Is Social Security Disability the "New Welfare"?

Beyond the Numbers

Wednesday, July 17, 2013
Posted by: 
The Office of External Relations

Probably not, according to a recent OIG evaluation report.

The recession has affected Americans across the country. Many employers downsized with layoffs while others shuttered all operations, leaving workers unemployed. In a little over two years, the U.S. unemployment rate rose from 4.4 percent to a high of 10 percent in October 2009, before retreating to a current rate of 7.6 percent.

As unemployment rates have risen, so have the number of disability applications that SSA has received for Disability Insurance (DI) and Supplemental Security Income (SSI). From 2007 to 2011, the number of DI applications for workers increased by 34 percent, and SSI disability applications increased by 18 percent.

These increases have not gone unnoticed. In a 2011 letter to Inspector General O’Carroll, Senators Tom Coburn and Orrin Hatch wrote, “Given the looming collapse of [Social Security] DI, it is imperative that disability claims are properly examined to ensure that only those who are lawfully entitled to benefits receive them.”  The Senators also wrote, “Individuals cannot be allowed to exploit [Social Security] DI, transforming it into a supplemental source of unemployment income with enormous and crippling costs to taxpayers.”

Responding to concerns from Members of Congress as well as from the general public and media outlets, our auditors took a closer look at the relationship between unemployment rates and SSA’s disability programs.

Our report focused on the 10 states with the highest percentage increases in unemployment from 2007 to 2011:  Alabama, Arizona, California, Colorado, Florida, Hawaii, Idaho, Nevada, North Carolina, and Utah. We reviewed disability claims from individuals in these states who indicated on their applications that they had previously worked (indicating they may have lost a job in the recession), rather than those who indicated they had never worked or had not stopped working.

We did find that, in those states, the number of disability applications for claimants with a work history increased by an average of 32 percent during this time period—compared to a nationwide increase of 27 percent.

However, we also found that the rate at which SSA allowed those claims had actually declined by 1 percent nationwide. Of the 10 states, eight had declines in allowance rates, and allowance rates in the two states with nominal increases (Alabama and Colorado, seen in the chart below) were still consistent with the national average.

Moreover, we found that in all 10 states, claimants in 2011 were waiting longer after stopping work to apply for disability than they were waiting in 2007. Nationwide, the number of applications filed within one year after the claimant stopped working decreased by about 11 percent.

A recent study suggests that this delay may have been a result of extensions in unemployment insurance benefits, while a second study from the White House found that unemployed persons aged 50 to 65 without access to $5,000 are more likely to apply for DI as their unemployment insurance benefits are about to expire.

Still, the challenge in specifying the relationship between unemployment and disability applications is that many other factors are also at play:

  • The size of the labor force has grown, and its demographics have changed—in particular, the baby-boomer generation began reaching its disability-prone years in 1996. 
  • Each state has unique demographics, health trends, and job-market factors that affect disability application rates.
  • Changes in Federal disability policy have affected SSA’s programs. 

Given those variables, it isn’t surprising that ultimately, we could not determine the exact nature of the impact of rising unemployment on SSA’s disability programs.  

Nevertheless, it’s clear that more people are applying for disability benefits, which has financial implications for SSA and all Americans. As SSA’s disability programs face new challenges, you can expect them to remain a high priority at SSA and here in the OIG.

Click here to view the full evaluation report. Click here to read more about the financial challenges of SSA’s disability programs.