Disability insurance is in trouble as more Americans apply for benefits

WASHINGTON — The pot of money the Social Security Administration uses to cover disability insurance is projected to run dry in 2016. This means that the more than 9 million out of work disabled Americans, plus their spouses and children, who also qualify will see their benefits shrink considerably. Incoming payroll taxes only cover 79 percent of the benefit, which means families' monthly checks will decrease by 21 percent, according to an article in Bloomberg Businessweek.

America is in this situation, according to a report by the Congressional Budget office, because since the program's inception the amount of money paid out in benefits has increased nine-fold, while money put into the program has only increased five times. Part of the reason more benefits are being paid out is that the percentage of Americans applying for the program has dramatically increased. In 1970, about 1.3 percent of working-age adults — individuals ages 20 to 64 — were receiving DI worker benefits. In 2011, that fraction was 4.5 percent. At least some of this increase is due to more women entering the workforce, according to the report, although it doesn't account for all of it.

As the Social Security Disability Insurance caseload has grown, the employment rate of disabled workers fell by one-half. This occurred despite the fact that the Americans with Disabilities Act created new employment protections for disabled workers, jobs became less physically demanding and the health of the working-age population remained stable, according to a September 2012 report by the RAND Corporation.

In its report, RAND researchers argue that the structure of the SSDI program is a major force behind the decline in employment and accompanying program growth. In the mid-1980's there was an expansion in program eligibility — this combined with a rising benefit-to-earnings replacement rate made going on social security benefits a more attractive option than working.

RAND argues that recipients of benefits who are on the margin, meaning they could accept benefits or work because their disability is not severe, actually would be better off if they worked. RAND suggests that "marginal" applicants account for 23 percent of total applicants for disability insurance. Persons with marginal disabilities would earn $3,800 to $4,600 more per year on average in the absence of SSDI benefit receipts than in the present system.