Social Security Disability Insurance (SSDI) is the fastest growing entitlement, now costing more than food stamps and welfare combined. Disability payouts totaled $132 billion in 2011, and the 2012 report of the Disability Fund Trustees warned the fund would be exhausted in 2016 — two years earlier than reported in 2011. While the disability system provides critical support to those truly in need, too many Americans are abusing the system, adding to the drag on our already weak economy. Adding insult to injury, these wrongdoers are taking resources from those who need help the most.
Some 14.1 million Americans now receive federal SSDI payments of up to $13,000 a year plus Medicare. By comparison, working a full-time, minimum-wage job pays $15,000 per year, less the expense of commuting and payroll taxes. Some people choose to go on disability rather than work at a low-paying job. The system is extraordinarily generous and, unfortunately, a few Americans are gaming it.
One issue is the vague way the law defines disability — the main criterion for SSDI eligibility. Under the system, a disability is a mental or physical problem that hinders the claimant’s ability to work. The claim does require a doctor’s certification, but some doctors are more than happy to certify disabilities upon request. My wife, an ophthalmologist, declines requests from patients feigning blindness to certify them as disabled.
It’s telling that the types of disabilities claimed have changed over time. In 1961, heart disease and stroke were the leading reasons to seek disability status. By 2012, back pain and other musculoskeletal ailments led all other causes. Between 1961 and 2012, back and neuromuscular claims quadrupled as a percentage of disability claims. The effects of heart disease or a stroke are objectively measurable by a doctor. Back pain, however, while real for many people, is a malady for which a doctor must simply trust the patient’s claims.
Some judges are far too lenient in granting claims. The Wall Street Journal reported that one judge in San Juan, Puerto Rico, approved over 98 percent of disability claims. In 2008, the New York Times reported that from 2000 to 2008, between 93 and 97 percent of retirees from the Long Island Rail Road (LIRR), many as young as 50, received disability after retirement, at the direction of union leadership. The leaders were appropriately arrested and criminally charged. Hundreds of former LIRR employees who ripped off the government for more than $1 billion were offered amnesty.
Another problem is that, as a recent NPR series explained, states are incentivized to move citizens from state welfare rolls to federal disability. The state of Missouri, for instance, pays a private firm $2,300 for each person the firm moves from welfare to federal disability.
The Social Security disability system does great good as a lifeline for millions of deserving Americans who rely on it for subsistence. It was actually set up rather well as an insurance system. In order to be eligible, claimants must have worked and paid Social Security taxes for a certain number of years. However, the loose standards and broad net that have crept into the system have spawned a parasitic ecosystem of disability lawyers, willing doctors and lax judges who cooperate to certify millions of undeserving Americans as disabled.
The system can be fixed. We need to update the definition of disability to capture only the truly disabled.
Technology today allows many people to work at jobs using a computer or telephone from any location, and to do so standing, sitting or reclining. Workers who cannot stand for long hours should seek jobs that do not require it. Moreover, we need to require Social Security recipients to periodically re-certify as disabled.
In 1981, President Reagan required that those receiving disability payments have “continuing disability reviews.” As a result, 400,000 Americans were dropped from disability rolls. But over time, enforcement of CDRs has waned.
We also need to tweak the system so companies and workers are incentivized to be creative, adaptive and motivated to stay off the federal system. The Wall Street Journal recently reported that private disability insurance companies have decent success rates returning disabled workers back into the workforce. Once someone is certified for SSDI, they almost never return to work.
These are relatively simple solutions. Such solutions can reform the system, provide support for those who truly need it, save tens of billions of dollars and help people return to economic independence. We live in a great, caring nation but we are broke, and we need to be prudent.
Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling books Ninja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro.