Study On UI Offset

     The Congressional Research Service is out with a report on the concurrent receipt of Social Security disability benefits and unemployment insurance benefits. The report is superficial but it does contain an estimate from Social Security's Chief Actuary that only about 0.39% of Social Security disability recipients also receive unemployment benefits. In other words, it's a tiny problem. Doing something about it wouldn't save much money.
     The report doesn't deal with the considerable technical problems in implementing an offset. Many states now have an offset that goes in the opposite direction, reducing unemployment insurance for Social Security disability benefits. How do you avoid a double offset? Similarly, Supplemental Security Income (SSI) benefits are already reduced for the receipt of unemployment benefits. Many people receive both SSI and Disability Insurance Benefits (DIB). Add an offset to DIB and you're doubly offsetting the same benefits. And there's the tax issue. Yes, the tax issue. Unemployment benefits are fully taxable. Social Security disability benefits usually aren't. If you have an offset that goes one way in some states and another one in other states, you have to add a provision to the Internal Revenue Code to equalize treatment. You say that you can't imagine that kind of provision in the Internal Revenue Code? Well, we already have such a provision in the Internal Revenue Code to equalize treatment between states that have a regular workers compensation offset and those which have a reverse offset. Here's I.R.C. 86(d)(3), for your reading pleasure:

For purposes of this section, if, by reason of section 224 of the Social Security Act (or by reason of section 3(a)(1) of the Railroad Retirement Act of 1974), any social security benefit is reduced by reason of the receipt of a benefit under a workmen’s compensation act, the term “social security benefit” includes that portion of such benefit received under the workmen’s compensation act which equals such reduction.

     Overall, it's questionable whether this sort of offset would even save money once you factor in the costs of administration. It's got superficial appeal but it's a dumb idea in my opinion.

ALJ Attitudes About Unemployment Benefits And Workers Compensation May Be Bias

     From Social Security Ruling 13-1p to be published in the Federal Register tomorrow: "Possible examples of allegations that the Appeals Council will refer to the Division of Quality Service include, 'the ALJ is biased against claimants who receive workers compensation benefits or unemployment benefits' and 'the ALJ shows prejudice toward women'.”

Does This Mean Anything?

This is from the National Academy of Social Insurance (NASI). I would not jump to the conclusion that there is a connection between these two lines. In fact, I think there probably is no connection but it is an interesting chart.

Strange Ruling In Pennsylvania

A court in Pennsylvania has ruled that a worker who files a claim for Social Security retirement benefits forfeits all rights to periodic workers compensation benefits because he has removed himself from the labor market.