Now We Know What's Wrong With Social Secuity Disability. It's A Case Of Hysteresis!

     From the Wall Street Journal:

The unexpectedly large number of American workers who piled into the Social Security Administration's disability program during the recession and its aftermath threatens to cost the economy tens of billions a year in lost wages and diminished tax revenues.

Signs of the problem surfaced Friday, in a dismal jobs report that showed U.S. labor force participation rates falling last month to the lowest levels since 1979, the wrong direction for an economy that instead needs new legions of working men and women to drive growth and sustain a baby boomer generation headed to retirement.

Michael Feroli, chief U.S. economist for J.P. Morgan, estimates that since the recession, the worker flight to the Social Security Disability Insurance program accounts for as much as a quarter of the puzzling drop in participation rates, a labor exodus with far-reaching economic consequences. ...

Former truck driver James Ottesen, who began receiving monthly payments in 2009, said, "I'm not real happy" about being on disability. "It kind of reminds me of welfare." He said he would "like to get re-educated to do something" because "my body is broke but my mind is not."

But even if the 53-year-old Ohio man learned of a job he could do with herniated discs, he said, the government disability program feels like "a blanket covering you, and to walk out from it…at my age, it's a little intimidating." ...

It is no longer a theoretical problem, said David Autor, a professor at the Massachusetts Institute of Technology, who has studied the disability program. The economy has a case of hysteresis, he said, created by the permanent transfer of workers to disability rolls.

Many newcomers to the disability roster are low-wage earners with limited skills, Mr. Autor said, and they are "pretty unlikely to want to forfeit economic security for a precarious job market."

Upated Fee Payment Numbers

     Social Security has issued updated numbers on payments of fees to attorneys and some others for representing Social Security claimants. These fees are withheld and paid by Social Security but come out of the back benefits of the claimants involved. The attorneys and others who have their fees withheld pay a user fee for this privilege. Since these fees are usually paid at the same time that the claimant is paid, these numbers show how quickly or slowly Social Security is able to get claimants paid after a favorable determination on their claims.

Month/Year	Volume	Amount
Jan-13	32,663	$96,690,734.65
Feb-13	35,508	$102,242,540.93
Mar-13	45,189	$130,690,281.94

Open Letter From Eight Former Social Security Commissioners

April 4, 2013 

An Open Letter from Former Commissioners of the Social Security Administration 

     As former Commissioners of the Social Security Administration (SSA), we write to express our significant concerns regarding a series recently aired on This American Life, All Things Considered, and National Public Radio stations across the U.S. ("Unfit for Work: The Startling Rise of Disability in America"). Our nation’s Social Security system serves as a vital lifeline for millions of individuals with severe disabilities. We feel compelled to share our unique insight into the Social Security system because we know firsthand the dangers of mischaracterizing the disability programs via sensational,anecdote-based media accounts, leaving vulnerable beneficiaries to pick up the pieces.           

     Approximately 1 in 5 of our fellow Americans live with disabilities, but only those with the most significant disabilities qualify for disability benefits under Title II and Title XVI of the Social Security Act. Title II Old Age, Survivors, and Disability Insurance (DI) benefits and Title XVI Supplemental Security Income (SSI) benefits provide critical support to millions of Americans with the most severe disabilities, as well as their dependents and survivors. Disabled beneficiaries often report multiple impairments, and many have such poor health that they are terminally ill: about 1 in 5 male DI beneficiaries and 1 in 7 female DI beneficiaries die within 5 years of receiving benefits. Despite their impairments, many beneficiaries at tempt work using the work incentives under the Social Security Act, and some do work part-time. For example, research by Mathematica and SSA finds that about 17 percent of beneficiaries worked in 2007. However,their earnings are generally very low (two-thirds of those who worked in 2007 earned less than $5,000 for the whole year), and only a small share are able to earn enough to be self-sufficient and leave the DI and SSI programs each year. Without Social Security or SSI, the alternatives for many beneficiaries are simply unthinkable. 

     The statutory standard for approval is very strict, and was made even more so in 1996. To implement this strict standard, Social Security Administration (SSA) regulations, policies, and procedures require extensive documentation and medical evidence at all levels of the application process. Less than one-third of initial DI and SSI applications are approved, and only about 40 percent of adult DI and SSI applicants receive benefits even after all levels of appeal. As with adults, most children who apply are denied SSI, and only the most severely impaired qualify for benefits. 

     Managing the eligibility process for the disability system is a challenging task, and errors will always occur in any system of this size.But the SSA makes every effort to pay benefits to the right person in the right amount at the right time. When an individual applies for one of SSA’s disability programs, the agency has extensive systems in place to ensure accurate decisions, and the agency is home to many dedicated public servants who take their ongoing responsibility of the proper stewardship of the programs very seriously. Program integrity is critically important and adequate funds must be available to make continued progress in quality assurance and monitoring. In the face of annual appropriations that were far below what the President requested in Fiscal Year 2011 and Fiscal Year 2012, the agency has still continued to implement many new system improvements that protect taxpayers and live up to Americans’ commitment to protect the most vulnerable in our society. 

     It is true that DI has grown significantly in the past 30 years.The growth that we’ve seen was predicted by actuaries as early as 1994 and is mostly the result of two factors:baby boomers entering their high -disability years, and women entering the workforce in large numbers in the 1970s and 1980s so that more are now "insured" for DI based on their own prior contributions. The increase in the number of children receiving SSI benefits in the past decade is similarly explained by larger economic factors, namely the increase in the number of poor and low-income children. More than 1 in 5 U.S. children live in poverty today and some 44 percent live in low-income households. Since SSI is a means-tested program, more poor and low-income children mean more children with disabilities are financially eligible for benefits. Importantly, the share of low-income children who receive SSI benefits has remained constant at less than four percent. 

     Yet, the series aired on NPR sensationalizes this growth, as well as the DI trust fund’s projected shortfall. History tells a less dramatic story. Since Social Security was enacted, Congress has "reallocated" payroll tax revenues across the OASI and DI trust funds–about equally in both directions – some 11 times to account for demographic shifts. In 1994, the last time such reallocation occurred, SSA actuaries projected that similar action would next be required in 2016. They were right on target. We are deeply concerned that the series “Unfit for Work” failed to tell the whole story and perpetuated dangerous myths about the Social Security disability programs and the people helped by this vital system. We fear that listeners may come away with an incorrect impression of the program — as opposed to an understanding of the program actually based on facts. 

     As former Commissioners of the agency, we could not sit on the sidelines and witness this one perspective on the disability programs threaten to pull the rug out from under millions of people with severe disabilities. Drastic changes to these programs would lead to drastic consequences for some of America's most vulnerable people. With the lives of so many vulnerable people at stake, it is vital that future reporting on the DI and SSI programs look at all parts of this important issue and take a balanced, careful look at how to preserve and strengthen these vital parts of our nation’s Social Security system. 

Sincerely, 

Kenneth S. Apfel 

Michael J. Astrue 

Jo Anne B. Barnhart 

Shirley S. Chater 

Herbert R. Doggette 

Louis D. Enoff 

Larry G. Massanari 

Lawrence H. Thompson

Astrue On MSNBC

     Michael Astrue was on the Chris Hayes show on MSNBC tonight arguing with some highly-opionated but poorly informed critic of Social Security disability. I'll try to find a link to the video.

Chained CPI And Disability Change Expected In Obama Budget

     From today's NY Times:

President Obama next week will take the political risk of formally proposing cuts to Social Security and Medicare in his annual budget in an effort to demonstrate his willingness to compromise with Republicans and revive prospects for a long-term deficit-reduction deal, administration officials say. ...

Mr. Obama’s budget will propose a new inflation formula that would have the effect of reducing cost-of-living payments for Social Security benefits, though with financial protections for low-income and very old beneficiaries, administration officials said. The idea, known as chained C.P.I., has infuriated some Democrats and advocacy groups to Mr. Obama’s left, and they have already mobilized in opposition.  ...

Mr. Obama will propose ... repeal of a loophole that allows people to collect both disability and unemployment benefits.

DOMA Being Declared Unconstitutional May Only Be The Beginning

      From Liz Goodwin writing at Yahoo News:

If, as many legal experts predict, the Defense of Marriage Act is struck down by the Supreme Court, advocates behind the decadeslong movement for gay rights will have won a major victory. But the decision could also create a dense legal maze for gay and lesbian married couples, one that would surely lead to more lawsuits that could make their way back to the Supreme Court. ...

If DOMA is struck down, then same-sex couples residing in states that allow gay marriage will suddenly be included in the more than 1,100 federal laws that give benefits to married couples. ...

But what about a gay couple that gets married in New York and then moves back to North Carolina, or any other of the 38 states that have explicitly banned gay marriage?

At first glance, it appears they would have no access to these rights, and that their marriage would not be recognized either by their state or the federal government ...

  [A law professor] predicts same-sex couples would sue the government, arguing that this policy violates their constitutional right to travel. ...

That would leave broad discretion to the Obama administration to define the issue administratively ... The White House could direct federal agencies like the IRS [or Social Security] to accept marriages based on where a couple got married, not where they live. ...

Who Would Have Thought?

     From an Op Ed in the Baltimore Sun:

The government in Britain recently did something interesting.

It asked everyone receiving an "incapacity benefit" -- a disability program slowly being phased out under new reforms -- to submit to a medical test to confirm they were too disabled to work. A third of recipients (878,000 people) didn't even bother and dropped out of the program rather than be examined. Of those tested, more than half (55 percent) were found fit for work, and a quarter were found fit for some work. ...

In 1960, 134 Americans were working for every officially recognized disabled worker. Five decades later that ratio fell to roughly 16 to 1.

Some defenders of the status quo say these numbers can be explained by the entry of women into the U.S. workforce, the aging of baby boomers and the short-term spike in need that came with the recession.

No doubt those are significant factors. But not nearly so significant as to explain why the number of people on disability has been doubling every 15 years (while the average age of recipients has gone down) or why such a huge proportion of claim injuries can't be corroborated by a doctor. ...

There are those who are quick to argue that this is all bogus, there's nothing amiss with the disability system that greater funding and a better economy won't fix. Maybe they're right. One way to find out would be to ask every recipient to get a thorough examination, just as they did in Britain. Maybe the results here in the United States would be interesting too.

      Wow! Doing medical re-examinations of Social Security disability recipients! Who would ever have thought this would be a good idea? Actually, the Social Security Administration would like to do these on a regular basis and keeps asking for the money it needs to do the exams -- as well as enough money to answer its phones and prevent lines outside its offices and so forth. Yes, the medical exams save money but Congress still must appropriate enough money to do the exams themselves and Congress hasn't been willing to do that. So, there we are. Don't point fingers at the Left on this issue. Point fingers at the Right.

Not Going To Happen Soon But Are You Sure It Won't Happen In The Next Ten Years?

     From the Washington Post's Wonkblog:

...[A] big new report (pdf) from the New America Foundation suggests that the conventional wisdom is exactly backward. Congress should be looking at ways to expand Social Security, not shrink it — particularly at a time when traditional corporate pensions are disappearing, and 401(k)s have proved fairly risky.

The major proposal in the report is to add a brand new benefit to Social Security, called Part B, which would provide a flat $11,699 per year to all retired workers. This would come on top of regular Social Security, which would also be protected from any further cuts. ...

So how much would this cost in taxes? Quite a bit. At the moment, Social Security is expected to experience a funding shortfall by 2033. Congress will need to raise taxes by between 1 and 1.5 percent of GDP just to maintain current benefits. On top of that, the expanded benefits proposed by New America would cost an estimated 3.7 percent of GDP. The net cost: About 5 percent of GDP. ...

Defined-benefit employer plans are vanishing. Workers aren’t saving enough or dipping into their retirement funds too often. And private-savings plans like 401(k)s or IRAs are proving quite volatile — the financial crisis wiped out an estimated $2.8 trillion from retirement plans.

As a result, fewer Americans are well-positioned for retirement: