In late 2016, the 11 million people that rely on Social Security’s Disability Insurance program will see their benefits cut by 19 percent. The Social Security Disability Insurance Trust Fund, which supplies the program’s funding through a reserve of payroll tax revenues, will run out of money. As a result, the program will be able to pay out only as much as it takes in, about 81 percent of the promised benefits.
The sooner Congress takes action to fix this looming catastrophe, the better. Early action would reassure beneficiaries who depend on the program and ensure that a wide array of viable, substantial solutions are on the table.
The easiest way to fix the program would be to simply reallocate the portions of payroll tax revenues so that disability gets more while retirement gets less. But what’s easiest isn’t always best. Reallocation would overlook significant flaws in the disability program while making the Social Security program worse off, as a whole. The depletion of the Disability Insurance Trust Fund, while unfortunate, creates the best opportunity in years to implement positive reforms.
Bentley Hankins and Jeffrey Joy set out to find the best reforms for the Disability Insurance program, and published their results in the Summer 2015 issue of the Cato Institute’s Regulation Magazine. Both Hankins and Joy are vocational experts with the Social Security Administration.
Rather than increasing revenue or chopping benefits, the duo focused on reforming who’s eligible for disability benefits. “The reform proposals we present target the SSDI program’s eligibility criteria because they are arguably the most amenable to swift yet momentous change,” Hankins and Joy wrote. “Eligibility criteria amendments would allow for the program to be modernized by accounting for changes in factors such as national demographics and workforce patterns.”
The pair suggested reforming the Social Security Administration’s definition of disability, which has been largely unchanged since 1967. The current definition allows for a high level of subjectivity in determining who is disabled. It’s often based on whether or not a particular job is significantly available in the national economy. Instead, say the authors, a person’s employability should be the only relevant factor, regardless of occupation.
This issue also applies to the doctors and judges who do not differentiate between an applicant’s tolerance to endure symptoms and ability to work. “The unfortunate consequence of this frequent occurrence is that many SSDI applicants who possess employment potential are awarded benefits based on their tolerance rather than their capacity,” they write.
Another relic of the disability eligibility process that needs updating has to do with the requirements for a given job. The Social Security Administration references the Department of Labor’s Dictionary of Occupational Titles, which was last formally revised in 1991. The outdated nature of the definitions means the process assumes a worker is limited only to unskilled occupations, when the worker may be able to be trained quickly in semi-skilled jobs. Many such jobs were nonexistent or extremely different in 1991.
Hankins and Joy also recommended gradually raising Social Security’s retirement age, so that the average remaining life expectancy of a full retiree is 15 to 16 years. As of 2010, the average life expectancy of a 65-year-old is 17.7 years for men and 20.3 years for women.
The pair concluded, “To the extent that the incessant bickering and perpetual gridlock that defines our current political system can be set aside for the common good, we hope that these proposals are useful in offering guidance for the legislative and administrative change that is needed to safeguard our nation’s disability safety net.”
