Will Congress ever really fix Social Security Disability?

Funding for SSD is a problem, but a larger problem is Congress

Social Security Disability had a close call last fall. Beneficiaries in Tennessee and across the nation would have seen an approximately 20 percent cut to their SSD checks somewhere in the next year or so had Congress not finally acted. They transferred a small amount of the revenue stream from the retirement program into the disability program, in order to fund the obligations through 2022.

This is sometimes described as a “bailout,” but that is mostly a lie. A bailout suggests that the program was out of control and that it needed to be rescued from mismanagement. In fact, the shortfall in funding was expected, and it was projected to occur in 2016 back in 1994 when Congress last made alterations to the funding mechanism.

There are critics of the program who constantly, in shrill voices, claim there is a great deal of waste and fraud within the program. Their unstated reason for doing this is to make people believe that we do not need to increase taxes to adequately fund the program, merely stop the waste and fraud.

What is the genuine problem?

In reality, the amount of waste and fraud is very small. Of course, there is some fraud, but even if 100 percent of the fraud that exists were eliminated, it would come nowhere near the dollars necessary to adequately fund the program.

With 11 million recipients, “improvements” to any aspect of the program become very costly. There is currently a significant backlog appeals’ hearings waiting for an administrative law judge (ALJ). This is because Congress has not been willing to adequately fund the personnel requirements.

ALJs are expensive, and SSA has more of them than any federal agency. However, with hundreds of thousands of SSD applications made every year, and with almost 60 percent of initial claims denied, the agency needs even more.

There is no free lunch or CDRs

Similarly, the agency is obligated to perform continuing disability reviews (CDR), to ensure that recipients who are being paid benefits are still eligible for those benefits. This makes sense and it does help to maintain the integrity of the program.

The trouble with CDRs is this: they are expensive, and again Congress has been unwilling to adequately fund SSA to ensure they have enough staff to perform the CDRs on schedule.

While the CDRs have been shown to be cost effective, because they require a full review of the beneficiaries medical condition in order to determine whether their health has improved and they could return to work, this assessment is complex and requires highly trained examiners.

Because of the strict standards for eligibility used at the initial determination, most people on the program are unlikely to improve enough to return to work, so performing too many CDRs is costly and triggers diminishing returns, with the cost of these reviews likely to become greater than any savings realized.

Return to work?

The same is true of SSA’s return to work programs. While it is a good idea to have robust programs in place that would enable those with proper accommodations the opportunity and ability to return to work, the reality is most of those program wind up with small numbers and few people participating because most are too seriously ill to ever return to what SSA calls “substantial gainful activity.”

Action still waits

Congress has pushed its deadline back to 2022 for action, but that date is not far off. The solvency of both the disability and retirement program could be resolved quickly and reasonably with a few straightforward steps.

If Congress simply increased the amount of income subject to the FICA tax and adjusted the tax rate, along with indexing this rate to inflation, it could prevent these problems from constantly reoccurring in the future.