Smart SpendingSmart Spending

Federal disability program running out of money

The Social Security trust fund that makes payments to disabled workers will be depleted by 2016. Why isn't this considered a crisis?

By Donna_Freedman Jun 3, 2013 9:41AM
Senior man in wheelchair looking out window © Tetra Images, Getty ImagesOn May 31, the Associated Press reported that Medicare looks a little better and Social Security doesn't look any worse. The Medicare inpatient care fund should last until 2026, two years longer than previously estimated, and Social Security will be solvent until 2033, as predicted last year.

Depending on the media outlet this information was reported as positive ("It's not as bad as we thought") or gloomy ("Only two decades left to come up with solutions").

What wasn't reported so much as glossed over was the fact that the Social Security Disability Insurance program's trust fund will be exhausted by 2016. 

About 8.8 million adults receive disability payments. Factor in their children, and you've got nearly 11 million U.S. residents relying on this program, which according to Nolo.com averages $700 to $1,400 per month.

 

In the very near future these payments could be reduced by one-fifth. Why isn't this considered a crisis?

Several reasons come to mind:

The disabled population is relatively small.
Currently, 40 million retirees receive Social Security and that number is rising fast -- every day, 10,000 people turn 65.

The elderly are better organized
. Simply put, baby boomers vote and the AARP is a pretty fierce lobbyist. By contrast, plenty of disabled people spend most of their time and energy dealing with the ramifications of their health issues, getting medical care, and navigating insurance and social service bureaucracies.

Misperceptions are pervasive.
Everybody seems to know a guy whose "bad back" keeps him from working but doesn't interfere with his gardening, remodeling or dancing. When MSN Money ran an article called "Is America the land of opportunity -- or the land of disability?," plenty of the 740 commenters railed about laziness and "playing the system."

No doubt those people exist, and shame on them. But according to the nonprofit National Academy of Social Insurance, many recipients have multiple and/or life-threatening conditions. About 1 in 5 one in five men and nearly one in six women die within five years of being approved for the payments.

A few facts and figures

The looming shortfall should not have been a surprise. Depletion of the disability trust fund was predicted as early as 1995, according to CNN Money.

Social Security is financed by a 6.2% tax (paid by both employers and workers) on the first $113,700 of wages. Just 0.9% goes to the disability insurance trust fund. In order to file for disability you must have worked for some part of five of the past 10 years.


The number of claims jumped 24% since 2007. One reason is the aging of the population: seven in 10 disability recipients are over age 50, and three in 10 are older than 60.

Another piece of the puzzle is the fact that more women are in the workforce, increasing the number of potential claimants. Currently, they represent 47% of all recipients.

The recent recession played a part, too -- but not necessarily the way you might think. An easy assumption is that unemployed workers are pretending to be too sick to find jobs. In some cases that may be true.

But some claimants are people who worked despite health issues, according to NASI. When they got laid off during the recession they weren't able to land new positions due to increased competition for fewer jobs. Some turned to disability benefits "as a last resort."

Do some people claim disability to scam the system? Without a doubt. How widespread is such fraud? No one can say.

Conditions such as cancer or rheumatoid arthritis can be medically confirmed. Health issues like soft-tissue injuries and mental illness can't always be "proved" (although they're plenty real to the folks who genuinely suffer from them).

What's the solution?

Government actuaries suggest two ways to bolster the disability program:
  • A temporary increase of the DI program's portion of Social Security taxes. It would rise from 1.8% to 2.6% and be stepped down gradually over the next 17 years. This plan would make the disability fund solvent until 2033; however, it would cut two years off the retirement trust fund's life span.
  • Slightly higher taxes. Workers and employers would be required to pay an extra 0.2% toward the disability fund. This plan would make the program solvent for the next 75 years.
Good luck getting legislators to suggest tax increases, let alone program reforms. "There's not much consensus about entitlement reform on Capitol Hill these days. Attempts to rein in Medicare spending have gone nowhere recently," notes Tami Luhby of CNN Money.

The NASI report notes that disability payments are the primary income source for many recipients. A 20% loss of benefits could be ruinous to this population, which is as financially vulnerable as the elderly but much less politically powerful. As the report points out, "Congress has never permitted such a drop in Social Security benefits to occur."

But something has to be done, and quickly. Otherwise, 11 million people could be living on a lot less.

More on MSN Money:

730Comments
Jun 3, 2013 12:36PM
avatar

We can send a billion dollars to Egypt.  We can send millions to buy arms to the

Syrians.  We buy tanks the military doesn't want, order ships that have already

been shown to be flawed.  But we can't fund the Social Security Disability

program.  Hey Mr. Democratic President.    Where are your and your parties

words that they are here to protect Americans.

avatar
Remove LAZY as a disability and there will be enough money.
Jun 3, 2013 12:30PM
avatar
Too many drunks, drug users, fat pigs and just plain stupid people qualifying as disabled.
Jun 3, 2013 12:25PM
avatar
People are getting disability for PTSD after coming out of jail.  They are getting disability after taking drugs for years.  Sorry but if you have done something to cause your disability then why should the American taxpayer pay a cent.  If a woman has a genetic issue and has children then she and her husband are to blame not the American taxpayers.  Many of the judges who look at cases are giving disability 100% of the time.  The odds of this are just impossible.  Illegal's are applying for disability and getting it without any proof that they have paid anything.  We need to clean up the mess and then ensure that the people and judges involved follow the rules.
Jun 3, 2013 12:31PM
avatar
Why  doesn't the lying government pay us back all of the money they have "borrowed" since the Ford Administration pay SS back?  We have to pay our debts back. The public is getting really sick of all the llying.  Time for a (CHANGE)AGAIN.
Jun 3, 2013 12:35PM
avatar
What is quite pathetic are the "disabled" folks who had drug problems that caused health problems that led them to be unable to work.  Then they get SSDI?  That is BS.  Or that morbidly obese person who cannot find adequate work within their "restrictions" and they get granted SSDI.  It is incredibly difficult to get SSDI...but yet somehow these folks get it!  I work for an SSDI attorney who assist those who are really disabled obtain benefits.  We pick & chose who we help.  When I read the reports and their is mentions that their use of drugs may have been a factor in their situation, we dismiss them as clients.  But not a lot of attorneys do that.  There are also, no offense to those in this situation, Hispanics who use their "language barrier" as a means to obtain benefits, both in the workers' comp. system & the SSDI system.  That to me is big time BS!!!!  But with what I see assisting those who are disabled, many truly need it and many don't.  Time to crackdown on those who are not truly disabled...they need to go get a job, minimum wage or not!!!
Jun 3, 2013 11:42AM
avatar
Solution = Get rid of Social Security payment cap so the rich pay into social security on every dollar earned instead of only the first ~$106,000
Jun 3, 2013 12:47PM
avatar
I went on disability in 1999. I worked for twenty five years and I suffer from a form of arthritis called reactive arthritis. I have had five spinal surgeries and have 8 plates and screws in my neck and lower back. I need a knee replacement to my left knee but I am putting of the surgery as long as possible because I am to young. I am fifty years old and if I have knee replacement now further on down the road I would need to have a replacement of the replacement. I take morphine sulfate between 4 to six times a day. Tell me what kind of job could I do? I cannot sit for more then ten minutes or stand or more than five. I can only walk about 150 feet without resting. I can lie down and sleep between  six to eight hours. The arthritis has destroyed my body. The last year I worked I earned 128,000.00. Today I draw 1,041.32 a month. Tell me I live better then my neighbors.
Jun 3, 2013 12:30PM
avatar

well i say stop giving it to the illegals like i have been told the government been doing it for years, my money going to someone that has never put into the plan, what ****s we have working in washington, probably part of the IRS party bus.

 

Jun 3, 2013 12:47PM
avatar
Social Security has very strict rules when it comes to medical documented disabilities which are far more strict than private insurance and most people on disability are dealing with end of life issues.  We need to take care of our disabled citizens and crack down on fraud, do away with layers coaching individuals applying for disability and go strictly by medical documentation, We also need to closely monitored suspected false claims. 
Jun 3, 2013 12:24PM
avatar
The system that stole the money all those years ago better replace it.
Jun 3, 2013 12:38PM
avatar
tell the gov. to pay back the money that they (borrowed) from social security, we would be alright for a long time
Jun 3, 2013 11:31AM
avatar
With the millions of people getting onto disability in the last 5 years, we need to reduce the benefit for those outside of true visible/verifiable medical claims.   If a solution isn't reached, everyone gets a haircut.  I have only one question...  With OSHA pushing for better standards for decades, and disability claims going nowhere but up, does that mean OSHA is adding no value in improving worker safety?   My first suggestion is to eliminate the sweetheart deal the lawyers have with getting a person onto disability.  Second is a annual review of the person's status.  Third is to give investigators a percentage of the value o those that say they are disabled, but truly are not.
Jun 3, 2013 12:37PM
avatar

Potential tragedy for those who are truly disabled, but most people know of recipients who somehow slipped through the system, getting benefits although not truly eligible.  We see them on the court shows all the time.  Would it help to do a sweep of the roles and get these freeloaders taken off the dole?  This sort of fraud is what makes most honest citizens hostile toward government policies.

We need government programs, but also need better monitoring to avoid fraud.

Jun 3, 2013 12:36PM
avatar
I have worked my entire life and now getting ready to retire "somewhat" this year to try to enjoy what there will be left of my llife. I also KNOW and SEE more people on DISABILITY that seem to do just about everything they want to do. Mental problems do not seem to keep them from buying homes to rent or resell. Doing businesses from home that are for cash online and all of them seem to walk just fine as they are getting out of their cars that have a "handicap sign" off the mirror or license plates and are parked in front. I work in the stores as a contractor and see TONS of people driving around on the electric carts that are most likely collecting DISABILITY also with what appears to me to be nothing more than obesity!!! Something HAS to be done about these people that GOT the LAWYERS that advertise they can get your Social Security disability payments. I personally know of a person that was suppose to be evaluated every 3 years for their disability and it has been 12 years now still they have not had any evaluation and have not seen a doctor the entire time. YES, this has to END and be re-evaluated. I do not know what the BEST solution is for this as there are SOME people that truly needed it. I just KNOW that something HAS to be done and WHO is to blame for this???? Mostly the lawyers I would guess.....
Jun 3, 2013 12:59PM
avatar
what no one is reporting is how, For years, Politicians have used Social Security as their  personal piggy banks, without ever repaying the money they stole from the system. It's no wonder that the program is almost broke when there are thieves  ripping off money faster than it comes in.
Jun 3, 2013 12:53PM
avatar
In the 60s the Federal Government had a separate fund for SS, and SS Disability.  Since the Government needed money to pay for the Viet Nam War, the fund was moved from the SS Administration, to the General Fund.  This is when the promise from the Legislative branch came about to fund the SS claims in the annual budget.  This is when Congress started the rumor that SS was going broke.  It's time for Congress to own up to what they call entitlements, and call them what they really are, returned benefits to the citizens from earned taxes.  Congress also has the nerve to tax SS benefits as income.  The original donation tax was taxed through the persons payroll tax on total income.  
Jun 3, 2013 11:32AM
avatar

If I had been inclined to try and con my way into disability instead of just retiring at age 62, my benefit would be almost as high as my benefit at age 66.

I'm not saying that some people don't deserve disability, I'm just questioning why the amount is more than the minimum retirement age benefit from social security ?

My benefit reduction at 62 was 25%, not 20% and it didn't "ruin" me.

Jun 3, 2013 12:10PM
avatar
The real problem is that no one expected disability claims to rise to 6 times what they were before we spent massive amounts on job safety.   It shows that OSHA has been a complete and utter failure.   And that does not even take into account the massive move away from heavy industry....

No, today the problem is that the definition of disabled has changed from anyone truly deserving to anyone with a hang nail as long as the vote democrat.   In the last 4 years the number on the rolls has risen 75%.   That is because of one thing and one thing only....  The democrats are willing to allow fraud in return for votes....


Jun 3, 2013 11:51AM
avatar

The confusing thing about disability is that there is no simple metric to determine eligibility. Medicare? Over 65. Social Security? Over 62. But what counts as 'disabled'?

 

I'd probably die before I collect disability payments. Largely because no matter how bad off I may get there must be someone out there worse off who needs it more than me anyway...

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More