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Possible Future for Social Security Disability Benefits: The Hamilton Project

Possible Future for Social Security Disability Benefits: The Hamilton Project
By Scott B. Elkind, Esq.

Former Congressman, Lee R. Hamilton (D-IN) served from 1965 – 99 during which time he was the Chairman of both the Foreign Affairs and House Intelligence Committees. He is known for his work as Vice Chairman of the 9/11 Commission and currently serves as a member on the U.S. Homeland Security Advisory Council. Congressman Hamilton also heads his own project concerning reformation of the Social Security Disability program as part of the Center for American Progress. The report is entitled: “Supporting Work: A Proposal for Modernizing the U.S. Disability Insurance System.” This report sets forth a series of findings and recommendations in order to stem the rising costs associated with the increase in the disability rolls, and in doing so, states the following:

Findings

• In 1989, SSA spent 1 in 10 dollars on SSDI. By 2009, this number has risen to 1 in 5 dollars

• SSDI expenditures exceed the payroll tax revenue collected by the program

• The SSDI trust fund will be exhausted by2018, 22 years ahead of the trust fund for Social Security retirement

• The rapid expansion of SSDI contribute significantly to the deteriorating health of the overall Social Security system since both depend on the same payroll tax

• From 1988 – 2008, disability rates increased 45% ofr men and 159% for females

• There is little evidence that the overall health for the working-age population is declining with the exception of mental illness which has increased substantially

• The SSDI structure and employment rates results in an unfortunate interaction in that a person can only obtain benefits by exiting the labor force. This problem has been exacerbated by a deterioration in the labor market which makes it harder for people to obtain employment

Recommendations

• Addition of a “front line” to the SSDI system to offer the following: workplace accommodations, partial income support, and other services to workers who suffer work limitations, with the goal of enabling them to remain in employment

• Financial incentives to employers to accommodate workers (including actual work accommodations, vocational rehabilitation services, and partial wage replacement) who become disabled and minimize movements of works from their payrolls onto the SSDI system via partial disability insurance (PDI) policies. This would support workers from 90 days to 2.25 years following onset of disability to provide partial income replacement to help individuals maximize work readiness and self-sufficiency. After receiving these benefits for 24 months, individuals who regain the ability to work would be taken off these benefits. Persons unable to sustain employment would be transitioned into the SSDI program. The medical criteria for this program would be less stringent than that used for SSDI purposes. This program would not cover medical expenses associated with disability which would be paid for by mandated health insurance coverage.

• Readily diagnosed, severe disabilities would receive SSDI payments almost immediately

• Funding for these programs would come from employers who would be responsible for paying 40% of the premiums of private insurance coverage for these specific disability policies (estimated cost of $150 – 250/month per worker) which would be subject to competitive bidding by private insurers or via self-insurance. Experience rating would be effective for companies of 50 employees or greater. Employers would be required to pay for these benefits for one-year following employment termination in order to prevent preemptive firing of presumptively disabled employees

Effects

• The proposed program changes will not affect current beneficiaries

• If half of the workers submitting for SSDI benefits could be covered by the PDI insurance program, it would cover 500,000 – 750,000 constituting 6 – 10% of the current SSDI beneficiary population, representing costs of $12 – 18B annually

• By limiting the number of person initially entering the SSDI system, it would allow acceleration in benefits determinations which have been subject to an inordinate backlog

• Employers would be incentivized to accommodate workers with disabilities while limiting their exposure to the effects of work-limiting disability. The employers would also face an incentive to minimize the economic costs of disability to minimize their insurance premium or payment costs

• There is no assistance provisions for persons who are qualified for 24 month PDI coverage who are not found qualified to receive SSD benefits thereafter

• This program may have the unintended result of leading employers to become reticent to hire employees who have a preexisting health condition which increases the likelihood of disability as it could result in their incurring increased premiums in coverage in the future

All in all, proposals such as this are being seriously evaluated by SSA given its pending insolvency of the Medicare, Disability and Retirement funds.

Scott Elkind is an attorney in Silver Spring, MD whose practice focuses on disability issues. He can reached at 301-495-6665.

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