Disability on Life Support

Though anyone who can do simple math should have seen it coming decades ago, both the media and many in Washington are wringing their hands as though the current economic crisis was unexpected. A prime example is what we are now being told about the fragility of the Social Security’s disability program.

Claims for disability benefits almost always rise during temporary economic downturns. “It’s primarily economic desperation,” said Social Security Commissioner Michael Astrue. “People on the margins who get bad news in terms of a layoff and have no other place to go, and they take a shot at disability.” Fortunately, the majority of people in the past did not want to be on government assistance and quickly returned to some kind of gainful employment as quickly as was physically possible.

Applications for disability benefits are up nearly 50 percent from a decade ago, as people with disabilities lose their jobs and can’t find new ones in an economy that has shed nearly 7 million jobs. The rate of the rise is staggering. 3.3 million people are expected to apply for federal disability benefits in 2011. That’s up 700,000 from 2010 and over a million since 1999.

While some of the factors for this increase were unexpected, one major one was not. Baby boomers are flooding Social Security’s disability program with benefit claims and pushing the financially impoverished system toward the threshold of insolvency. Recent Congressional estimates point to the trust fund that supports Social Security disability running out of money by 2017. Unless Congress does something it has failed to do in the past—act—that means we are just over five years away from the collapse of the disability system.

The trustees who oversee Social Security have urged Congress to reallocate monies from the retirement program as was done in 1994. Of course, even that action would only allow for short-term relief at the expense of weakening a retirement program that is gasping for air itself.

Charles Blahous, one of the public trustees who oversee Social Security, notes that the disability program “got into trouble first because of liberalization of eligibility standards in the 1980s. Then it got another shove into bigger trouble during the recent recession.” The result is that they are currently over 13.5 million people receiving either disability benefits through Social Security or Supplemental Security Income.

One problem is overpayment and payments of benefits to those who are not qualified. The deficit reduction package that was enacted will allow Congress to boost Social Security’s budget by about $4 billion over the next decade to invest in programs that identify people who no longer qualify for disability benefits. The Congressional Budget Office estimates that increased enforcement would save nearly $12 billion over the next decade.

But fraud and overpayments is hardly the majority of the problem. The application process itself is a nightmare for legitimate applicants. Almost two-thirds of initial applications are rejected. Most of these people drop their claims, but those willing go through an appeals process that can take two years or more generally do receive benefits. Like the Federal tax system, the result is a process overloaded with litigation leaving as much as 40 percent of all initial disability benefits going to attorneys rather than those who need the money most.

Like other aspects of the current economic situation, the disability system is based on fifty-year-old assumptions that no longer hold up. Our aging population, shrinking dollar, and generally ineffective lawmakers have created a perfect storm that everyone could see on the horizon but few were willing to do anything about.

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Disability facts from the American Association of Disabled Persons

There are 48.9 million Americans with a disability. This represents 19.4 percent of the total population of the United States. In other words, nearly one in five Americans has some type of disability. There are 24.1 million people who have a severe disability, which represents 9.6 percent of the total population.

There are 29.5 million Americans with disabilities who are between the work ages of fifteen and sixty-four. Of these individuals, 13.2 million have a severe disability. Within the other age groups, 2.9 million children have a disability, and 16.5 million adults sixty-five and older have a disability. The sixty-five and older group is the most severely disabled. Of the 16.5 million adults in this age range with a disability, 10.4 million have a severe disability.