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Dynamics of SSA’s Disability Programs

The dynamics of the disability programs have been shaped over the years by many events. Economic conditions, demographic changes, public opinion, and resulting congressional and Administrative actions have had a significant impact on program experience. This chapter reviews the historical development and growth of the disability programs administered by the Social Security Administration (SSA) for the working age population in the 45 years since the inception of the Social Security Disability Insurance (SSDI) program in 1956 and in the 30 years since the Supplemental Security Income (SSI) program in 1972. The chapter further discusses some of the main factors—economic and noneconomic, intrinsic and extrinsic to the program—that have shaped these programs over the years. These include legislative initiatives and judicial decisions, the demographic composition and characteristics of the population, the types of impairments of applicants, incentives and outreach, and the changing nature of work.

Although the decision of an individual to apply is an important variable in the program size, the program’s eligibility requirements affect its ultimate size. Moreover, the stringency or leniency of program implementation impacts the size and cost of the program and also the probability of a person’s applying. Growth in the initial awards (or allowances) often is attributable to some of the same factors that are associated with growth in applications during that period. A better understanding of the dynamics of the disability programs is essential to enhance the ability to predict the future growth and cost of the program.



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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs 2 Dynamics of SSA’s Disability Programs The dynamics of the disability programs have been shaped over the years by many events. Economic conditions, demographic changes, public opinion, and resulting congressional and Administrative actions have had a significant impact on program experience. This chapter reviews the historical development and growth of the disability programs administered by the Social Security Administration (SSA) for the working age population in the 45 years since the inception of the Social Security Disability Insurance (SSDI) program in 1956 and in the 30 years since the Supplemental Security Income (SSI) program in 1972. The chapter further discusses some of the main factors—economic and noneconomic, intrinsic and extrinsic to the program—that have shaped these programs over the years. These include legislative initiatives and judicial decisions, the demographic composition and characteristics of the population, the types of impairments of applicants, incentives and outreach, and the changing nature of work. Although the decision of an individual to apply is an important variable in the program size, the program’s eligibility requirements affect its ultimate size. Moreover, the stringency or leniency of program implementation impacts the size and cost of the program and also the probability of a person’s applying. Growth in the initial awards (or allowances) often is attributable to some of the same factors that are associated with growth in applications during that period. A better understanding of the dynamics of the disability programs is essential to enhance the ability to predict the future growth and cost of the program.

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs In the 1970s when the disability programs were growing rapidly, econometric research studies using aggregate time series techniques were undertaken to understand the role of the various factors in this growth. Recent rapid growth in the programs again has focused attention on the need to undertake a rigorous research program to estimate the extent of disability in the United States and to determine the potential need for disability benefits in the twenty-first century. Unfortunately, analysts have been faced with a paucity of current information since the late 1960s and 1970s when SSA conducted three surveys of disability and work. These surveys obtained information on impairments and various socioeconomic factors that were useful in the analysis of disability programs. Likewise, any legislative and/or administrative initiatives to increase control over the program size and to improve the processing of claims should be based on research aimed at understanding the relative roles of the various variables that impact on disability programs administered by the SSA. Some of these factors may be within the control of the Congress and the Administration, while others may be outside their purview. HISTORICAL DEVELOPMENTS AND PROGRAM GROWTH1,2 The need for disability insurance was recognized in the late 1930s when the Social Security Act was enacted. For many years, Congress and the Administration were hesitant to enact such a program because of concerns about the difficulties in deciding whether a particular person is disabled and in containing costs and predicting future program growth. These concerns have remained to the present day. However, a Social Security Disability Insurance program was enacted in 1956 to provide cash benefits to a person unable to engage in substantial gainful activity (SGA) ($780.00 per month in 2002) by virtue of a medical impairment that was expected to result in death or be of long-continued or indefinite duration. The Act gave states responsibility for initial disability determination, acting under contract with the federal government. Reflecting the concerns about containing costs, it limited disability benefits to individuals 50–64 years old and did not extend benefits to the dependents of disability beneficiaries. A separate disability insurance tax rate and trust fund were established to allow close monitor- 1   Much of the information in this section is excerpted from DHHS, 1992; Berkowitz, 1997; and Mashaw, 1997. The statistics presented are mostly published data from the Social Security Administration. 2   Consistent with the mandate of the study, the discussion and statistics presented in this chapter for the most part relate to disabled workers for the SSDI program and the working age population (18–64 years of age) for SSI program.

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs ing of program costs. The first payments were made in 1957. At that time, SSDI was thought of as a source of early retirement benefits mainly for men who had worked most of their lives but became disabled with chronic diseases of aging close to the normal age of retirement. Period of Growth Over the years the SSDI program has steadily, if not uniformly, expanded its coverage and support levels. The program grew rapidly in the early 1960s and through the middle of the 1970s. Several amendments to the Social Security Act extended the qualifying requirements for disability benefits. In 1958, benefits were extended to dependents of beneficiaries. The 1960 amendments extended benefits to all qualified persons under 65 years of age. These alterations changed the concept of SSDI from being an alternative to retirement to an alternative to working. The legislative amendments of 1965 made the definition of disability more liberal by requiring only that the impairment be expected to result in death or to last for at least 12 months. The 1967 amendments eased the insured status requirements for persons under age 31, allowing a substantial number of young beneficiaries to enter the rolls. These amendments led to an increasing proportion of younger and relatively healthier beneficiaries. The required waiting period before receiving benefits was reduced from six to five months in 1972. The level of SSDI benefit amounts was increased in the early 1970s and automatic cost-of-living adjustments were enacted. Also in 1972, Medicare coverage was extended to persons who had received disability benefits for two years. By the mid-1970s these changes had resulted in higher replacement rates of prior earnings, making it more financially attractive for people to apply for benefits and for beneficiaries to remain on the rolls. These changes defined a much larger pool of persons potentially qualified for entitlement. The early 1970s experienced a rapid increase in the number of applications and awards. During the period 1960–1975, the number of applications grew rapidly from about 418,000 in 1960 to nearly 1.3 million in 1975. During the same period the number of awards grew from about 200,000 in 1960 to almost 600,000 in 1975. Figure 2-1 shows the number of applications, awards, beneficiaries on the rolls, and terminations of disability worker benefits from 1960 to 2000. In relative terms, the number of applicants grew from 8.6 to 15 per 1,000 persons insured in case of disability from 1960 to 1975 (see Table 2-1 below). In 1970, Congress enacted legislation establishing the Black Lung Program and in 1972 enacted legislation establishing the Supplemental Security Income program for the aged, blind, and disabled (P.L. 92-603). These programs, especially SSI, had a major impact on the growth and manage-

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs FIGURE 2-1 Number of SSDI applications, awards, beneficiaries, and terminations, aged 18–64 years, 1960–2000. SOURCE: SSA, 2001d. TABLE 2-1 Disabled Workers: Number of SSDI Applications, Awards, Ratio of Awards to Applications, and Applications per 1,000 Insured Workers for Selected Years, 1960–2000 Year Number of Applications (thousands) Number of Awards (thousands) Awards as a Percentage of Applications Applications per 1,000 Insured Workers Awards per 1,000 Insured Workers 1960 418.6 207.8 49.6 8.6 4.5 1965 529.3 253.5 47.9 9.6 4.7 1970 869.8 350.4 40.3 11.7 4.8 1975 1,285.3 592.0 46.1 15.1 7.1 1980 1,262.3 396.6 31.4 12.6 4.0 1985 1,066.2 377.4 35.4 9.7 3.5 1990 1,067.7 468.0 43.8 8.9 4.0 1995 1,338.1 645.8 48.3 10.5 5.1 2000 1,330.6 621.7 46.7 9.6 4.6   SOURCE: SSA, 2001d.

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs ment of disability programs administered by SSA. The SSI is a nationwide federal assistance program administered by SSA that guarantees a minimum level of income for needy aged, blind, and disabled persons (SSA, 2001b). SSI benefits are provided on the basis of need to eligible individuals to the extent that their needs are not met by other sources; insured worker status is not required. SSI replaced the means-tested assistance programs administered by the states—Old-Age Assistance, Aid to the Blind, and Aid to the Permanently and Totally Disabled—with a program of uniform benefits and eligibility criteria across states. The definition of disability and blindness for adults was the same as that used for SSDI, and as with SSDI, state Disability Determination Services (DDSs) have the responsibility to process initial disability claims. The five-month waiting period before the start of benefits under SSDI does not apply to SSI recipients. Whereas SSDI beneficiaries are transferred to the Social Security retirement program, SSI recipients may remain on the rolls even after they are 65 years of age. SSI recipients also are eligible for Medicaid. Benefit payments under the SSI program started in January 1974. About 1.3 million disabled persons who were receiving welfare payments under the state programs were transferred to the SSI rolls in 1974 (DHHS, 1992). During 1972–1974, processing disability redeterminations for continuing eligibility of former state welfare recipients for SSI disability payments and for new disability claims under the new SSI program resulted in additional workloads for processing disability claims. The SSI program requires applicants under the age of 65 to apply first for benefits from all other programs, including SSDI, that may partially or fully offset SSI benefits. This provision, combined with the increased publicity and active outreach efforts that accompanied implementation of this new program, as well as pressures on limited staff resources of administering the new programs, may have contributed to the sharp increase in applications and new awards under both SSI and SSDI from 1972 to 1976. The recession of 1974–1975 placed additional burden on the two programs. Applications for benefits continued to increase and terminations declined. Disability benefit allowances were increased during this period, first in 1970 and again in 1971 and 1972, making it more financially attractive for people to apply for disability benefits and for beneficiaries to remain on the rolls rather than return to work. Figure 2-2 shows the absolute number of SSI applications, awards, recipients, and terminations for persons 18–64 years of age from 1974 to 2000 comparable to the trends in the SSDI program shown in Figure 2-1. In 1974 when the SSI payments started, 1,503,000 persons aged 18–64 received federally administered SSI payments; by the end of 2000 there were 3,744,000 SSI recipients 18–64 years of age (SSA, 2001d).

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs FIGURE 2-2 Number of SSI applications, awards, recipients, and terminations, aged 18–64 years, 1974–2000. SOURCE: SSA, 2001b. 2001c. Processing this large workload with limited staff resources led to administrative expediencies in the requirements for processing disability claims. Central Office reviews of DDS decisions for quality assurance fell from 100 percent to about 5 percent in 1972, and they were conducted after, rather than before, payment of benefits began. Most reviews were deferred, and only obvious decision errors were returned for correction. The legislative changes, increased benefit levels, changes in program administration, and the economic downturn of the early 1970s probably contributed to the sharp increase in the disability incidence rate (number of new SSDI benefit awards per 1,000 workers insured in case of disability) from 4.8 in 1970 to a high of 7.1 in 1975 (Table 2-1). At the same time the termination rate (proportion of beneficiaries whose benefits were terminated) declined from 174 per 1,000 beneficiaries in 1970 to 132 per 1,000 in 1975 (Table 2-2). Terminations of SSDI benefits occur as a result of death, conversion of disability benefits to old age and survivor benefits upon attainment of normal retirement age (currently 65), or recovery (beneficiary no longer meets the standards used to define disability, either

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs TABLE 2-2 Disabled Workers: Number of SSDI Beneficiaries and Terminations and Termination Rate per 1,000 Beneficiaries, 1960–2000 Year No. of Beneficiaries (thousands) No. of Terminations (thousands) No. of Terminations per 1,000 Beneficiaries 1960 455.4 89.1 195.6 1965 988.1 156.6 158.5 1970 1,492.9 260.4 174.5 1975 2,488.8 329.5 132.4 1980 2,858.7 408.1 142.7 1985 2,656.6 340.0 128.0 1990 3,011.3 348.2 115.6 1995 4,185.3 399.5 95.4 2000 5,042.3 460.4 91.3   SOURCE: SSA, 2001d. because of medical recovery or return to work).3 More than half of the decline from 1970 to 1975 in termination rates was due to lower medical recovery rates. Period of Retrenchment The rapid growth in disability rolls during this period renewed past concerns about SSA’s ability to control program growth and the unpredictability of program expenditures. This situation led to legislative and administrative changes in the program in the late 1970s and early 1980s, slowing the increase in disability program growth. The legislative amendments in 1977 reduced the income replacement rates in SSDI, particularly for younger beneficiaries. The 1980 amendments mandated reviews of 65 percent of allowed claims in the ensuing three years prior to the start of any payment. They also required a vastly increased process of review of the eligibility of existing disability beneficiaries. The 1980 amendments also limited the total amount of monthly Social Security benefits that could be paid to a disabled worker and his family by enacting replacement rate caps, further modified the calculation of benefits for younger disabled workers, and added work incentives. In 1981, Congress eliminated the minimum Social Security benefit for new beneficiaries (DHHS, 1992; Mashaw, 1997). 3   For a detailed discussion of the experience of disability benefit terminations, the reader is referred to Social Security Disability Insurance Program Worker Experience (SSA, 1999c).

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs SSA also refined its regulations and guidelines, changed the instructions and training to state Disability Determination Services to make eligibility criteria and evidentiary requirements more stringent, made quality assurance reviews more stringent, and increased the number of continuing disability reviews (CDRs). These actions had a dramatic impact on applications for benefits and initial award decisions. The proportion of claims awarded benefits by the DDSs declined from 46 percent of the claims in 1975 to 31 percent in 1980 (see Table 2-1), and terminations rose to almost 143 per 1,000 beneficiaries by 1980 (see Table 2-2). The rate of applications also declined from 15 per 1,000 insured workers in 1975 to 12.6 in 1980. Although the economy was in decline, the number of new awards dropped sharply and the number of persons discontinued for “medical and return-to-work recovery” reasons increased (SSA, 2001d). Period of Slow Growth These legislative and administrative changes and resulting practices faced strong resistance both in the courts and in state governments, and led to widespread criticism in the media. Negative publicity over the large numbers of beneficiaries—particularly the mentally impaired—being removed from the disability rolls led to a reconsideration of the changes in disability programs. By 1984, another reversal in attitudes occurred followed by another round of legislative and administrative changes. SSA placed an administrative moratorium on the conduct of CDRs. A series of congressional hearings were held highlighting the plight of beneficiaries removed from the rolls. Several legislative and judiciary actions undid many of the stringent policies that had produced the retrenchment during the late 1970s and early 1980s. Court cases and class action suits increased dramatically, and many persons were returned to the rolls through court appeals. Congress enacted the Social Security Benefits Reform Act of 1984. Its provisions included more liberal standards for mental impairments that emphasized the individual’s ability to perform substantial gainful work, consideration of combined effects of multiple impairments in the absence of a single severe impairment, requirement for proof of medical improvements before termination of benefits, and use of SSA’s regulatory standards to evaluate the effect of pain on disability. Court decisions on class action suits during the middle 1980s resulted in placing more emphasis on the opinion of treating physicians in the disability determination process, the role of pain as a disabling factor, and evaluation of a person’s functional limitations in addition to the medical condition.

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs Once again, both applications and awards began to rise. The initial allowance rate that had declined to a low of around 31 percent of applications in 1980 and 1981, increased steadily during 1985–1989 and remained at about 35–44 percent during 1985–1990 (see Table 2-1). The final implementing regulations revising the eligibility criteria for mental impairments were published in 1986, resulting in dramatic increases in the number of benefits awarded on this basis. The number of awards to individuals with disabilities based on AIDS or HIV infection contributed to this increase. The termination rates also declined significantly as a result of SSA’s moratorium on CDRs and their subsequent reinstatement under new and less stringent standards (see Table 2-2). During the latter half of the 1980s, after the brief increase in the late 1980s associated with adjudicating a large number of cases under the new regulations for mental impairments, applications and incidence rates for disability benefits remained fairly stable. Growth in the 1990s Although the legislative and administrative climate was relatively stable after 1985, applications and awards for disability benefits once again began to climb rapidly in 1989 and into the 1990s. Most of the increase in awards followed the sharp increase in applications for benefits accompanied by a small increase in the initial allowance rates. The economic downturn in 1990 and 1991 may account for part of this increase. Applications for SSDI benefits rose by 8.4 percent in 1990 over the previous year followed by another 13 percent increase in 1991. This growth resulted in an increase in the incidence rate from 3.7 per 1,000 in 1989 to 4.5 in 1991, a 21.6 percent increase over the two-year period (SSA, 2001d). In recent years, well in excess of a million disabled workers have applied for SSDI benefits each year reaching 1.3 million in 2000. More than 600,000 disabled workers were awarded benefits in 2000. In contrast, the number of persons whose benefits have been terminated was around 460,000 in that year (see Figure 2-1). With the exception of the late 1970s and early 1980s, the proportion of SSDI beneficiaries whose benefits have been terminated has declined steadily from the earliest years of the program, from 132 per 1,000 beneficiaries in 1975 to nearly 143 per 1,000 in 1980, to 115.6 in 1990, and to about 91 per 1,000 in 2000 (see Table 2-2). As shown in Table 2-3, with the exception of the period in the early 1980s, the overall number of beneficiaries on the rolls, as well as the rate per 1,000 persons insured in the event of disability, has increased steadily over time as the growth in awards has outpaced terminations. Most terminations occur as a result of death or conversion. The trend in terminations has been declining. Two significant factors contribute to this trend—

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs TABLE 2-3 Disabled Workers: Number of SSDI Beneficiaries, Workers Insured in Event of Disability, and Beneficiaries per 1,000 Insured, 1960–2000 Year No. of Beneficiaries (millions) No. of Workers Insured (millions) No. of Beneficiaries per 1,000 Insured 1960 0.455 48.5 9.38 1965 0.988 55.0 17.96 1970 1.493 74.5 20.04 1975 2.489 85.3 29.18 1980 2.857 100.3 28.48 1985 2.657 109.6 24.24 1990 3.012 120.1 25.08 1995 4.185 128.2 32.64 2000 5.042 138.7 36.35   SOURCE: SSA, 2001d. lower death rates as a result of people living longer and a reduction in the average age of beneficiaries. The change in the number of persons 18–64 awarded SSI disability benefits and the total number of recipients over time is similar to the dynamics observed in the SSDI program. The rapid increase in the total number of SSI participants in the early 1990s is a function of the growth in the number of disabled persons among SSI applicants and the poor economy as the 1990s began. The growth in the number of disabled adults is complicated and not fully understood. The reforms of the early 1980s and the outreach efforts in the 1980s also resulted in increases in the SSI program. With the strong economy of the late 1990s, a modest decline in SSI program participation was noted. However, because relatively few persons leave the SSI rolls, the total number of recipients has risen steadily since the 1980s, with the exception of a slight decline in the late 1990s. FACTORS CONTRIBUTING TO RECENT GROWTH As stated above, applications and awards for disability benefits in both the SSDI and the SSI programs increased significantly in 1989 and into the 1990s. The reasons for this recent increase are complex and are not fully understood. A combination of many factors may have contributed to this growth—some may be related to the broader socioeconomic and demographic environment and others may be associated with pro-

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs grammatic actions and court decisions. Many of the same factors have had a role in the programs’ growth since their inception and are contributing also to the recent growth of the disability programs of SSA. Some of these factors are discussed briefly below. Demographic Trends The number of persons who apply for and receive benefits is influenced by the size, composition, and characteristics of the potentially eligible population. The composition of the SSDI and SSI populations has changed dramatically since the programs’ inceptions. The size of the insured population for disability insurance has grown primarily because the working age population has grown (and an increasing number of women have entered the labor force). Between 1980 and 2000 the population of workers 20–64 years of age insured in the event of disability grew from 56.6 million to 71.6 million for men and from 37.4 million to 62.5 million for women (SSA, 2001d). The working age eligible population is projected to increase in the coming years as the baby boom generation ages and reaches 40–50 years of age, when chronic disease and disabilities are more likely to occur. The composition of the SSI population also has undergone a fundamental change since the program began in 1974. In the early years, nearly 60 percent of the recipients were aged. Over the years, the number of aged beneficiaries has declined significantly until today they comprise about 30 percent of the SSI rolls—about 20 percent of these are eligible based on age and 11 percent on the basis of disability. Today about 80 percent of SSI recipients are eligible on the basis of disability; 56 percent of these are 18–64 years of age (SSA, 2001b). The beneficiary population, especially in the SSI program, is diverse. Throughout the 1990s, the proportion of SSI awards each year for adults 18–64 who are noncitizens has ranged from 7 to 8 percent of the total (SSA, 2001b). The largest numbers come from Viet Nam, Mexico, and Cuba. Many of them have limited or no work experience and limited English proficiency (SSA, 2000). The law provides uniform standards for citizenship and residency. However under certain circumstances, “qualified aliens” are eligible for SSI (some permanently and others for up to seven years). To qualify for SSI, someone who is not a U.S. citizen must be a qualified alien and meet one of certain additional requirements such as: a person lawfully admitted for permanent residence in the United States, a refugee, asylum seekers, or a person subjected to battery or extreme cruelty or whose child or parent has been subjected to such battery; or is a “qualified alien” who was lawfully residing in the United States and receiving SSI as of August

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs 22, 1996, or who was living in the United States on August 22, 1996, and subsequently became blind or disabled (U.S. House of Representatives, 2000; SSA, 2001b). Legislative amendments in 2000 (P.L. 106-386) extended eligibility to noncitizens, regardless of their immigration status, as refugees if they are determined to be “victims” of “severe forms of trafficking in persons” (SSA, 2001b). Age and Gender The increases in applications and awards and a decrease in the number leaving the program have resulted in a dramatic growth in the number of beneficiaries on the rolls. This growth is due, at least in part, to an increase in the number of persons in the relatively younger ages entering the disability programs with fewer life-threatening impairments, resulting in increasing the duration of entitlement. As shown in Figure 2-3, the average age of persons awarded disability insurance benefits has been declining for both men and women, with a consequent increase in the duration of benefits. The average age of men awarded SSDI benefits declined from 54.5 in 1960 to 51.2 in 1980 and 49.6 in 2000, while the average age of women awarded SSDI benefits declined from 52.5 in 1960 to 51.1 in 1980 and 48.7 in 2000. As seen in Table 2-4, in 1960 less than 1 percent of men and women who were awarded SSDI benefits were under 30 years of age, but by 2000, 6.8 percent of the men and 5.8 percent of the women were in this age range when awarded benefits. Similarly, the proportion of both men and women who were between 30 and 39 years of age when awarded benefits approximately doubled, while the proportion between ages 40 and 49 when awarded benefits also increased. In contrast, the proportion of men 50 to 64 years of age when awarded benefits decreased from about 75 percent in 1960 to nearly 57 percent in 2000; the proportion of women in this age group awarded benefits decreased from 70 percent in 1960 to almost 55 percent in 2000. As increasing number of women have entered the labor force, the proportion of beneficiaries who are women has increased. Thus, in 1960, 78 percent of the 455,000 SSDI disabled worker beneficiaries were men and 22 percent were women, but by 2000, of the approximately 5 million SSDI disabled worker beneficiaries, the proportion who were men had declined to 56.6 percent and the proportion of women had increased to about 43 percent (SSA, 2001d).

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs FIGURE 2-3 Average age of persons awarded SSDI benefits, by gender, 1960–2000. SOURCE: SSA, 2001d. Impairments In the early years of the SSDI program, a much larger proportion of benefits were awarded on the basis of chronic diseases of aging. In recent years, as a result of legislative changes and court decisions, an increased number of awards have been based on impairments that occur much earlier in life such as mental disorders, including mental retardation. As shown in Figure 2-4, in 1981, 11 percent of SSDI disabled worker beneficiaries 18–64 years of age were awarded benefits on the basis of mental disorders including mental retardation compared with 24 percent in 2000,

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs TABLE 2-4 Percentage of Disabled Workers Awarded SSDI Benefits, by Gender, 1960–2000   Age Year <30 30–39 40–49 50–64   Men 1960 0.8 7.0 17.0 75.2 1970 6.7 7.6 16.6 69.1 1980 8.3 9.7 14.4 67.6 1990 10.9 16.9 18.9 53.3 2000 6.8 12.9 23.4 56.8   Women 1960 0.7 8.1 21.3 69.9 1970 4.2 6.3 17.1 72.4 1980 7.4 9.7 15.7 67.2 1990 8.5 16.3 22.9 52.3 2000 5.8 13.7 25.8 54.7   SOURCE: SSA, 2001d. an increase of 118 percent. A similar distribution of impairments is noted for SSI working age beneficiaries, with 31 percent receiving benefits in 2000 because of mental disorders other than mental retardation and another 21 percent receiving benefits because of mental retardation.4 Between 1981 and 2000, the proportion of SSDI benefit awards based on circulatory conditions, the top ranked condition in the earlier year, declined by 52 percent. The proportion of persons awarded benefits on the basis of musculoskeletal conditions increased by 41 percent between 1981 and 2000. By 2000, musculoskeletal conditions had eclipsed circulatory conditions as the most common set of conditions associated with the award of SSDI benefits. One possible explanation is the aging of the baby boom generation cohorts (1946–1964) who are currently entering the ages of highest incidence of arthritis and back disorders (Helmick et al., 1995). In addition, rates of cardiovascular disease have declined over the past 10 to 15 years. 4   1981 data for SSI comparable to those for SSDI are not available.

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs FIGURE 2-4 Percentage distribution of SSDI awards for adults aged 18–64, by diagnostic groups, 1981 and 2000. SOURCE: SSA, 2001d. Outreach Efforts As mentioned in the previous section, mandated outreach activities to enroll persons in the SSI program contributed to growth in the programs in the early and mid-1970s, when a nationwide effort was launched to enroll eligible persons in the new SSI program that was enacted in 1972 and implemented in 1974. During the late 1980s, Congress again mandated a number of SSI outreach activities to facilitate applications by needy individuals with severe disabilities (U.S. House of Representatives, 2000). Beginning with earmarked appropriations in 1989, SSI outreach activities became a priority for SSA. In addition to its own effort, SSA promoted outreach through a series of grants to the private sector (Muller and Wheeler, 1995). Some who applied for SSI were found to have enough covered work experience to qualify for disability insurance benefits concurrently with SSI. Cost Shifting by States In times of poor economy, cuts made in state and locally funded general assistance and other welfare programs result in shifting the burden from state and local programs to federal programs. Welfare agencies routinely refer persons to SSA’s disability programs. During 1989–1992, such cost shifting may have contributed to the acceleration of applications and awards particularly in the SSI programs (Rupp and Stapleton, 1995). Deinstitutionalization of persons with mental disorders and mental retardation and other disabilities who were previously cared for in and financed by state hospital systems also led to an increase in the SSI claims.

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs Legislative and Regulatory Changes and Court Decisions As in the early years of the programs, legislative and regulatory changes and court decisions continue to play a crucial role in extending or restricting the scope of the disability programs. For example, Congress and the courts required revision of the medical and functional criteria and new evidentiary requirements used in determining eligibility for disability benefits. In 1984, Congress required SSA to review and update the Listings of Impairments and related regulations resulting in significant increases in awards of benefits for mental impairments in the late 1980s. The 1996 legislation dropped drug abuse and alcoholism as a contributing factor material to finding disability. The Welfare Reforms and legislative changes with respect to qualifying noncitizens for SSI benefits also led to changes in applications for benefits. Court decisions have had a major impact on the programs by modifying and liberalizing the adjudication standards. The publicity created by court cases increased public awareness and perception of easier standards, which in turn may have led to growth in applications for benefits. Structural Changes in the Labor Market Structural shifts in the economy have an uncertain impact on workers with disabilities and can influence the types of impairments that result in work disability. For instance, the shift from manufacturing to service industries and occupations and the emergence of new terms of employment have been emerging over the past several decades. The changing demands of work also limit employment prospects for individuals whose social and adaptive functioning is impaired by mental disorders. The current labor market places emphasis on cognitive and technical skills, advanced education, and the ability to communicate and interact with others. People with disabilities, especially those with mental impairments, have poor employment prospects in such a market. Rupp and Stapleton (1995) argue that business cycle effects overwhelm the effects of economic restructuring. Their study found a negative effect of restructuring for the SSDI only, but it was small and not replicated for other program categories; they found no significant long-term effect of economic restructuring. Although the short-term effect of economic restructuring may increase applications for benefits, the long-term effect may be to decrease applications because workers in service sector jobs are less susceptible to disabling injuries, at least as far as physical impairments are concerned.

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs Changes in Economic Conditions As in the 1970s, the economic downturn of 1990–1991 contributed to the rapid increase in applications and awards in the disability programs (Stapleton et al., 1998). In times of poor economy and high unemployment, low-wage workers with disabilities are more adversely affected than others in the workforce (Yelin, 1992). Lack of training, unavailability of adequate alternative employment, and prospects of losing medical coverage lead to increased applications for disability benefits. In the 1980s, despite poor economic conditions at the time, applications and awards declined as a result of programmatic changes in the SSDI and SSI programs. Labor Market Dynamics5 In 1960, almost all working age (18–64) men were in the labor force, while only a minority of women of these ages were in the labor force. Since then, labor force participation rates among men fell, dramatically so among men 55–64 years of age, the decade prior to entitlement to full Social Security retirement benefits. At the same time, labor force participation rates among women have increased. In 1960, 66.8 percent of all working age persons were in the labor force. Primarily because of the substantial increases in employment among women, the overall labor force participation rate among working age persons increased to 79.0 percent as of 1998, or by more than 18 percent in relative terms. In 1960, 93.2 percent of all working age men were in the labor force. However, male labor force participation rates fell dramatically, particularly after 1970, before stabilizing in the last few years. By 1998, only 86.3 percent of all working age men reported being in the labor force, a decline of 7 percent in relative terms. The employment picture among women is the reverse of that observed among men, with substantial increases in labor force participation rates among women. Thus, between 1960 and 1998, labor force participation rates among all working age women rose from 42.7 to 72.0 percent, or by 69 percent (calculations using data from BLS, 1999, Jacobs, 1999). Employment patterns among persons with disabilities reflect these overall trends among men and women (Table 2-5).6 Among all working 5   Much of the information in this section is drawn from the background paper commissioned from Edward Yelin and Laura Trupin for use by this committee. The committee appreciates their contribution. The full text of the paper can be found in Part II of this report 6   Throughout this section the National Health Interview Survey definition of disability is used, that is, those persons who report a limitation in the ability to do usual major activity, in the kind or amount of activity, or in outside activities.

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs TABLE 2-5 Labor Force Participation Rates (percent) of Persons with and Without Disabilities, by Gender, United States, 1983–1999   Year   Gender and Disability Status 1983 1999 Percent Change 1983–1999 All persons 75.0 78.6 4.8 With disabilities 48.6 41.5 −14.6 Without disabilities 79.1 82.8 4.7 All men 87.2 85.9 −1.5 With disabilities 60.0 44.9 −25.2 Without disabilities 91.5 90.4 −1.2 All women 63.8 71.6 12.2 With disabilities 38.0 38.5 1.3 Without disabilities 67.6 75.5 11.7   SOURCE: Adapted from Trupin et al., 1997, and reprinted with permission from Yelin, 1999. age persons with disabilities, labor force participation rates decreased from 48.6 to 41.5 percent between 1983 and 1999, a decline of 14.6 percent. This overall decrease is the net effect of a huge decrease among men with disabilities—from 60.0 percent in 1983 to 44.9 percent in 1999, or by 25.2 percent—and a slight increase among women with disabilities from 38.0 percent in 1983 to 38.5 percent in 1999. Compared to men without disabilities, men with disabilities experienced a larger relative decrease in labor force participation rates (25.2 versus 1.2 percent, respectively). Compared to women without disabilities, women with disabilities experienced a much smaller relative increase in these rates (1.3 versus 11.7 percent, respectively). This is consistent with the hypothesis that persons with disabilities, like those facing discrimination on the basis of age, gender, or race, are prone to a last hired, first fired phenomenon. Labor Market for Persons with Disabilities Although among all working age persons, including men (and even extending to men 55 to 64 years of age), labor force participation rates have increased in the last few years, two recent studies indicate that persons with disabilities have not shared in this increase (Bound and Waidmann, 2000; Burkhauser et al., 2000), while another study finds no change (Levine, 2000). Thus, although labor force participation rates

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs among persons with disabilities reflected the trends affecting all workers over the past two decades, there is now at least equivocal evidence that, despite the passage of the Americans with Disabilities Act of 1990 (ADA), the employment picture among persons with disabilities diverged from that among the remainder of the working age population at the end of the 1990s. Studies conducted in recent years have suggested that the ADA may have unintentionally harmed rather than helped workers with disabilities (DeLeire, 2000a, 2000b; Acemoglu and Angrist, 1998). The ADA was enacted to remove barriers to employment for people with disabilities by banning discrimination and requiring employers to provide accommodations. However, the costs of complying with the Act and fear of litigation may reduce the demand for their labor and undo its intended effect. Bound and Waidmann (2001) using the Current Population Survey (CPS) data from 1989 to 1999 found little evidence indicating much of a role for the ADA, but argue that increases in Social Security disability benefits played an important causal role in the growth of the population on disability rolls and can account for the decline in employment of working age men with disabilities during the period. Others also have indicated that the increasing program generosity and worsening labor market conditions increase the option value of disability applications (Autor and Duggan 2001). The literature on employment among persons with disabilities suggests that their labor force participation rates appear to reflect more general labor market dynamics (Yelin, 1992, 1999; Stapleton et al., 1998). Consistent with this observation, during the slack labor markets in the 1970s and late 1980s, there were substantial increases in the number of people applying for Social Security Disability Insurance benefits. CONCLUSION The impact of any one factor on the demand for and provision of disability benefits is difficult to determine. In addition to the factors already discussed above, other factors also may have led to the growth of the disability programs at different times. These include record low termination rates of beneficiaries, public perceptions about the ease of qualifying for benefits, and access to medical care and its role in influencing choice between work and acceptance of disability benefits. As stated earlier in the chapter, the disability rolls are projected to grow over the coming decades as the baby boom generation reaches the ages of increased likelihood of developing disabilities. This increase in workloads will make it increasingly important for SSA to have clear and workable policies, rules, and guidelines to operate its programs and to project future growth. The gradual increase in full retirement age from 65

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The Dynamics of Disability: Measuring and Monitoring Disability for Social Security Programs to 67 years also means that disabled workers may remain on the rolls for two additional years before converting to Social Security retirement. An improved understanding of the dynamics of the programs and the factors that influence them is required. At this time, little is known with certainty about what contributes to disability trends and to what degree. Ongoing and future research using new data sources, such as the data that will be generated by the National Study of Health and Activity and other SSA administrative files, should provide relevant information about disability program participation and cost and other related policy issues. Moreover, as aptly stated by Burkhauser et al. (2001), “no studies have been able to satisfactorily disentangle the impact of demand side factors related to the passage of the ADA or changes in the mix of jobs in the economy in the 1990s from supply side factors related to changes in the ease of access to SSDI and SSI benefits or to a r oeduction in the share of jobs that provide private health insurance, which would discourage work among the population with disabilities.” Research is needed to delineate the magnitude of the various effects in order to understand the causes of recent declines in employment among people with disabilities. Only then can policies be developed to reverse the trend.