Social Security Disability Insurance Should Not Be Ignored

Brian Faler of Bloomberg has an article about the unwillingness of lawmakers to address Social Security's Disability Insurance program. Although the program's trust fund will run out in only four years (resulting in an automatic 20 percent benefit cut at that time), most people assume that money will simply be transferred from the old-age component of Social Security to fund the shortfall in the disability program. As a result, reforms to make the DI system financially solvent are often overlooked. Still, the looming DI insolvency should be used as an opportunity to make reforms to the Social Security system as a whole.

In recent years, as Faler details, enrollment has exploded due to the recession and it will continue to rise as the baby boomers continue to age and increase their risk of becoming disabled. In addition, eligibility may be difficult to determine -- and may be determined loosely -- due to the subjective nature of some disabilities. Despite the financing issues, the program is also overlooked because of the messy politics. Lawmakers are loathe to do more than tackle outright fraud in the program since cutting benefits can lead to harsh political backlash. 

^{Source: Social Security Trustees}

A month ago, CRFB's Senior Policy Director Marc Goldwein offered a few solutions for the short-term DI problem and urged policymakers to find structural solutions for DI. He noted that:

The Social Security disability system is broken in many ways. Not only is the program financial insolvent, but the system is wrought with fraud, needlessly complex, difficult to navigate, inconsistent and unfair in determining eligibility, inflexible to changes in the structure of the workforce, administratively overburdened, almost completely uncoordinated with other government policies, and unable to help or reward those who are interested in reentering the workforce.

In terms of short-term solutions, Goldwein suggested enhancing anti-fraud efforts, limiting retroactive benefit awards, and eliminating the payroll taxable maximum for the 1.8 percent portion of the payroll tax that is dedicated to DI, among other things. In terms of structural solutions, he suggested that policymakers figure out ways to more clearly define disabilities, coordinate DI with other similar programs, encourage beneficiaries who can do so to return to work, and discourage those can avoid it from entering DI in the first place.

Disability Insurance should not be overlooked in the context of the overall Social Security system. Lawmakers can use the 2016 opportunity to reform the DI system for the better.