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?
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.
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:
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.
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.
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.
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.
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...
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