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The federal disability insurance program (SSDI) is a good example of a government program ripe for reform. It represents $143 billion in annual expenditures, or 4% of the federal budget — and has some serious structural flaws. Here are some facts...
1. States pay for a laid-off worker’s temporary welfare and unemployment benefits, but if the worker claims disability instead — the federal government pays 100%. Any guess as to what type of incentive that creates for states?
2. For a worker that qualifies, the avg. SSDI benefit is $2k < the full-time return of a min. wage job, w/ Medicare kicking in after 2 yrs. This wouldn’t be so bad, if over half of beneficiaries weren’t qualifying b/c of easily claimed conditions like mood disorders & back pain.
3. Relative to comparable private disability insurance programs, SSDI has higher claim rates & lower return-to-work rates. Why would one insured working population be more prone to injury *and* slower to heal than another? It doesn’t add up.
4. Given these flawed incentives, it’s no surprise that, since 1990, SSDI recipients have tripled despite a much healthier population. The average age of a beneficiary has also decreased — with the percentage of beneficiaries in their 30s/40s doubling since 1960.
5. The CBO estimates that SSDI trust fund is close to going bust. It’s unsustainable. The ratio of workers to beneficiaries has plummeted from 134:1 to about 16:1.
Disability insurance is important. We need to make sure those who are debilitated get the help they need to stay on their feet. But this is why we need a serious right-of-center governing party in America. Without one, these programs are more susceptible to abuse & may go bust.
