Smackdown Of Chief Actuary!

     From an op ed piece by Gary King and Samir Soneji of Harvard in today's New York Times:

What’s not [widely known] is that the Social Security Administration underestimates how long Americans will live and how much the trust funds will need to pay out — to the tune of $800 billion by 2031, more than the current annual defense budget — and that the trust funds will run out, if nothing is done, two years earlier than the government has predicted...

[T]he government’s methods for forecasting Americans’ longevity were outdated and omitted crucial health and demographic factors. Historic declines in smoking and improvements in the prevention and treatment of cardiovascular disease are adding years of life that the government hasn’t accounted for. ...

This omission can be explained by the fact that the Office of the Chief Actuary, the branch of the Social Security Administration that is responsible for the forecasts, is almost exclusively composed of, well, actuaries — without any serious representation of statisticians or social science methodologists.

      Wow! An academic smackdown of actuaries! That will really rivet the nation's attention!
     There are at least a couple of lines of response to this. First, longevity is only one element in the forecast for the Social Security retirement trust fund. Rates of economic growth, interest on federal debt obligations, female fertility (that is, the average number of children that women bear) and immigration are also major factors in producing the actuarial estimates. The economic elements are the biggest imponderables. On the whole, a two year error isn't a big deal and is likely to be overwhelmed by errors in predicting future economic growth and interest rates. Those errors could go in either direction but historically, Social Security's actuaries have erred on the side of caution. The trust funds have almost always held up better than the actuaries predicted.  Dean Baker at the Center for Economic and Policy Research states the other line of response:

Based on their projections of life expectancy, King and Soneji calculate that in 2031 Social Security will cost about 0.65 percentage points more than the trustees currently project measured as a share of taxable payroll. This comes to 0.25 percentage points measured as a share of GDP.

Should we be scared by this? Well, the amount is certainly not trivial, but the increase in defense spending associated with the wars in Iraq and Afghanistan came to 1.7 percent of GDP. So, we have dealt with much bigger expenses without too much disruption to the economy. So if King and Soneji's projections prove accurate, Social Security will not exactly be breaking the bank.

Fee Payment Numbers

     Social Security has released updated numbers on payments of fees to attorneys and some others for representing claimants before the agency. These fees are withheld from the past due benefits of the claimants involved. The attorneys involved pay a user fee for this service. The fees are paid at about the same time as the claimant is paid. These numbers give some indication of how quickly or slowly that the agency is able to process claimants onto benefits after they are approved.

Fee Payments
Month/Year	Volume	Amount
Jan-12	29,926	89,749,312.99
Feb-12	43,946	134,207,416.10
Mar-12	47,376	139,571,577.57
Apr-12	38,239	113,225,483.07
May-12	37,648	112,446,283.39
June-12	43,816	128,559,225.66
July-12	33,342	97,458,955.82
Aug-12	41,441	119,484,061.59
Sept-12	38,393	115,676,630.23
Oct-12	29,646	84,612,068.75
Nov-12	37,384	110,226,459.65
Dec-12	34,780	104,926,570.07

NCSSMA Newsletter

     The National Council of Social Security Management Associations (NCSSMA), an organization of Social Security management personnel, has issued its December 2012 newsletter. Much of the newsletter is devoted to NCSSMA's recent annual meeting. Mary Glenn-Croft, Social Security's Deputy Commissioner for Operations spoke at the meeting. She predicted that the agency's employees would be down to 41,258 in the current fiscal year from 48,261 in FY 2010. She must have been talking about field office personnel.

     Of interest to those who represent Social Security claimants is this resolution adopted by NCSSMA:

NCSSMA will work with the Commissioner and the Deputy Commissioner for Operations to advocate for the expansion of representative access to electronic folders to reduce, and eventually eliminate the need for field offices and teleservice centers to burn compact disc copies and respond to requests for disability claim status from for-profit third-party representatives.

Benefits Authorizer Sentenced To Two Years In Prison For Fraud

     The Associated Press reports that Christopher George Perry has been sentenced to two years in prison for collecting Social Security disability benefits while working in Baltimore as a benefits authorizer for Social Security. He was overpaid by more than $150,000.

Poll

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The WHO ICF And Social Security

     Social Security has published today in the Federal Register a request for comments from other government agencies on how it might incorporate the World Health Organization's (WHO's) International Classification of Functioning, Disability and Health (ICF).
     Social Security can't possibly have a specific intention in publishing this request since the current Commissioner of Social Security leaves office in less than three weeks and no one knows who will succeed him. So what might this portend? Australia has recently gone through a process to incorporate the ICF into its disability determination. Take a look at what the Aussies ended up with. It involves a lot of vague terms such as mild, moderate, severe and extreme that have proven to be be indefinable in U.S. disability determination. (U.S. Social Security defines "moderate" as more than "mild" and less than "severe" and "severe" as more than "moderate" and less than "extreme.") The Aussie system also involves a point system -- as in 5 points for mild, 10 points for moderate, 20 points for severe and 30 points for extreme. Apparently, there is some explicit consideration of work capacity as well as consideration of the labor market at some point. 

     What happened in Australia was probably far from inevitable once the decision was made to use the ICF. My very, very early impression is that ICF does not dictate any process for determining disability; it looks like an empty glass into which you can pour whatever you want.

     If Social Security wants to completely redo determination of disability, ICF would be a way of doing it. Whether the change would be for the better or worse would be determined as we go along. At least, we're likely to have a Democrat as Commissioner of Social Security for the next six years.

     The ICF would also be a great way of telling Congress that wonderful changes are on the way -- and, by the way, Congress, could you allow interfund borrowing so the Disability Trust Fund doesn't run out of money before we get these wonderful changes in effect? Those of you who remember former Commissioner Barnhart may recall how her wonderful "plan" kept Congress off her back about those awful hearing backlogs for six years. Introduction of her "plan" always seemed just around the corner. In the end, Barnhart introduced her "plan" as she was about to leave office. Barnhart's "plan" turned out to be worthless and was quickly abandoned by her successor. I doubt this came as a surprise or disappointment to Barnhart. Her "plan" was probably a success in her eyes since it had achieved its goal of keeping Congress off her back. My rule is to beware of any plan that a public official is just starting to implement as he or she is leaving office. If the public official really had a great idea, he or she would have implemented it long before leaving office. Still, the ICF could be a useful tool to help persuade Congress to allow interfund borrowing.

Happy New Year

Over The Cliff

     The House of Representatives is shutting down for the day without taking action on a fiscal cliff deal meaning we're going over the cliff at least for a day. There is no fiscal cliff deal at this point anyway. Will there be one before January 2? Stay tuned.