Creating Financial Incentives to Serve Partial Benefit Recipients in the
Ticket to Work Program

December 6, 2003

Working Paper Prepared for the Ticket to Work and Work Incentives
Advisory Panel

by

Stephen H. Bell[^1]

The Urban Institute

2100 M Street, N.W.

Washington, D.C. 20037

Table of Contents

*Executive Summary*
...........................................................................
*3*

Introduction......................................................................................
6

1\. Reasons to Consider Payments to ENs for Partial Benefit Cases
................... 8

Providers Act on Economic Incentives
............................................ 8

Why SSA Should Reward ENs That Contribute to

> Partial Benefit Reductions
> ................................................. 9

What's the Down Side of Partial Benefit Payments?
.......................... 14

2\. Inputs to Designing Partial Benefit Reduction Payment Rules
................... 18

Characteristics of an Ideal Partial Benefit Payment System
.................. 18

Payment Parameters to Be Specified in Any Design
........................\... 20

Past Patterns of Combining Work and SSI Cash Benefits
..................\... 21

3\. Setting Monthly Payment Parameters in a Partial-Benefit-Reduction

> Plan---What Are the Options?
> ........................................... 22

Options for Defining Recipient Eligibility
...................................... 22

Using Level or Change-Since-Baseline as the Payment Trigger ............
23

Indicators on Which to Base the Trigger Point
..............................\... 24

Trigger Amounts---How Large?
.................................................. 26

Monthly EN Payment Amount
................................................... 28

4\. Suggested Plan for Rewarding ENs for Assisting

> Partial Benefit Recipients
> ................................................ 28

Priority Goals and Main Parameters of the Suggested System
............\... 29

Finding the Hardest-to-Serve Recipients in the Payment Diagram
.......... 31

Conflicting Objectives and How Each Might Be Favored

> when Designing Payment Rules .........................................
> 31

Arriving at a Balanced Design
................................................... 32

Checking the Model---and Refining It Where Necessary---to

> Address Issues Not Previously Discussed .............................
> 36

5\. Additional Parameters and Issues for the Suggested Plan
........................ 40

The Simplicity Concern
........................................................... 40

Should Payments for Partial Benefits Mimic Existing Ticket Rules? ......
42

Options for Handling Shifts in Providers and Setting a Lifetime

> Payment Limit
> .............................................................. 42

Segueing to Existing Payment Rules Once Benefits Reach \$0
............\... 43

6\. Conclusions and Next Steps
........................................................... 44

Appendix A - Defining and Comparing Different Partial Benefit

> Payment Features
> ...................................................... 47

Appendix B - Evidence of SSI Recipients Combining Work and Benefits

> Prior to Ticket to Work
> .......................................\......... 50

Appendix C - Assessment of Alternative Bases for Initiating EN Payments

> in a Partial Benefit Reduction Payment Plan ...................... 53

Appendix D - Indicators that Could Trigger EN Payments in a Partial

> Benefit Reduction Payment Plan .................................\...
> 57

Appendix E - Determination of Monthly Provider Payment Amounts:

> Basis, and Variation over Time and among Individuals ......\.... 59

Appendix F - Relating Countable Earnings Gains to Different Gross

> Earnings Starting Points: Where Do We Find the Hardest-
>
> to-Serve in a Graph of Countable Earnings Gains ................ 61

Appendix G - Optimal Payment Structures for Achieving Different

> Combinations of Partial Benefit Reduction Program Goals ...\... 66

References
................................................................................
69

Executive Summary

The Social Security Administration's most recent employment initiative
for people with disabilities, the Ticket to Work program, creates
incentives for employment service providers (called "employment
networks," or ENs), including state vocational rehabilitation (VR)
agencies, to serve individuals receiving federal income support who have
the potential to leave cash assistance through increased earnings.
Recipients perceived as unlikely to leave the Supplemental Security
Income (SSI) program might not be served, however, even when able to
benefit from Ticket services and reduce---but not eliminate---their cash
benefits. At present, recipients are required to leave cash assistance
entirely before most provider reimbursement can take place. Concerns
have arisen about this gap in incentives to serve less-employable SSI
recipients, along with calls to reform the Ticket program by adding
payments for partial benefit reductions, consistent with the priority
given to hard-to-serve individuals in the Ticket legislation.

This paper examines the rationale for expanding reimbursement to ENs
that serve partial benefit recipients. Specifically, it considers
reforms that add to the payments already issued on behalf of working
recipients (by Ticket's "milestone-outcome" reimbursement component,
which pays for only higher-earning SSI recipients and for at most 12
months) to provide more universal, long-term incentives. It concludes
that:

-   The arguments for making long-term payments to ENs that help partial
    benefit recipients succeed in work substantially outweigh the
    drawbacks of such a reform (Section 1: pages 6 through 18).

-   The design of new partial benefit reduction payments requires
    specification of a number of interrelated, complex rules that
    together determine eligibility for and amounts of the EN
    reimbursement provided (Section 2: pages 18 through 22).

-   The expected economic incentives of different partial benefit
    payment plans, along with Ticket to Work's overall policy goals,
    define better and worse options in each area where rules must be set
    (Section 3: pages 22 through 28).

-   Examining different combinations of design features to see how they
    might work together leads to the identification of a number of
    constraints and possible steps toward an attractive overall design
    (Section 4: pages 28 through 38). This analysis, and its extension
    to more practical aspects of program implementation (Section 5:
    pages 38 through 44) determine that:

1.  A number of the goals of payment plans that promote services to
    partial benefit recipients (and of the Ticket program generally) are
    at odds with one another.

2.  A good compromise among goals puts protection of the Social Security
    Administration (SSA) budget and incentives for ENs to keep serving
    partial benefit recipients for as long as they can benefit ahead of
    other goals.

3.  One such payment plan with the potential to appeal to providers and
    prompt services to some of the hardest-to-serve SSI recipients
    would:

    -   Condition monthly payments to providers serving partial benefit
        recipients on the gain in SSI countable earnings accomplished
        since the month of ticket assignment

    -   Pay providers a monthly dollar amount equal to 40 percent of the
        implied SSI benefit reduction stemming from the countable
        earnings gain since the month of assignment, with some
        exceptions

    -   Pay *more* than 40 percent of the implied benefit reduction for
        those making the smallest earnings gains to encourage services
        to the hardest-to-employ partial benefit recipients, but less
        than 100 percent

    -   Pay *less* than 40 percent of the implied benefit reduction for
        recipients approaching benefit exit, to assure that no EN ever
        earns more in stopping short of that goal for a given client
        than in assisting her or him to leave benefits entirely

    -   Make the rules applicable to all partial benefit recipients,
        including those who received full benefits at the outset because
        they did not work but who have since begun to do so

    -   Allow providers to move from partial benefit reimbursement to
        "outcome only" exit-based reimbursement in months following exit

    -   Cap lifetime payments issued on behalf of a single partial
        benefit client to the dollar cap on current participants in the
        outcomes-only payment approach....or not at all

    -   Explain the payment system's features to each of Ticket's three
        constituencies (recipients, providers, and SSA administrators)
        by (i) covering only what each individual group needs to
        understand to properly carry out its part and (ii) relating the
        new rules to what providers and SSA administrators are already
        dealing with in implementing the "milestone-outcome" payment
        system.

The top challenges in refining and implementing this payment system are
(i) setting reimbursement terms that are sufficiently profitable that
ENs want to serve this new target population and (ii) making the plan
administratively feasible at SSA and comprehensible enough to other
actors in the system---ENs, recipients, and advocates---to both gain
their trust and allow them to participate fully. Interestingly, these
also represent the two main challenges still facing the broader Ticket
program.

The suggested design is offered as a starting point for future debate on
the best way to reform Ticket to Work to reach the more
difficult-to-serve recipients who may depend on partial SSI benefits for
a considerable time. These are individuals who, like benefit exiters,
can contribute to Ticket's social goals of increased earnings and
reduced fiscal burdens if given the opportunity to access program
services through expanded provider incentives. Suggested priorities for
additional analysis that would help accomplish this goal appear at the
end of the paper (Section 6: pages 43 through 45).

Creating Financial Incentives to Serve Partial Benefit Recipients in the
Ticket to Work Program

Many people receiving Supplemental Security Income (SSI) from the U.S.
Social Security Administration (SSA) because of disabilities want to
work and are believed capable of working with proper supports. SSA's
most recent employment initiative for people with disabilities, the
Ticket to Work program, creates incentives for employment service
providers (called "employment networks," or ENs) including state
vocational rehabilitation (VR) agencies to serve individuals with the
potential to exit cash assistance through earnings. But other SSI
recipients who could increase their earnings and reduce but not
eliminate dependence on cash benefits are unlikely to be able to access
Ticket-supported services, since ENs (i) can choose whom they serve and
(ii) receive no reimbursement for clients who never reach \$0
benefits.[^2] This despite the fact that these individuals substantially
reduce overall SSI benefit costs and contribute to the social goal of
helping low-income families rely less on government benefits and more on
self-sufficiency through work.

Commentators on Ticket's design have pointed out this limitation, in
some instances calling for changes to Ticket's authorizing legislation
to create financial incentives to serve partial benefit recipients who
work.[^3] Among these was the recommendation of the Ticket to Work and
Work Incentives Advisory Panel in its *2001 Advice Report to the SSA
Commissioner* that:

*"The Panel... believes all beneficiary employment outcomes in the
Ticket*

*program are valued and that any savings to the Trust Fund or the
general funds*

*should be viewed as a positive outcome... The Panel recommends SSA
interpret*

*'benefits not payable' \[in the Ticket to Work legislation, for the
purpose of issuing*

*provider payments\] as a reduction in benefits rather than zero cash
benefits."*

*(page 31)*

Moreover, persons working while receiving partial cash benefits form one
of the four "hard to serve" groups singled out for special attention in
the Ticket to Work and Work Incentives Improvement Act of 1999.[^4] This
paper examines the rationale for including partial benefit recipients in
the Ticket to Work EN payment system for periods longer than provided
for by the current milestone-outcome payment system[^5] (Section 1). It
then reviews the inputs that could be used to guide the design of such a
system (Section 2) and develops options for that design, comparing
advantages and disadvantages (Sections 3). An illustrative plan with
desirable features in all these areas appears next (Section 4) and is
examined in terms of its implementation feasibility (Section 5).
Conclusions and future directions for research appear in a brief final
section (Section 6).

Prior to beginning it is useful to note that partial payment options
could be applied to people receiving Social Security Disability
Insurance (SSDI) payments if gradual benefit reductions as earnings rise
were initiated in that program, or tested on a trail basis. At present,
the SSDI program does not pay partial benefits---payments are "all or
nothing" each month based on whether beneficiary earnings exceed a fixed
threshold defined as "substantial gainful activity" (SGA). For SSDI
beneficiaries who make partial progress toward this goal, SSA cannot
share benefit savings with providers since there are no savings to
share. Currently, a beneficiary must earn at least \$800 in 13 months of
a 60-month period before benefits change and drop to \$0.[^6] SSI
benefits on the other hand decline in value as earnings rise, eventually
reaching \$0 on a graduated basis.

The issues explored in this paper apply already to one special group of
SSDI beneficiaries---those who receive SSI cash assistance as well as
SSDI, called concurrent beneficiaries. Presumably, making progress in
lowering SSI payments is worthy of provider reimbursement even if SSDI
benefits are neither reduced nor eliminated. This presumption, plus the
fact that earnings affect SSI benefit amounts in the same way for
concurrents as for SSI-only recipients, means the same general
principles apply to both groups. However, providers may pursue
concurrent beneficiaries more aggressively than other SSI recipients
because the former would receive the higher reimbursement amount
provided for SSDI exit should they exit that program as well.

1\. [Reasons to Consider Payments to ENs for Partial Benefit
Cases]{.underline}

To understand the rationales for paying providers when an SSI client
partially reduces her/his benefit amount, we must first see what current
EN payment rules look like and how they create incentives that encourage
ENs to be selective among the ticket-holders who come to them asking for
assistance. It is only by seeing what is wrong with existing incentives
that skew services toward certain subsets of SSI recipients that one can
understand why expanding payments to other groups may be justified.

[Providers Act on Economic Incentives]{.underline}

Service providers that must recover their investment in services to stay
in business have difficulty accepting clients with a low probability of
generating revenue. If clients are accepted who never meet the Ticket
provider reimbursement criteria, ENs are forced to draw on surpluses
generated in serving other clients or on general funds provided by
outside supporters (e.g, fixed budget allotments from other programs,
government or private grants to support the organization's general
mission) to cover investments not recovered through "pay for results"
funding from SSA.

State VR agencies have a good deal more additional funding to fall back
on should they accept a risky client who does not generate payment,
since these agencies receive federal Rehabilitation Act (Title 1) funds
from the U.S. Department of Education for general service delivery
support, in addition to any revenues garnered from SSA. In addition, the
probability of reimbursement from SSA is much higher for state VR
agencies if they channel ticket-holders into SSA's traditional
cost-reimbursement system---an option not available to other ENs. This
means that the need to create financial inducements to serve the
most-difficult-to-employ cases is not as strong among VR agencies. But
it remains nonetheless, since even under traditional VR payment rules
SSA reimbursement comes only if a client sustains a minimum level of
earnings for nine months.[^7]

In contrast, both ENs and state VR agencies may be eager to enroll
recipients who look near the earnings point SSA has established for
Ticket reimbursement---i.e., close to leaving cash assistance through
work. *By tying provider revenues to the ability of individual
recipients to leave benefits, Ticket to Work creates uneven incentives
to accept or reject Ticket clients depending on a recipient's starting
characteristics and likelihood of leaving benefits through work.* Both
scholars and practitioners have pointed out this feature[^8], mirroring
concerns raised in the law itself about incentives to serve
hard-to-serve populations.

An EN may always expect to increase exit rates through the services it
offers. However, business managers and clinicians at these organizations
have the ability---and the motivation---to anticipate better or worse
results in individual cases. They probably ask themselves "If we serve
this person, how far will s/he get?". When concerns about cost recovery
exist, ENs have no other way to contain financial risks except through
selective admissions or (which is much harder) coming up with more
effective or less costly services. In this framework, it is likely that
some potential Ticket clients will be seen as poor bets even should they
receive the EN's best, most cost-efficient services.

[Why SSA Should Reward ENs That Contribute to Partial Benefit
Reductions]{.underline}

A notable group that brings meager or no financial rewards to ENs under
current law is the set of SSI recipients who---with the help of Ticket
services---succeed in lowering their monthly SSI checks through earnings
but do not reach \$0 benefits for any sustained period. The language of
the current Ticket law, following careful legal scrutiny, does not allow
SSA to provide reimbursement to ENs in such cases except the relatively
small "milestone" payments for earnings at a threshold level
insufficient to leave benefits (see footnote 2 above). This omission,
which from examination of the legislative history may have been
inadvertent, keeps Ticket to Work from realizing its full potential to
benefit SSA, disability beneficiaries, and society as a whole.
Collectively, it is this restriction on the social gains achieved by
Ticket that generates the reasons for adding an additional payment
component. The rationales involved are summarized in Exhibit 1 and
discussed now in the text. For balance, a later display considers the
reasons for not reimbursing providers until SSI benefits fall to \$0.

In considering whether an expansion of the payment rules is warranted, a
previous payment refinement sets an important precedent: the
milestone-outcome option created by the original Ticket legislation.
Under this option, Ticket pays providers for increases in countable
earnings when full benefit exit has not been achieved. These payments
are made during the milestone phase when earnings exceed the substantial
gainful activity (SGA) level (\$800 in 2003) but do not eliminate all
SSI cash assistance. This provision adds to the rationale for a new
partial benefit payment system in two ways. First, the willingness to
begin paying providers ahead of full benefit exit has already been
established. Second, providers and SSA are already accustomed to
administering payments that hinge on more complex criteria and data than
benefit exit---in particular, the achievement of countable earnings that
exceed the SGA level. A partial benefit payment plan can be seen as an
expansion of the current milestone-outcome payment system, extending
payments prior to exit to *all* situations where incomplete but valuable
recipient progress has been made, not just those above SGA earnings and
for at most 12 months.

Exhibit 1

Reasons for Paying ENs when SSI Benefits Are Reduced, but Not Eliminated

1.  Partial benefit cases contribute to Ticket's overall goals of
    increasing earnings and reducing benefit dependence

2.  Costs to ENs of serving partial benefit cases may equal or exceed
    those for other ticket-holders

3.  Social benefits of Ticket participation go beyond direct benefit
    reductions and earnings gains; regardless of benefit exit status
    they also include

    -   lower costs for other assistance programs as earnings rise

    -   fewer *non-Ticket* employment services and resources used

    -   increased sales and payroll taxes paid

    -   improved quality of life for SSI recipients who find work
        because of EN assistance, and possibly for their families

4.  Congress identified those who work and receive partial cash benefits
    as a hard-to-serve group needing special attention in the Ticket
    program

5.  SSI recipients who cannot leave benefits may put in work effort
    equal to those who can, but face added labor market constraints
    beyond their control

6.  Making it more economically attractive to serve more (or different
    kinds of) clients will draw more providers into Ticket, thereby
    increasing competition and choice and benefiting *all*
    ticket-holders

7.  Employers may be better served if services to partial benefit
    recipients increase their options to hire qualified workers,
    especially for part-time job openings

8.  Though expected by ENs not to go off benefits, some of those
    accepted by providers only because partial benefit reduction will be
    reimbursed *will* in fact go off benefits and provide even more
    social benefits than expected and listed above, including
    contributions to the general welfare through payment of income taxes

[(1) Partial Benefit Cases Contribute to Program Goals]{.underline}.
Ticket to Work seeks to reduce dependency and encourage work among SSI
recipients and to save taxpayers money on SSI cash outlays. Individuals
whose benefit amounts drop as a result of Ticket participation
contribute to all these goals, whether the benefit level ever reaches
\$0 or not. For that reason, recipients capable of partial benefit
reductions with the help of EN services should receive *some* priority
in constructing Ticket's reimbursement rules, though perhaps not equal
priority to those ending benefits entirely. At present, by paying
nothing for partial benefit reductions except temporarily through the
milestone-outcome system, the program puts little priority on serving
this group. Almost all emphasis is placed on another set of recipients
who contribute to the same social goals---ticket-holders who are
actually capable of leaving benefits entirely.

[(2) EN Costs for Recipients Unlikely to Leave Benefits Are Commensurate
with or Above Those Incurred in Serving Other Clients]{.underline}. This
proposition has not been tested from Ticket to Work experience, since
the clients at issue have not yet been served by the program. Opinions
among providers who have spoken out on this issue, and among researchers
studying the hardest-to-employ SSI recipients,[^9] suggest that it will
take *more* resources to support those individuals at the same level of
earnings success, including earnings while still on benefits. They point
out that the costs of long-term tracking for reporting purposes and
administering the provider side of the SSA reimbursement process will be
little different from what ENs are incurring now with full benefit
exiters. And services, if not more intensive, are likely to be
longer-term for clients whose initial progress leaves them nearer their
starting point than for those who gain full economic independence.

[(3) Social Benefits of Ticket Go Beyond Benefit Reductions and Earnings
Gains]{.underline}. This point has been recognized with regard to
current Ticket participants who advance to full economic independence
but applies in large part to anyone who increases his/her earnings and
reduces benefit dependence without reaching full independence. The most
frequently mentioned "side benefit" of Ticket-induced changes is the
savings they produce for other government programs such as Medicaid and
Medicare, food stamps, and federal housing assistance.[^10] If overall
income rises for Ticket participants---i.e., earnings gains exceed SSI
benefit losses (as they must whenever earnings rise and benefits decline
along SSI's 2-for-1 payment schedule)---food stamp benefits
automatically decline for those enrolled in that program since food
stamp entitlements are computed taking all other sources of income into
account. Programs such as Section 8 housing and Temporary Assistance to
Needy Families (for the children of SSI recipients, not the recipient
her/himself) do not track as directly with changes in net income but
have some dependence thereon.

A further (and largely unrecognized) social savings from successful
Ticket participation concerns *alternative employment supports* that are
not needed once Ticket is in the picture. In expecting the program to
reduce overall SSA outlays when reductions in SSI costs are compared to
the added cost of paying ENs, it is often overlooked that either SSA or
the Department of Education (through its state Vocational Rehabilitation
programs) or other funders of employment services for people on SSI
(e.g., charitable foundations, local governments) have *saved* money on
the services they otherwise would provide out of non-Ticket budgets.
Depending on the utilization of other sources of employment assistance
were Ticket not available, this savings could be considerable and
constitutes a real benefit to society in the sense that the resources
provided by other funders can now be put to alternative uses or returned
to taxpayers. This could arise for partial benefit recipients as well as
benefit exiters.

Ticket to Work may also provide a further, more frequently mentioned
side benefit: added tax contributions of participants whose earnings
rise. A major portion of potential tax benefits to federal, state,
and/or local governments do not apply to individuals whose expanded
earnings still leave them short of SSI exit; incomes low enough to
retain SSI eligibility will never be subject to personal income
taxes---though some of these revenue gains might occur for those whose
earnings rise well above the SSI exit point. Still, the partial benefit
cases of current interest will pay more payroll and sales taxes as their
incomes switch from cash assistance to earned income and increase in
total, leading to more spending.

Another intangible but potentially large gain may arise from expanding
Ticket to serve more SSI recipients: improved quality of life for Ticket
participants and their families. The intellectual and personal
gratification of having a job, and the increased self-esteem and "social
connectedness" that come with it, seem likely to lead to higher quality
lives for successful Ticket participants and the family members with
whom they interact most frequently...above and beyond any financial
gains to the family or government through increased income. Though
harder to quantify than other gains of expanded employment, we would
expect quality of life gains to occur for anyone working more and
feeling more productive, whether all SSI cash assistance is ended in the
bargain or not. Moreover, as individuals with more functional
limitations and greater severity of conditions than those able to leave
SSI entirely, standards of social equity may indicate that partial
benefit recipients deserve *greater* improvements in life quality than
standard ticket users. If one of Ticket's goals is to improve
inter-family equity, added importance should be attached to lifestyle
gains for these individuals in particular---individuals now left out of
the program entirely due to insufficient provider incentives.

[(4) Congress Identified Partial Cash Benefits Recipients for Special
Attention]{.underline}. Perhaps reflective of added concern for the
welfare of the most challenged and hard-pressed of SSI's working
recipients, the Congress wrote into the Ticket legislation a requirement
that SSA examine the adequacy of incentives in current law to get
providers to serve beneficiaries who work and receive partial cash
benefits. Two of the other three groups singled out for special
attention also overlap the working beneficiary population to some
extent: those who earn a subminimum wage and those who need ongoing
support and services in order to work. It is ironic that the law, having
flagged these groups as particularly at risk of being unserved due to
inadequate EN financial inducements, provided no financial incentive at
all to serve this core group....except in cases where ENs expected to
help recipients in this group actually get them to exit benefits on a
sustained basis.

[(5) Work Effort May Not Be Lacking while Opportunities to Succeed
Are]{.underline}. It is believed that many SSI recipients who work and
receive cash assistance (i) work full time or (ii) put as much time into
their work effort as non-disabled workers while technically employed
just part-time.[^11] For example, some SSI recipients cannot earn a high
enough hourly wage in competitive employment to reach the threshold
where cash assistance ends even with full-time work hours.[^12] Or the
added time needed to prepare for work (e.g., personal grooming) and/or
get to work (i.e., commuting) with a disability require 40 or more hours
per week of work effort even though paid hours spent on the job are much
lower. In addition, some SSI recipients earn above the benefit cut-off
threshold in some months but not in most months over a sustained
interval. This can occur due to variable health conditions or
involvement in self-employment, which is known to produce uneven monthly
incomes for any worker and is a not uncommon choice for people with
disabilities who want to work. A reasonable question under these
circumstances is whether, with commensurate effort but more restricted
labor market opportunities, recipients who work steadily but still
receive cash benefits most months should be excluded from Ticket's
provider service incentives?

[(6) Expanding the Number and Types of Recipients Served Profitably by
Ticket Will Draw in More ENs and Benefit All Ticket Users]{.underline}.
The goal of Ticket from a consumer standpoint is to expand the range of
providers a ticket-holder can choose from and thus allow her/him to
obtain the best-matched services from the most effective source. When
providers are added to the choices available by becoming interested in
the program for the first time, all ticket users potentially benefit. If
Ticket's reimbursement incentives are changed to create revenue
potential for more SSI recipients (i.e., recipients who reduce benefits
but do not leave cash assistance entirely), providers can access a
larger customer base by joining Ticket as ENs. This---plus the
possibility that providers that specialize in serving mostly
hard-to-employ recipients have avoided the program entirely to this
point---suggests that the range of choices for existing Ticket
participants will expand if payment is offered for helping recipients
reduce their benefit amounts without eliminating them.

[(7) Employers May Be Better Served by a Program that Engages a Wider
Range of Workers]{.underline}. If payment for partial benefit cases
leads to more Ticket participants (as we would expect), employers will
have a wider range and larger number of Ticket-assisted workers to
choose from in their hiring decisions. This may be especially helpful to
companies seeking part-time help---an increasingly popular staffing
approach---especially if the supply of such workers from the
non-disabled workforce is inadequate to cover emerging employer needs in
this area. Presumably, more SSI and SSDI beneficiaries who worked
part-time prior to Ticket will seek to work full-time with Ticket's
assistance. What workers will replace them if incentives to serve those
capable of only part-time work are not expanded? This factor could go
the other way, however, if increased work hours for those leaving SSI
through Ticket services reduces employers' needs for part-time help.

[(8) Some of the Added Recipients Served Due to Expanded Provider
Incentives Will Fully Exit Benefits and Achieve All of Ticket's
Goals]{.underline}. Of those individuals who look like bad business
risks to ENs and hence are not now served, some would in fact be able to
permanently exit SSI cash assistance with the help of an EN. Provider
judgments of future potential are not perfect. If paying for partial
benefit reductions brings more high-risk recipients into the Ticket
program, some of the added cases will prove capable of not just reducing
cash support but of ending it in total. For these cases, the addition of
partial-benefit payments to ENs will extend Ticket to individuals who
fully achieve the program's goal of economic self-sufficiency: a
win-win-win situation for SSA, the recipients involved, and the
cognizant providers.

[What's the Down Side of Partial Benefit Payments?]{.underline}

Despite the above arguments, there are some down sides to incorporating
partial benefit reductions in Ticket's provider payment incentives. As a
practical matter, deciding what constitutes a "benefit reduction" worth
compensating will be problematic---and it's important that a reasonably
simple way of establishing payment eligibility for such cases be
found.[^13] Deciding the right level of payment may be equally
difficult. Presumably payment amounts should relate to the degree of
forward progress made in reducing benefits or increasing earnings since
the ticket was first assigned to the EN. Putting in specifics around
this will not be easy. (We look at both these questions, and other
technical issues in crafting a workable partial benefit payment system,
later in the paper.)

There are also more fundamental reasons to question the
desirability---or more accurately, the potential side effects---of
payment for partial benefit reductions. Exhibit 2 summarizes these for
discussion. As a group, these considerations do not outweigh the reasons
given above for attempting payments of this sort.

[(A) Buying the Base]{.underline}. Although attention has focused to
this point on financial risks to providers, probably the most important
downside of payment for partial benefits concerns the financial risk to
SSA. Issuing EN payments under a wider range of circumstances inevitably
means issuing *more* payments, even if providers do nothing

Exhibit 2

Possible Down-Sides to Paying ENs for Benefits Reduced but Not
Eliminated

> A. "Buying the base"

B.  Difficult to make cost-neutral to SSA

C.  If cost neutral, difficult to interest ENs

D.  Not socially efficient to pursue work for some of the
    hardest-to-serve

E.  Moves away from Ticket's clear message and original intent

F.  Creates an incentive for ENs to hold some recipients below their
    full potential

G.  Potential "double dipping" from multiple payment streams

differently. Some of the ticket-holders ENs are already serving achieve
lower, but non-zero, benefits than when they enrolled. These cases will
automatically generate provider

payments under a partial payment system, yet do not represent an advance
in program goals. In addition, it is likely that ENs will seek out
additional clients who---without any new employment assistance---will
qualify for partial benefit payment by taking actions on their own to
reduce their benefits.

Payments to both of these groups is what's called "buying the base".
This situation occurs when no SSI recipient moves to a better outcome
(on earnings or benefits) than if there were no expanded
reimbursement---resulting in no cost savings to SSA---yet some
recipients trigger EN payments that SSA must finance. These individuals
are the "base" that SSA cannot avoid paying for if it wants to extend EN
reimbursement to partial benefit cases. The same was true for the
original Ticket program---it had to "buy the base" of beneficiaries
headed off benefits due to work *without* Ticket services before it
could do anything to spur *added* benefit exits through provider service
incentives---no one can tell which are which.

[(B) The Challenge of Cost Neutrality]{.underline}. Buying the base of
itself clearly is not a cost neutral change for the federal budget: more
money goes out as a result of payment reforms, while no savings come in
for cases in the "base." Given this net fiscal loss, cost neutrality of
the entire policy will be achieved only if the benefit reductions
*caused by* the establishment of partial benefit reimbursement offset
the costs of buying the base. To do this, the "induced benefit
reduction" cases must be moneymakers for SSA; their cash benefits must
fall enough due to EN services to offset the EN payments needed to
produce this result. While we cannot know the number of such cases
created by any payment reform, this does tell us that EN reimbursement
must be set below the benefit reduction achieved if cost neutrality is
to be upheld.

[(C) Attracting ENs with a Cost-Neutral Payment Scheme]{.underline}.
Once constraints on payment levels are recognized as part of the
cost-neutrality objective, the problem of designing a system that will
attract providers becomes harder. SSA must provide *enough*
reimbursement for partial benefit reduction cases to get ENs to (i)
accept tickets from recipients they think will not exit benefits and
(ii) invest in their employment services. This of course is the same
challenge facing the existing Ticket program. If a middle ground can be
found there---combining acceptable financial risks for SSA and EN
payments adequate to attract providers---presumably it can be found for
partial benefit reduction cases as well. It may be, however, that
payments above the cost-neutrality standard will be needed to create
provider interest, as dicussed later in the paper.

[(D) May Not Be Any Socially Efficient Way to Pursue Work for Some of
the Hardest-to-Serve]{.underline}. It is possible that no service
compensation system can be found that simultaneously breaks even for the
government and yields a viable return on investment for service
providers---i.e., that no socially efficient Ticket program for partial
benefit recipients exists that can help at least one segment of society
while harming no other. The original instigator of the Ticket to Work
concept, Professor Monroe Berkowitz of Rutgers University, acknowledged
this by suggesting that the economically rational approach for
providers---and possibly for society---was to begin by focusing on those
most likely to return to work, at least if those who would achieve this
result on their own can be screened out.[^14] Those least likely to
return to work should perhaps never be served from a social efficiency
standpoint.

If no win-win payment design can be found for the partial benefit
population, one should perhaps question the social value of a
Ticket-like intervention in that population. Putting this the other
(more positive) way around, if we find a system for paying ENs when
benefits are reduced but not eliminated that simultaneously:

-   attracts providers;

-   has positive---or at worst neutral---effects on government finances;
    and

-   inspires SSI recipients to participate voluntarily;

we can be sure it is socially efficient. By appealing to the first and
last groups, who presumably act only in their own self-interest, it
necessarily provides net benefits in both quarters. If it also does no
harm to the government (i.e., taxpayers), the reform must yield overall
gains to society as a whole. Absent one or more of the bulleted
conditions, however, we cannot be sure of this result.

Still, with participation voluntary for providers and ticket-holders,
these groups will not participate if they perceive a net loss to
themselves. Thus, the worst that can happen in implementing a partial
benefits payment plan that assures government cost neutrality is that
nothing happens. Either ENs won't "play", SSI recipients won't come, or
both. Neither group will voluntarily choose actions that make it worse
off. On the basis of social efficiency, something of this sort is worth
trying whether in the end it attracts participants and providers or not.
[^15]

[(E) Movement Away from Ticket's Clear Message and Original
Intention]{.underline}. Berkowitz has also emphasized that Ticket was
conceived as a system for paying providers only when they produce the
single result most desired by SSA, permanent benefit exit.[^16] Paying
for anything else (such as short-term earnings above the SGA level in
the milestone-outcome payment system)---particularly something defined
by its *failure* to reach the penultimate goal of \$0 cash
benefits---departs from the original intent and philosophy of the Ticket
concept, makes the system more complex, and dilutes SSA's central
message to recipients and providers: "We're interested in getting people
permanently off benefits, period."

It is difficult to assess the claim that this message will be diluted by
offereing payments for partial benefit reductions. Will this weaken
Ticket's message to recipients and ENs already in the program? If so,
would this interfere with the progress toward self-sufficiency that
might have been made otherwise? To test this, we would have to know
whether some of the SSI recipients who earn their way off benefits under
current rules would not do so once they "hear" the message that partial
benefit reductions are "OK" and will be rewarded. This is extremely hard
to determine even after the fact, and cannot be known ex ante.

[(F) Incentive to Keep Some Recipients on Cash Benefits
Longer]{.underline}. By increasing provider reimbursement for partial
benefit reductions (from \$0 to a positive amount) without changing
reimbursement terms for benefit elimination, SSA runs a risk of
providers deliberately replacing full benefit exit cases with partial
benefit reduction cases. In rare instances, a provider may find it is
more lucrative to "hold back" a Ticket client who would otherwise exit
benefits in order to continue receiving partial benefit payments.
However, with the right alignment of the two payment levels, one for
exits and one for benefit reductions, it should be possible to avoid
this result.

[(G) Possibility of ENs "Double Dipping" from Multiple Payment
Streams]{.underline}. Another potential risk in providing EN payments
for partial benefit reduction concerns the possibility that a Ticket
participant will inappropriately generate two sources of revenue for the
EN. One will come while the client is receiving reduced but still
positive cash benefits, and the other after exiting SSI entirely, with
total reimbursement exceeding what either system alone could produce.
Carefully crafted rules governing the transition from partial to full
benefit reduction can prevent this result by reducing total
reimbursement attainable from benefit exit by the amount issued while on
partial benefits (see discussion in a later section).

As a group, these considerations do not outweigh the arguments in favor
of paying ENs for partial benefit reductions in Ticket to Work. Some of
these concerns have clear solutions noted above, while others are highly
speculative or would involve little risk to SSA should they emerge.

2.  [Inputs to Designing Partial Benefit Reduction Payment
    Rules]{.underline}

If the balance of considerations favors paying ENs when they help a
ticket-holder reduce but not eliminate her/his dependence on cash
assistance, the challenge becomes one of finding the best possible
partial benefit payment system for this purpose. This challenge infuses
the remainder of the paper, beginning with the delineation of
characteristics sought in the ideal partial-benefit payment regime. The
current section also identifies the generic factors, or parameters, that
must be specified to define a complete payment approach. Also, in
preparation for choosing these parameters well, the section reviews the
evidence of SSI recipients combining work and benefits prior to Ticket.

[Characteristics of an Ideal Partial Benefit Payment System]{.underline}

Exhibit 3 summarizes the qualities sought in the "perfect" payment
structure to induce providers to get recipients part way off benefits
when full exit is not attainable. Many of the most sought-after
characteristics emerge from the discussion above of the pros and cons of
paying ENs for partial benefit reductions and will not be discussed

Exhibit 3

Ways to Judge Various Partial Payment Approaches -- the Sought-After
Features of the Ideal Design

-   Brings into Ticket SSI recipients for whom gains from investments in
    added employment services exceed the cost of those services (i.e.,
    represents an efficiency gain for society)

-   Encourages the largest possible reduction in dependency (i.e., cash
    benefits) through the largest possible increase in earnings for each
    participating partial-benefit recipient

-   Does not remove the incentive for ENs to get participants entirely
    off cash assistance

-   Attracts many new ENs, maximizing the number of provider options for
    all Ticket participants

-   Is cost neutral or better for SSA and government agencies as a whole

-   Causes no SSI recipient to be worse off (e.g, does not give ENs an
    incentive to under-serve individuals who could have left SSI
    entirely)

-   Is simple to understand and administer

further here. Two others concern the highest-level policy goal of Ticket
to Work and the most practical aspect of its implementation, the desire
to:

-   Encourage the largest possible reduction in dependency (i.e., cash
    benefits) and the greatest possible earnings gain for each
    participating partial-benefit recipient; and

-   Be simple to understand and administer.

The advantage of this first characteristic is obvious---the best payment
changes are those that contribute most to the penultimate goals of the
Ticket to Work program. The second trait---simplicity of understanding
and administration---also has self-evident advantages all other things
equal. Less obvious is that simplicity may be worth pursuing in its own
right, even at the expense of some other desirable features. No new
payment system can yield benefits unless providers and ticket-holders
(i) understand the benefits it can bring for them and (ii) see the
"mechanics" of the system clearly enough to feel confident that
participation carries little or no risk. This latter feature has often
been lacking when work incentives and employment services have been
added to SSA disability programs in the past. This leaves the critical
constituents of the intervention, particularly SSI or SSDI
beneficiaries, wary of the harm it might do them as concerns (i) future
cash benefit and/or health care eligibility and (ii) potential ill
effects on their health or burdens for other family members. This will
be a particular problem if ticket-holders are unaware that Ticket
participants can withdraw from the program at any time with a guarantee
that no adverse consequences will follow.

To counter these uncertainties and fears, we need a design that makes
apparent, or better yet *transparent* *at first glance*, that no harm
can come from participating. If unable to instill this confidence in
recipients, a payment system carefully crafted in other ways may get few
"takers" and have little value to SSA or society.

[Payment Parameters to Be Specified in Any Design]{.underline}

Any service delivery and provider payment system will have many
components that should mimic the ideal characteristics in Exhibit 3. Of
this full set of payment parameters, the current paper looks only at
rules for payment eligibility and formulas for determining payment
amounts when ENs serve partial benefit recipients. Like those of
existing Ticket components, EN payment rules for partial benefit
reductions must define:

-   eligibility of SSI recipients to participate in the system

-   a payment trigger (an event that initiates the first EN payment for
    an eligible recipient)

-   basis for payment---client's earnings outcomes, SSI benefits, or
    other milestones

-   payment amount in months with EN reimbursement

-   limit on cumulative EN payments for a given client

-   reimbursement procedures when a recipient moves from one EN to
    another

-   payment implications of a partial benefit reduction client getting
    clear off SSI and transitioning to traditional Ticket reimbursement
    rules

Before considering how one might define partial benefit payment rules in
each of these domains, a broader discussion of each category may prove
helpful to readers. This is provided in Appendix A, which explores the
complexities of defining and comparing partial benefit payment
parameters in each of these areas and makes some preliminary suggestions
on how these might be resolved.

[Past Patterns of Combining Work and SSI Cash Benefits]{.underline}

In addition to conceptual considerations, a good partial benefits
payment design should be informed by knowledge of how work and benefits
currently come together in the SSI program. We need to understand the
starting point for partial benefit recipients if we hope to design
payment rules that move more recipients into this status and help them
forward in their work efforts. Among the aspects of partial benefit
payment reform discussed to this point, the factors most capable of
being informed by data on current work patterns include:

-   "Buying the base" of people who would work to lower their benefit
    amounts even without EN assistance (e.g., how big might "the base"
    be?);

-   Potential for reducing benefit payments below where partial benefit
    recipients now stand (e.g., how many partial benefit recipients are
    already near the SSI exit point due to earnings?)

-   The maximum EN payment amount (assuming this will be based on
    benefit size or recipient earnings);

-   Likelihood that some SSI recipients do not have the potential to
    benefit from work assistance in a cost-effective way; and

-   The size of the pool from which Ticket is likely to draw
    participants who can successfully combine work and benefits.

We review what evidence can be found on these factors in work and
benefits data from the SSI's pre-Ticket era in Appendix B.[^17] There,
we conclude that:

-   Non-workers so outnumber workers that "buying the base" of current
    workers may not carry a high cost relative to the potential for
    inducing more recipients to work and produce *new* benefit
    savings---though the cost may be high relative to the cost of
    "buying the base" in the *current* Ticket program;

-   Even without adding new workers through partial benefit recipient
    service incentives, the great diversity of earnings levels for those
    already working prior to Ticket suggests that partial benefit
    payment rules will need to be established for a broad range of
    initial earnings levels;

-   While data on benefit amounts for SSI recipients working prior to
    Ticket are not available, a substantial share must have been near
    the benefit exit point given that 10 percent earned over \$1,000 per
    month in 1999.

-   Based on demographic and work history variables from the pre-Ticket
    era, it is difficult to anticipate whether recipients brought into
    Ticket through provider payments for partial benefit recipients
    will (i) be those for whom newly-provided investments in employment
    assistance are likely to be successful and socially efficient
    and/or (ii) constitute the "most deserving" of previously unserved
    SSI recipients.

All of these considerations will influence the desirability of the
particular partial benefit payment parameters discussed in the next
section.

3\. [Setting Monthly Payment Parameters in a Partial-Benefit-Reduction
Plan---What Are the Options?]{.underline}

With the design dimensions and past evidence clearly laid out, we can
now proceed to the core of the payment redesign effort---specifying
specific options for defining each of the main payment parameters
identified in Section 2. Put in less abstract language, it is time to
say just what features might be built into a partial-benefit-reduction
payment plan to maximize results? which payment trigger to use? how to
set monthly payment amounts? and so on. This will set the stage for
combining later in the paper the most attractive features in different
domains to form a fully specified payment plan---i.e., set of
rules---for paying ENs that serve SSI recipients receiving partial
benefits.

[Options for Defining Recipient Eligibility]{.underline}

We begin with the logically first issue when defining reimbursement
rules for any added group of SSI recipients not well-served by current
Ticket program. We ask "Do any special circumstances have to be present
at the time a ticket is assigned to a provider for the EN to qualify for
SSA reimbursement during subsequent months in which the recipient
combines earnings and SSI cash benefits? If so, what are those
circumstances, to the extent they differ from the conditions that must
apply for reimbursement to take place under the current Ticket system?"

These questions arise because a partial benefit payment system could
choose to target its new service incentives on just a portion of the
recipients ENs now do not want to serve because of financial risks, or
on the entire group. It is not clear whether people advocating or
inquiring about expanded EN payment for partial benefit recipients mean
"recipients *who currently receive* partial SSI benefits" or the broader
group that *someday might become* partial benefit recipients if they get
jobs and receive countable income.

Inclusion of the latter group seems more attractive. All of the reasons
put forth in Section 1 for expanding Ticket payments to individuals
still receiving SSI benefits (see Exhibit 1 above) apply equally to
those currently receiving full SSI benefits without earnings and those
starting with countable earnings and partial SSI benefits.[^18]

This choice also makes any partial benefit component added to Ticket
easier to understand and administer. Why force ENs to screen on current
benefit status---whether benefits are full or partial---when someone
asks them to accept a ticket in order to determine their eligibility for
reimbursement? And why force SSA to police whether the individuals for
whom an EN is claiming payment really were partial benefit recipients at
the time of assignment? Keep it simple, allowing ENs to concentrate on
finding candidates they think can achieve some degree of financial
independence at some point in the future, whether they have already
started toward that goal or not. And let SSA concentrate on its many
other administrative challenges when running Ticket.

Perceptions of Ticket among providers and beneficiaries should also
become clearer due to this simplicity: "Ticket is a program to help
disability recipients whose work and earnings can lessen their
dependence on SSI." That's the whole story; participants' level of
dependence when the help begins---their benefit status at
assignment---does not matter. As long as the desired results take place
*following* ticket assignment, providers should be eligible for
reimbursement, irrespective of whether anything good was already
happening.

[Using Level or Change-Since-Baseline as the Payment
Trigger]{.underline}

Having accepted a ticket from a beneficiary capable of generating EN
payments, when should an EN's payments actually begin? This is central
to the payment-for-partial-benefits concept: EN revenues start flowing
when benefits decline and/or earnings increase appreciably, not when
benefits fall all the way to \$0. The trick, then, is deciding when
benefits have declined and/or earnings risen enough for payments to
begin. This actually involves three related decisions:

-   whether to base payment start-up on the dollar level of some
    indicator or the change in that indicator since the EN accepted a
    ticket;

-   what indicator measure to use in this way; and

-   what magnitude of the indicator is required for payment to begin.

We will eventually get to all of these elements. The first two are
closely related---whether the threshold for payment should be stated in
terms of SSI benefits, earnings, or some other indicator (e.g., an
intermediate milestone) and whether the indicator should be measured in
terms of level or change since baseline. Hence we introduce both of
these dimensions at once in a technical discussion in Appendix C.

Whatever indicator variable is used, issuance of the first EN payment
could be made dependent on...

> .... the indicator moving in the desired direction from its starting
> value in the
>
> month of ticket assignment; or

.... the indicator improving by a minimum amount, from \$X in the month
of

> ticket assignment to \$Y in the current month with \$Y - \$X (the
> amount of improvement) equaling or exceeding a pre-specified amount;
> or
>
> .... the indicator reaching a certain level---that it meet or exceed a
> certain
>
> pre-specified dollar amount regardless of where it started (at ticket
>
> assignment) or how much it has improved since then.

Exhibit 4 provides examples of each of these concepts, in the case where
monthly benefit amount rather than earnings is the basis for the
trigger. Each translates readily to a payment system in which monthly
earnings or hours worked provide the trigger.

The discussion in Appendix C identifies the most attractive option among
the three trigger mechanisms considered, a trigger based on a minimum
amount of improvement in the indicator variable since the month of
ticket assignment. How large an improvement to require depends on what
indicator measure we choose, the topic of the next subsection.

[Indicators on Which to Base the Trigger Point]{.underline}

For partial benefit recipients, SSI benefits move up or down in step
with changes in countable earnings through work (and other changes in
countable income). So in theory either indicator could be used as the
basis for EN payments and achieve the same results. This is especially
the case when the payment trigger---and, potentially, the payment
amount---is determined based on *changes* from baseline levels as is
recommended above. Countable income from sources other than earnings
need not complicate matters if income from those sources does not
change. In this situation, the countable earnings change associated with
any given change in SSI benefits can be calculated using the established
benefit reduction formulas of the SSI program, once the starting points
for each indicator are taken into account.

Exhibit 4

Illustrations of Alternative Trigger Points for Provider Payments in a
Partial Benefit Reduction Payment System

Example A: Trigger = Any Movement in Desired Direction

> Recipient assigns ticket to a provider in month with SSI benefit of
> \$431.
>
> First EN payment issued when monthly SSI benefit drops below \$431 for
>
> the first time, to \$430 or less

Example B: Trigger = Sufficient Improvement

> Recipient assigns ticket to a provider in month with SSI benefit of
> \$431.
>
> First EN payment issued when monthly SSI benefit drops to \$331 for
> the
>
> first time (sufficient improvement threshold = \$100 reduction).

Example C: Trigger = Exceed Fixed Threshold

> Recipient assigns ticket to a provider in month with SSI benefit of
> \$431.
>
> First EN payment issued in first month after that that SSI benefit is
> \$300
>
> or less (fixed threshold = \$300).

Hours worked has a much different character. Its connection with both
countable earnings and benefit amount depends on the individual's hourly
wage rate. Those with very low wage rates could qualify their ENs for
reimbursement based solely on the hours worked; this would not happen
with an earnings- or benefit-based trigger. The hours-based approach has
appeal in creating incentives to serve those with the most meager
earnings power per hour, arguably the most difficult to employ of all
SSI recipients. However, in so doing it divorces payment amounts from
SSA's benefit savings, violating the basic tenant of the Ticket
program---that SSA can reduce SSI costs by sharing back with providers a
portion of any benefit savings achieved. There are other ways to shift
incentives in the direction of recipients with low wage rates when they
work a substantial number of hours, by rewarding earnings increases
and/or benefit reductions more heavily when clients begin with low
initial earnings (in dollars) for whatever reason.

The reverse concern---that providers could receive reimbursement for
people who have made very little progress in hours worked simply because
their hourly and thus total earnings for any hours changes are
especially high. Again, it is the total income produced by the extra
hours, not the number of hours per se, that generates SSI savings, so
large earnings in few hours seems at least as good from a social
standpoint as the same dollar gain through many work hours. Moreover,
few recipients of SSI have large potential wage rates even if helped in
finding and maintaining employment, given their lack of work experience
and often limited education.

Returning to earnings and benefits as the top candidates for triggering
EN payment, we have noted that these two approaches can produce
identical incentives for providers due to the tight dollar translation
between them. That being the case, the choice between earnings and
benefits should hinge on the relative practicality and simplicity of the
two options. Appendix D concludes that countable SSI earnings provides
the best basis for triggering payments in this respect.

To complete the specification of the trigger point, one more standard
must be established: the particular amount, in dollars, by which
countable earnings must increase relative to the month of ticket
assignment for provider payments to begin. Given the close
correspondence between this standard and the size of the EN payment that
should follow we examine triggers and payment levels together in the
next subsection.

[Trigger Amounts---How Large?]{.underline}

The most fundamental question in expanding Ticket reimbursement to
motivate service provision to partial benefit recipients---how hard to
make it for ENs to get paid when they serve such clients---is also
possibly the most difficult to determine. The entire point of adding EN
payments for clients still receiving partial benefits is to make it
*easier* for ENs to serve these individuals profitably. When the payment
trigger keys off improvements in countable earnings (as recommended
above), payments must begin before countable earnings rise so far that
SSI benefits fall to \$0---the point where current rules already supply
EN payments. So the question here is: How much *less* improvement in
countable earnings is appropriate for rewarding ENs serving partial
benefit recipients?

The literature on Ticket to Work's incentives and design features
focuses little on *change measures* as the basis for deciding if a
provider should be paid---or, to anticipate the next subsection, how
much it should be paid. It mostly considers *levels* of an indicator,
not changes since assignment, as the basis for payment. How much
progress in raising clients' earnings should be required for EN payments
to begin? The answer depends on several difficult-to assess factors:

-   The strength of increased incentives to serve partial benefit
    recipients---and hence the number of such people served by the
    program---that policy makers desire.

-   How much of the "base"---the people who reduce their benefit amounts
    without Ticket assistance---policy makers are willing to "buy".
    Larger required earnings gains mean "buying the base" for fewer
    people.

-   How much change in countable earnings is possible before reaching
    \$0 benefits for those receiving partial benefits at baseline. One
    would not want to set an earnings increase requirement so large that
    it puts total countable earnings above the benefit exit point for
    most partial-benefit recipients.

-   The size of the EN payment that goes out once the "trigger" fires.
    Larger earnings gains would be needed to justify the initiation of
    larger provider payments.

The first two of these factors reflect the basic philosophical
disagreements over Ticket that have existed for some time. Translated to
the partial benefit issue, they point in opposite directions. We want a
*lower* earnings trigger to motivate ENs to serve more partial benefit
recipients. However, a higher earnings trigger is better since it
reduces the number of recipients capable of reaching this benchmark on
their own---the "base" for which SSA must pay even though ENs contribute
nothing to this success. The same tension afflicts the last two factors,
but at a more practical level; they suggest that we simultaneously seek
(i) a lower trigger to create incentives for ENs to serve a wider swath
of the partial benefit recipient population and (ii) a higher trigger to
justify larger initial payments to ENs (which helps ENs deal more
effectively with their cash flow problems and thereby potentially
attracts more providers into the program).

Clearly a compromise will be needed, one that becomes clearer when we
consider the dollar amount that might be set for monthly EN payments
once the trigger is reached.

[Monthly EN Payment Amount]{.underline}

Several questions must be answered in order to set the monthly amount
paid to ENs that assist partial benefit recipients reach the selected
trigger point:

-   On what indicator should monthly payment amounts be based? Do the
    arguments stressed above for basing the payment trigger on changes
    in countable earnings apply as well to the monthly payment amount?

-   Should payment amounts be the same for all qualifying clients?

-   Should payment amounts be constant over time or vary with the
    client's circumstances (including her or his countable income level)
    or by pre-defined formula?

-   What would payment levels look like if we choose to make them
    conceptually consistent with the existing Ticket rules for
    reimbursing ENs when their clients completely leave SSI? Should we
    choose to do so?

Answering the first three of these questions puts us in a position to
propose particular payment amounts for each countable earnings increase
... and in the process settle the question of how large to make the
threshold for the initial payment trigger. We provide these answers in
Appendix E, concluding that:

-   Changes in countable earnings since the month of ticket assignment

> should form the basis for calculating monthly payment amounts.

-   The best approach to paying for partial benefit reductions is to
    vary payments across individuals and over time to reflect the size
    of earnings gains achieved in each month.

Based on these conclusions, we next suggest a partial benefit payment
plan that matches all of the preferences identified in this section and
consider how it stacks up against current payment rules as well as other
design parameters and goals not yet discussed in detail.

4.  [Suggested Plan for Rewarding ENs for Assisting Partial Benefit
    Recipients]{.underline}

Of the many parameters in a partial benefit reduction payment system,
the last three discussed in the previous section---trigger amount,
payment amount, and payment variations across individuals and
time---come together in this section. They provide the basis for
describing a complete partial benefit reduction payment plan, including
for the first time specific dollar amounts for provider payments. We
integrate these three factors with the other preferred payment
parameters identified in Section 3 in describing a fully-formulated
partial benfit approach of considerable promise. This does not mean that
other designs could not be found with equivalent or greater appeal.
Rather, it illustrates one direction that reforms of the Ticket program
might take to better assist hard-to-employ recipients. A final section
of the paper examines several payment parameters not yet discussed,
including lifetime payment limits and payment rules for beneficiaries
who shift providers.

[Priority Goals and Main Parameters of the Suggested System]{.underline}

Except for the question of service effectiveness---i.e., ENs'impact on
client outcomes compared to what would have happened without
Ticket---which we will leave to the eventual Ticket to Work
evaluation,[^19] the two greatest concerns in setting up a partial
benefit payment system are:

-   Creating access to Ticket services (i.e., willing providers) for as
    many additional SSI recipients as possible, being careful not to
    leave out the hardest-to-employ.

-   Not costing SSA money on net, but instead keeping EN payments equal
    to or lower than the SSI benefit reductions produced.

The system described here seeks to maximize the first of these
goals---the range of recipients served---by avoiding incentives for ENs
to prefer tickets from the most promising partial benefit recipients. It
minimizes the second concern---the risk of creating net costs at
SSA---through steps that address some of the financial issues raised in
previous sections.

From the earlier discussion, Ticket payments to ENs serving clients who
reduce but do not end their dependency on SSI benefits should

1.  Begin when SSI countable earnings rise above their level in the
    month of ticket assignment by a sufficiently large amount without
    taking the individual completely off SSI, and

2.  Vary among individuals and across months based on the extent to
    which countable earnings in any month exceed those in the month of
    ticket assignment.

The most convenient way to represent a payment system of this sort
involves a graph relating the dollar increase in countable earnings
since baseline to the dollar amount of the associated EN payment. Figure
1 provides such a graph, depicting a sample payment system designed not
to be particularly attractive from a policy standpoint but to illustrate
certain features we would like to include in all the payment designs
considered.

The trigger point for starting EN payments appears on the horizontal
axis of the graph. This axis represents the increase in recipient
countable earnings since baseline

![](media/image1.wmf){width="6.884722222222222in"
height="5.344444444444444in"}

(month of ticket assignment). SSA issues no provider payments (i.e.,
\$0) for any earnings gain below this level. When earnings gains exceed
the trigger amount provider payments become positive (\>\$0), as shown
in the line to the right of the trigger point that rises above the
horizontal access. Provider payments also should increase or at least
hold constant as countable earnings gains increase toward the right side
of the graph. This reflects the principle that SSA pay providers more
when earnings gains (and hence benefit reductions) increase.

[Finding the Hardest-to-Serve Recipients in the Payment
Diagram]{.underline}

Before we can consider how the EN payment line might be shaped to meet
the

second goal listed above---avoiding financial incentives that lead
providers to neglect the hardest-to-employ partial benefit recipients
and serve only those with better initial prospects---we need to know
where to find each type of recipient on the graph. If the
hardest-to-employ concentrate near the righthand side of Figure 1, the
line shown provides the strongest incentives for ENs to pick that
particular subset of recipients through the higher payments offered by
SSA on that side. If those individuals concentrate mostly in the left
half of the figure, the opposite is true: the payment line as shown
gives ENs less reason to serve the hard-to-employ population compared to
other recipients.

We cannot assume that the most difficult clients are found toward the
left, as would be the case if initial earnings *level* determined
left-to-right positioning on the graph. Instead, recipients sort out
according to the size of their earnings *gains* following assignment of
their tickets to providers. The relationship of this factor to greater
or lesser difficulties finding employment *prior to Ticket entry* is not
so clear-cut. Even so, the tendency remains for the initially
hardest-to-employ to concentrate toward the left side of the graph where
smaller earnings increases take place. Appendix F explains why this is
the case. The argument hinges on providers' need to spend more on
rehabilitation and employment services to move the hardest-to-serve
upward in countable earnings as much as other partial benefit
recipients.

[Conflicting Objectives and How Each Might Be Favored when Designing
Payment Rules]{.underline}

The concentration of hardest-to-serve recipients toward the left side of
Figure 1 creates a conundrum for defining the exact contours and dollar
amounts of the EN payment line. Given our prediction that the
hardest-to-serve beneficiaries will concentrate near the lower end of
the countable-earnings-increase scale, we would like for equity reasons
to pay ENs just as much---and possibly more---for a comparatively small
earnings gain as for a large one. This feature is needed to encourage
greater acceptance of hard-to-serve clients on the part of ENs.

But strong reasons also have emerged for ensuring that EN payments do
not *decline* as countable income gains increase---i.e., in moving from
left to right in the graph. First, we want payment amounts to track with
benefit savings for SSA, which rise in step with countable earnings
gains. Also, if the payment line ever declines ENs would have an
incentive to stop advancing partial benefit clients at that point so as
not to see their revenues drop. This would keep the recipients involved
from reaching their potential to increase earnings and become
self-sufficient...and preclude SSA from reaping the largest possible
benefit savings.

Just as in the main Ticket program, we cannot achieve all of SSA's goals
at once. Conflicts exist between the four goals that have been the focus
of discussion to this point:

1.  Avoiding incentives that tempt ENs to stop assisting recipients
    short of reaching their full earnings potential;

2.  Never making EN payments that exceed the associated benefit savings
    to SSA;

3.  Giving ENs as much incentive to serve hard-to-employ recipients as
    possible; and

4.  Getting more providers to serve as ENs and to accept tickets.

Balancing these goals will require a hybrid design combining aspects of
several different plans, each intended to maximize one or more of these
objectives. We will not know what this design looks like until we
establish the best payment structure for pursing the combinations of
goals on the list that *do not* have conflicting design implications.
Appendix G does this. It concludes that:

-   A low, upward sloping EN payment line would best serve goals 1 and
    2;

-   A high, upward sloping EN payment line would best serve goals 1 and
    4; and

-   A high, downward sloping EN payment line would best serve goals 3
    and 4.

The appendix also explains why all other combinations of goals have
conflicting design implications.

[Arriving at a Balanced Design]{.underline}

How do we compromise between a low, upward sloping EN payment line, a
high upward sloping EN payment line, and a high downward sloping EN
payment line to achieve a good balance of all four goals without
necessarily meeting any of them completely? One way is to start with a
design that upholds the principles of never paying more than the SSI
savings returned and never encouraging premature service
cessation---i.e., a low upward-sloping EN payment line---and then
consider altering it to more closely resemble the other two
designs.[^20] For want of a better standard, suppose one begins with a
version of a low upward-sloping payment line that pays ENs 40 percent of
the SSI benefit savings produced by their clients prior to benefit exit.
This seems philosophically consistent with the current Ticket system
that encourages the client outcome it most wants---elimination of all
SSI benefits---by paying providers 40 percent of the average benefit
savings produced. [^21] And it improves on that system by computing
payment amounts as a percentage of an individual's benefit savings
rather than an average of many individuals. Such a payment line appears
in Figure 4,[^22] sloping upward from \$0 at a steady clip equal to .4
times the increase in benefit savings. The benefit savings resulting
from increased countable earnings are shown along the line rising to the
right at 22.5 degrees, reflecting the \$1 decline in benefits for every
\$2 rise in countable earnings that characterizes the SSI benefit
calculation.[^23] Forty percent of 22.5 degrees is 9 degrees.

To match the graph used to illustrate this design in Appendix G, the
straight-line design shown in Figure 4 s it approaches the payment level
for benefit exiters (shown as a flat line parallel to the horizontal
axis) when countable earnings gains reach \$1,104, the point at which
all participants leave SSI, including those who began with \$0 earnings.
The dotted line curving below the solid payment line in Figure 4
reflects this change. It assures that no partial benefit recipient
generates a payment larger than the \$196 per month awarded when a
recipient leaves SSI cash assistance entirely; indeed, it deliberately
caps partial benefit payments at 90 percent of this amount, \$176. This
leaves a reimbursement incentive of \$20 per month for ENs to help their
best-paid partial benefit clients achieve the final goal of going off
benefits entirely. A still larger incentive applies to almost all
clients, since much smaller earnings gains---points further to the left
on the graph---produce benefit exits for recipients who start with more
countable earnings. As

![](media/image2.wmf){width="6.625in" height="4.394444444444445in"}

these cases approach the \$0 benefit goal, partial benefit payments will
peak somewhere below \$176, creating a larger incentive to move clients
entirely off benefits---the vertical distance between the partial
benefit payment line and the dotted line representing the fixed \$196
payment for benefit exit.

Despite this careful detailing, we have accomplished only two of our
four goals: incentives to improve client outcomes at all points up to
benefit exit, and maintaining the fiscal integrity of the plan by SSA
never taking a loss. Are there further ways to change the payment line
to do better with respect to our other two goals, drawing in more
providers and getting them to serve the hardest-to-employ?

Yes there are, by raising the entire payment line in Figure 4, and
raising its left-hand side where the hardest-to-serve concentrate more
than the rest. But this would sacrifice some or both of our first two
goals: fiscal integrity and incentives to continue services to reach
benefit exit. \|Moreover, we judge these two outcomes to be the
highest-order objectives of a partial benefit payment system. Other
goals seem less urgent because:

-   Progress toward getting more of the harder-to-employ into
    EN-provided services has already been made in creating a partial
    benefit recipient reimbursement system in the first place. After
    all, this entire system creates incentives to serve SSI recipients
    with less promising labor market prospects than ENs are prepared to
    take on now with payments covering only months completely off
    benefits. In addition, the release of Title 1 funds (from the
    Rehabilitation Act mentioned above) to other uses once state VR
    agencies receive steady revenues from their relatively successful
    partial benefit clients may further expand services to the
    hardest-to-employ at those agencies.[^24]

-   The great challenge of getting more ENs to participate in Ticket
    (and to accept more tickets) has begun to be addressed for the
    Ticket program as it now exists, paying just for benefit exit and a
    few initial milestones.[^25] If this effort succeeds in expanding
    services for those expected to leave benefits---and if that of
    itself does not induce enough providers to also serve people
    expected to remain on partial benefits---a parallel strategy likely
    can be devised for the partial benefit group. If no solution is
    found, the question of overcoming this same challenge for partial
    benefit recipients becomes moot, since Ticket would still be
    hamstrung by a lack of provider response to the economic incentives
    in the existing \$0-dollar payment structure.

In contrast, any plan that violates one of our initial objectives, such
as creating incentives for ENs to halt services that have proven
effective *short of achieving benefit exit,* will be viewed as a folly
or greeted with incredulity, if advanced as a recommended plan. And any
plan that includes sharing more than 100 percent of SSA's savings with
providers by paying more than the benefit reductions achieved will face
serious challenges from budget managers at SSA and a Congress fighting
the burgeoning federal deficit. This despite the fact that the existing
Ticket program has this same obvious flaw---it pays 40 percent of the
average national benefit at exit even for recipients who enter Ticket
with less than that amount of SSI benefits to shed. Having noticed this
fiscal shortcoming of the current system, no one concerned about program
costs will be anxious to repeat it when expanding coverage to partial
benefit recipients.

Within these constraints, some adjustments can be made to the design in
Figure 4 to improve its performance on second-order priorities without
sacrificing its strengths in other areas. Figure 5 shows a design that
differs from that in Figure 4 by paying providers more for smaller
countable earnings gains. Beneficiaries who increase their countable
earnings by a relatively modest amount---say no more than half the
substantial gainful activity level, or by \$400 per month---generate EN
payments greater than 40 percent of the associated benefit reduction
(but still less than 100 percent). This increases incentives for
providers to participate in the partial benefit payment system in
general and particularly encourages them to serve the more disadvantaged
recipients in this population---but probably only by a little. An
important feature of this adjusted payment line is its continued
adherence to the proposition that EN payments must increase with each
successively larger earnings gain---i.e., the line must still slope
upward at all points as it moves to the right.

This modified payment plan would pay providers almost all of SSA's
benefit savings when recipients increase their countable earnings only
slightly. This added generosity serves to both (i) soften incentives for
providers to avoid serving partial benefit recipients who cannot do
better than this and (ii) underline sharply the basic philosophy of
partial benefit payment: that Ticket should not be just about producing
dramatic earnings gains and generating large net savings for SSA but
should reward progress whenever it is made. This form of Ticket
expansion would declare the value of all work, as a social standard and
for helping those facing the most serious challenges in their work
efforts but trying and moving forward nonetheless.

[Checking the Model---and Refining It Where Necessary---to Address
Issues Not Previously Resolved]{.underline}

Having developed a fully specified EN payment system for those receiving
partial SSI benefits, we can now examine how that system relates to the
design questions we raised in Section 3 but have not yet fully resolved.

![](media/image3.wmf){width="6.68125in" height="4.322916666666667in"}

[Trigger Amount in Dollars]{.underline}. Most importantly, the suggested
plan finally answers the question of what size earnings gains should
trigger the first EN payment. Figure 5 above shows a system that pays
ENs for client earnings gains of any size, down to a single dollar of
added countable income....assuming ENs are willing to go to the trouble
of filing for such a small payment. Since this seems unlikely, and
certainly non-optimal from the program administration point of view at
SSA, it might be best to require a minimum \$50 increase in countable
earnings before payments initially begin or are issued in any given
month, resulting in a \$25 reduction in SSI benefits and a provider
payment of nearly that much (e.g., \$22).

> While this may seem a small amount of recipient progress, not every
> SSI recipient

has the potential to increase monthly earnings by more than \$50.
Moreover, setting the trigger for payment at a low threshold reinforces
the program's philosophy that everyone can and should work, and that all
work is valued. In addition, it more fully accords with reason payment
for partial benefit recipients is being considered at all: to give a
fuller meaning to the government's implicit pledge that "as soon as we
gain, you gain." Of course, providers that do not want to bother with
payments as low as \$25 (or any other small amount) do not have to file
for reimbursement, or they can wait until they are eligible for bigger
payments in later months or can file for payment for a whole series of
eligible months.

[Monthly Payment Amount in Dollars]{.underline}. This same point of view
motivates the proposed plan's answer to the question of how to set the
monthly EN payment amount for partial benefit recipients. Having
established clients' countable earnings as the basis for payment, the
curved payment line in Figure 5 indicates a specific EN payment amount
(the height of the curve) for each gain in countable earnings. The
largest countable earnings gains at the right end of the curve, gains in
the \$900 to \$1,104 range (the latter amount representing the largest
countable earnings gain possible without leaving SSI) produce EN
payments to \$176, as high as one dare go if concerned about maintaining
a meaningful incentive for providers to continue working with these
individuals in search of a benefit exit payment of \$196 per month.

Switching to the extreme left of the payment line, monthly payments rise
quickly as countable earnings gains move up from \$50. At first, they
equal nearly 100 percent of the implied benefit savings. If 90 percent
is chosen as the maximum rate, SSA would share 90 percent of its benefit
savings with ENs as partial benefit cases begin to improve, keeping 10
percent. This heavy tilt toward providers may be essential in getting
ENs to even begin to serve this population, especially recipients with
the least earnings potential long run. Once underway, the balance of
savings from larger earnings gains shifts toward SSA.

All this is achieved by setting EN payments to gradually decline as a
share of implied benefit savings as earnings gains increase (i.e., when
moving rightward) though they continue to rise in absolute dollars.
Starting at 90 percent, the payment percentage drops to 40 percent of
implied benefit savings at \$400 in countable earnings gains---half the
SGA level. It drops below 40 percent at higher countable earnings gains,
reaching 36

![](media/image4.wmf){width="6.690972222222222in"
height="4.249305555555556in"}

percent (90 percent of 40 percent) at the point of benefit exit. With
these additional refinements, EN payments for partial benefit recipients
can be defined in dollar terms for every possible countable earnings
gain short of benefit exit. Figure 6 (otherwise identical to Figure 5)
illustrates this by showing dollar payment amounts for selected
countable earnings increases.

5\. [Additional Parameters and Issues for the Suggested
Plan]{.underline}

Three more design parameters from our original list of seven I(see
Section 2) have not yet been addressed: the limit on lifetime EN
payments for a given recipient, reimbursement procedures when a
recipient moves from one EN to another, and the transition in payment
rules when partial benefit recipients move entirely off SSI and
transition to traditional Ticket reimbursement rules. Before visiting
these issues briefly, one desired characteristic of an ideal payment
plan identified in Exhibit 3 above---simplicity of understanding and
administration---has to be considered. As does the importance of
mimicking the rules of existing EN payment regimes when constructing a
new one for partial benefit recipients. We cover all of these topics in
this section.

[The Simplicity Concern]{.underline}

The goal of making any new payment system simple to understand and
administer may be jeopardized by the approach illustrated in Figure 6.
Based on the extensive discussion and explanation of this design in this
paper, readers may think it anything but simple. As a result, the
earlier observation that simplicity may be worth pursuing in its own
right, even at the expense of some other desirable feature of the
approach, may need to put into practice here. The litmus test of
simplicity described in Section 2 asked whether providers and
ticket-holders would be able to (i) understand how they can benefit from
participating in the new system and (ii) see the mechanics of the scheme
well enough to feel confident that participation carries little or no
risk. Given how often past work initiatives at SSA have been hung up on
the same factors, one would wish that these features are transparent on
first glance to potential participants.

In fact, the operative rules of the proposed design *are* reasonably
straightforward for each of the players involved: the ENs that must
understand it, the recipients who must trust it, and SSA which must
administer it. The transparency level of the design roughly matches that
of the current milestone-outcome payment approach, with both centering
on countable earnings rather than benefit amounts. The complexities of
the new design lie principally with the designers, who must develop the
payment approach in full detail and build a rationale for choosing each
of its parameters ahead of the alternatives---essentially, the process
we have gone through in this paper. None of the actors who will actually
use the system need to understand these nuances in order to effectively
participate, as we explain in the next three subsections.

[Conveying the System to ENs]{.underline}. The payment design in Figure
6 can be presented simply to ENs and potential ENs. What counts most in
motivating their behavior is getting them to understand their revenue
potential when working with clients who have not yet left cash
assistance. Under the suggested partial benefit reduction payment plan
this incentive can be condensed into three brief sentences addressed to
providers:

> *"If a Ticket client earns more than when you accepted his or her
> ticket, you get paid. As long as this is true you will get paid for up
> to 60 months regardless of the individual's benefit status, on or off
> cash assistance. Payments will get bigger as earnings continue to
> rise."*

When EN managers want to know more than this---e.g., the specific
payment amounts---and they face in precise dollar amounts---they can
refer to just such a schedule provided by SSA on its internet site and
printed materials. Other operational aspects of the new system will
become apparent in working with the Ticket Program Manager to process
claims. Workshops similar to those done in rolling out the original
Ticket program will also be important.

Two caveats probably need to be added to this summary of the new
provisions for providers:

*"As earnings approach the point where benefits would end, monthly
payments*

*level off at \$176 per month to ensure that the familiar \$196 payment
following*

*benefit exit remains an incentive to get clients completely off cash
benefits---*

*which is still the ultimate goal of Ticket to Work."*

*"The measure used to determine payment eligibility and monthly amounts
is SSI*

*countable earnings, not total earnings---just as it is for the first 12
months of the*

*current milestone-outcome payment approach.\"*

[Communicating with Recipients]{.underline}. Beneficiaries likely will
trust the new payment system more than the original Ticket provisions
once they understand that they *will still be on SSI whenever using it.*
This should convince them that the new provisions do not threaten their
benefits in the way the current Ticket provisions do when based on
benefit exit. What recipients need to know to feel this assurance, along
with the information needed to participate, is paraphrased below:

*"SSA is increasing access to Ticket to Work by encouraging Employment*

*Networks to serve more SSI recipients who want to work while still
receiving SSI*

*benefits. This should expand your options for getting an EN to accept
your*

*ticket, but it will not affect you in any other way."*

*"Your participation in this new Ticket component, should you choose to
use it, is*

*purely voluntary. You may end it or switch ENs at any time with no*

*repercussions."*

*"Your continued SSI and Medicaid eligibility are assured while
participating in*

*this new component since the new provisions apply only to people who
remain on*

*SSI. We encourage you to seek the assistance of an EN in your area if
you have*

*an interest in work but are not sure if leaving benefits is right for
you."*

[New Understandings and Administrative Challenges at SSA]{.underline}.
SSA will face the largest adjustments in perceptions procedures should
the proposed reforms be adopted. Even so, they do not need to go into
new territory to administer the program. Information on SSI countable
earnings is already central to reviewing and paying EN claims in
Ticket's milestone-outcome approach. And like that already-existing
system, SSA administrators will have to deal with at most one transition
between payment regimes per recipient. For milestone-outcome payments
the transition is from an earnings-based payment structure to a
benefit-exit-based payment structure after 12 months. The same two
components may be encountered in administering the new partial benefit
option when recipients switch from partial benefit payments to
exit-based payments.

Likely the biggest operational challenges in adding partial benefit
payment rules are the need to (i) educate other actors about the new
payment regime and (ii) handle the sheer volume of added EN claims that
may emerge if the reforms proposed here are adopted and successful in
getting ENs to serve a larger share of the SSI caseload. These changes
will pose major management and capacity challenges to the agency and may
need to be studied in pilot sites before moving to national
implementation of the reforms.

[Should Payments for Partial Benefits Mimic Existing Ticket
Rules?]{.underline}

The answer to this question is yes, but not out of blind fealty to the
existing Ticket design. Rather, we have found that certain aspects of a
partial benefit payment system would work better to achieve that
system's goals if structured like exiting Ticket rules for recipients
who leave SSI. This realization popped up at various places during the
development of the payment model suggested here, but always as an
outgrowth of what was needed at that stage rather than a pre-existing
desire to mimic anything that came before. Readers are welcome to go
back and pick out these similarities but really there is no point in
doing so. If what works best for the goose works best for the gander,
similar components will wind up in both designs. Where the new rules do
*not* parallel Ticket's original rules, there is no value now to
checking whether they should. Indeed, the trend in our deliberations
suggests that they should not: several parameters were set differently
from current rules *specifically because of recognized weaknesses in how
current payment rules are structured.*

Any similarities that do arise between the new and old payment plans
have at least one consequent advantage: they make it easier for all
actors to understand and absorb intuitively how the new payment
structure will work, having dealt with similar provisions under the
previous approach.

[Options for Handling Shifts in Providers and Setting a Lifetime Payment
Limit]{.underline}

These two design issues must be tackled simultaneously since any
lifetime payment limit has to accommodate recipients who change
providers. And it must accommodate payments made to ENs under both a new
partial benefits reimbursement system and exiting payment rules for
benefit exiters. While there is not enough space in this paper to
examine these issues in depth, a first thought for specifying and
integrating the two payment systems over a lifetime is to establish a
lifetime limit on total EN reimbursement for a given participant in
dollars, not months as in the existing payment rules.

With this approach, the specific monthly structure of payments under
different reimbursement regimes does not need to be reconciled when
recipients move between payment systems---outcomes-only,
milestone-outcomes (a switch that could occur when a recipient changes
providers), and partial benefit reductions. The critical question is not
what path does a given recipient follow but whether he or she ever
reaches this dollar total.

In designing such an approach, the most important decision is whether to
vary the lifetime dollar limit across the different payment regimes.
This would cause considerable difficulties in monitoring, given that
some recipients will move through more than one regime. In this
circumstance, what lifetime limit applies? As long as individual
payments are set up to protect SSA from costs exceeding benefit savings
in each individual month, and all payment systems use roughly the same
standard for determining amounts in most months---40 percent of SSA's
savings---it does not seem necessary to agonize over whether some Ticket
participants should have access to more total reimbursement dollars over
a lifetime while others do not. Most Ticket participants will never
reach this limit in any case. Nor would it be worth the burdens involved
in monitoring different recipients against different lifetime totals,
particular those who move between payment regimes.

The simplest and best course might be to use the maximum lifetime
payments allowed for a single SSI recipient under current benefit
rules---\$11,760 in 2003 dollars---as the lifetime limit for all
recipients, regardless of what payment regimes an individual passes
through. This universal standard would establish a limit on EN payments
in all cases. The maximum amount of provider reimbursement could only be
accumulated while serving partial benefit recipients over a span of more
than 60 months. But staying longer with individuals who have progressed
but not yet earned their way off benefits may be a good idea---both
because some of these individuals may eventually reach that goal and
because others may require ongoing supports to keep from slipping back
to lower earnings and higher SSI benefits. Paying to avoid this latter
outcome could be a smart investment.

[Segueing to Existing Payment Rules Once Benefits Reach \$0]{.underline}

This has already been handled in the design in Figure 6 and discussed in
earlier sections. The recommended approach makes the transition in
payment procedures intuitive and relatively easy to understand, as well
as administratively feasible and. It also creates strong incentives for
providers to get recipients completely off benefits, yet at the same
time offering substantial payments to ENs for serving recipients short
of this goal.

6\. [Conclusions and Next Steps]{.underline}

The thinking in this paper represents a starting point for deciding how
the Ticket to Work program might be expanded to include SSI recipients
who, to providers, appear less likely to reach Ticket's ultimate
objective and main basis for payment: leaving the SSI rolls through
work. The strategy for assisting these "partial benefit
recipients"---recipients who currently do or could in the future combine
earnings with reduced SSI benefits---involves creating new incentives to
serve them by paying Employment Networks for any partial benefit
reductions achieved. While there is broad interest in expanding Ticket
to Work in this direction, a clear delineation of the goals and
tradeoffs in adding a partial benefit payment system has been lacking,
as have concrete suggestions for what the payment rules might look like
and how they might affect SSI recipients, service providers, and the SSA
budget.

This paper addresses these gaps, offering a complete design for partial
benefit payments to providers that will not cost the government money on
net. The rationale for each of the different elements of this design is
presented, along with rejected alternatives. Tradeoffs and reasons for
our choices could have greater importance to the future policy debate
than any specific approach suggested, since they provide the "building
blocks" for proposing---and understanding---a wide range of additional
designs that may also merit consideration in the future. In addition to
these contributions to the formative process for future policy, the
paper takes a look at three related questions:

Q1: Are we sure payments to ENs for helping recipients combine work and
benefits should be instituted at all?

*A: Yes, for a variety of reasons provided in Section 1 that outweigh
identified limitations.*

Q2: Can a payment plan be created that (i) has a chance of attracting
ENs, (ii) dovetails with current payment rules for benefit exiters, and
(iii) protects the SSA budget?

*A: Yes, an example of which is provided in Section 4.*

Q3: What will be the biggest challenges in designing and implementing an
effective system for getting Ticket services to more hard-to-serve
recipients in the SSI caseload?

*A: Creating payment rules that will (i) make the additional clients
profitable enough for ENs to choose to serve the added client group to a
sufficient degree and (ii) be administratively feasible at SSA and
sufficiently comprehensible to the other constituencies involved ---ENs,
recipients, and advocates---to gain their trust and inspire full
participation.*

Perhaps not coincidentally, these two great challenges in extending
Ticket to new client groups constitute the major stumbling blocks of the
current Ticket program as it seeks to increase the number of ENs and
recipients participating. The partial benefit payment approach suggested
here likely has not found the best ways to meet these challenges. But it
has carved out the challenges as the areas for future attention.

In closing, a number of topic areas and analytic extensions seem
important to improving the design of a partial benefit payment system
beyond this initial thinking. Assuming that a reimbursement approach
based on changes in countable earnings becomes widely accepted as the
best approach (as is argued here), priority areas for future research
include:

-   Understanding better the capabilities of the SSI data system (the
    SSR file) to compute benchmark levels of countable earnings on a
    timely basis and track changes against those benchmarks over many
    subsequent months, in order to calculate EN payments.

-   Considering further the potential for providers to "game" the system
    to increase their revenues by influencing the baseline measure of
    countable earnings.

-   Projecting likely recipient and EN responses to a new set of rules
    at a more detailed level, to better assess risks and potential
    unwanted consequences of any given approach and anticipate how EN
    and recipient behaviors and outcomes may differ from those emerging
    under the main Ticket to Work payment rules.

-   Adding interactions between SSI benefit rules, SSDI benefit rules,
    and the suggested partial benefit payment plan for individuals who
    concurrently receive both types of benefits or who cycle between the
    two programs over time.

-   Estimating the budgetary costs and potential gains from specific
    payment plans (best left to SSA's Office of the Actuary and the
    Congressional Budget Office).

As its final contribution, the investigations begun here could produce
heightened attention to conceptual flaws in the *existing* Ticket system
for reimbursing ENs based on client benefit exits. At a number of
junctures, the pros and cons of different partial benefit payment
options pointed out ways in which existing rules may stop short of the
ideal for the Ticket program as a whole. Though much research has
already been done on the strengths and weaknesses of the current Ticket
parameters, with more underway, the effort to envision a sensible
companion approach for partial benefit recipients has sparked many
questions regarding existing Ticket rules---and provided a fresh
perspective for finding their solutions. It is hoped that researchers
and policy makers engaged in this larger effort to make Ticket to Work
"work" will consider and benefit from the ideas offered by the current
paper.

Appendix A

Defining and Comparing Different Partial Benefit Payment Features

This appendix describes the seven areas in which EN payment rules for
partial benefit reductions must be fully defined if Congress adds a
component to the existing Ticket to Work program to encourage services
to SSI recipients who can work but

are unlikely to exit benefits. The seven areas come from a list in
Section 2 of the text, which raises the issue of defining design
parameters but does not explore options in depth as is done here.

1\. Initial recipient eligibility rules determine the conditions
necessary for a recipient to receive and assign a ticket to a provider.
As in the current program, we assume that anyone getting and using a
ticket must be in active pay status and satisfy other conditions under
the law. Other conditions for using a ticket under new partial benefit
rules may need to be added as part of the partial benefit payment design
process. Most importantly, we need to stipulate whether only individuals
who have already reached partial benefit status can enter the program by
this route, or whether those with no SSI "countable" income as yet---and
thus still in receipt of full SSI cash benefits---may be admitted as
well.

2\. Once a ticket is assigned, the partial benefit payment trigger
determines when a recipient not yet off benefits has nonetheless
advanced far enough to trigger a first payment to her or his EN. While
seemingly simple, this rule has many dimensions that designers have to
consider. For example, the trigger can be a single criterion (e.g., SSI
benefits below \$X) or a combination of indicators all met in a single
month. In addition, SSA has the option to base the trigger on the same
indicator that will determine monthly payment amounts once reimbursement
begins, or to base these two dimensions of payment on different
indicators (e.g., the trigger could depend on an SSI benefit reduction
of a certain size while calculation of payment amounts hinges on the
size of the accompanying earnings gain).

3\. Out of these considerations grows a need to define the basis for
setting the payment amount once the trigger has "fired." Is the payment
to be calculated from the dollar amount of earnings in a given month, or
the change in that measure since ticket assignment? Still further bases
of payment might be considered (e.g., reaching an intermediate milestone
related to other program goals, such as a certain numbers of hours
worked per week).

4\. Once the indicator or basis for payment is established, the actual
EN payment amount in any month must be decided. In addition to dollar
amounts, structural aspects of month by month payments must be
addressed---e.g., whether to vary payments with the characteristics of
the client served or, for any given client, over time. Current Ticket
payment mechanisms work from a payment amount that is fixed across
individuals except for the universal distinction between SSI recipients
and SSDI beneficiaries.

Constancy of payment amounts over time is nearly as strong under current
rules: in the outcomes-only system, ENs receive the same dollar amount
each month for recipients at \$0 in SSI cash benefits: \$196, derived as
40 percent of the average monthly SSI payment nationally in the prior
calendar year. The milestone-outcomes approach currently varies payments
over time during the initial "milestone interval," providing \$167 in EN
reimbursement for a client's first month of earnings above the SGA level
and three other milestone payments of progressively larger amounts
(topping out at \$835) during the first 12 months of SGA earnings. After
that point, however, monthly outcomes payments are fixed over time for a
given recipient, as in the outcomes-only system.

The overall level of payments probably plays the most crucial role in
determining the economic viability to ENs of a partial payment approach,
and the cost exposure to SSA from adopting any particular reforms in
this area. As has emerged in the existing Ticket program, payment amount
may be the most controversial and consequential of all design
parameters---and potentially the most difficult to specify.

5\. The cumulative payment limit for individual Ticket users could be
simple and guided by the criterion used in the current payment system:
no more than 60 monthly outcome payments over a lifetime (for both the
outcomes-only and milestone-outcomes approaches). Or partial-benefit
payments to providers may need to be capped at a different point,
limited in another dimension over a lifetime such as total dollars paid,
or not constrained at all. If a dollar limit is adopted, it could vary
by individual (based on personal characteristics) or be set uniformly
across all Ticket participants who receive partial SSI benefits. The
partial benefit cap could be smaller or larger than what can be realized
cumulatively by ENs when recipients go entirely off cash SSI (the
former, for example, in order to strengthen EN incentives to get a
client to \$0 in benefits. Perhaps the true ideal would place *no* limit
on cumulative payments if each month's benefit reduction exceeds what
SSA pays to the EN that month. (The same could be said of lifetime
limits in Ticket's current \$0-benefit payment rules.)

6\. The appropriate way to transition payments---and especially the
cumulative payment limit over a lifetime, if any---from one EN to
another when the recipient decides to switch providers is still being
debated for the main Ticket program. The rules for recipients who leave
benefits and then change ENs have become complex, or at least difficult
for clients to keep in mind---they depend on how the ticket was first
assigned, the type of organization providing Ticket services (e.g.,
state VR agency versus other EN), and the use of outcomes-only versus
milestone-outcome payments. Making this simpler and more intuitive for
partial benefit recipients would likely increase recipient understanding
of this program element and consequently their mobility among providers.

Conversely, it may be important to adopt rules that parallel as much as
possible existing "change-of-provider" rules for recipients who have
reached \$0 in benefits, to avoid blurring EN and beneficiary
perceptions of this part of the payment system by introducing a
conceptually different approach for partial benefit cases. The tension
between these objectives runs through the design of many reimbursement
parameters: should we adopt simpler, more intuitive payment rules for
partial-benefit recipients---which would help make this *added* payment
system more efficient and comprehensible---or take an approach more
consistent with the rules already in place for \$0 benefit cases to help
everyone keep track of a well-integrated overall set of rules.

7\. Nowhere is this dichotomy more evident than in setting payment rules
for clients who transition from partial benefit reduction reimbursement
to complete benefit cessation. EN payments following benefit exit will
continue under existing Ticket provisions, no matter how different they
are than the approach selected for partial benefit clients. This puts
some premium on reflecting the parameters of the current rules when
choosing new parameters for partial benefit recipients...as long as this
does not excessively compromise the incentive and fiscal properties of
the latter.

Appendix B

Evidence of SSI Recipients Combining Work and Benefits Prior to Ticket
to Work

Understanding how certain SSI recipients combined work and benefits
prior to Ticket to Work will help policy makers design provider
incentives that will encourage more recipients to move into work even
when not expected to leave benefits entirely. Most empirical evidence on
SSI recipients combining work and benefits comes from a recent,
comprehensive summary of available data compiled by Newcomb et al.
(2003). Unfortunately, information on the month-to-month progression of
earnings and benefit amounts for individual SSI recipients---the pattern
that will ultimately determine how much EN reimbursement will be issued
under any partial-benefit payment system and how much progress that
system makes toward the overall goals of the Ticket program---is nowhere
to be found.[^26] Instead, we review in this appendix cross-sectional
information on the employment, earnings, and benefits of SSI recipients
and consider the characteristics of recipients who worked pre-Ticket and
how these might change in a partial benefit reduction Ticket scheme.

[Employment Rate]{.underline}. In calendar year 1999, roughly 1 in 13
SSI cash recipients obtained some of their income by working---or about
7.5 percent. In the same year, 9 percent left benefits due to "excess
income", which may or may not have involved earned income (evidently it
did not for at least 1.5 percent of the caseload, those with excess
income but no earnings). We can infer that more than 7.5 percent had
combined earnings with cash benefits at some point in their lives, given
the sporadic nature of work for this population. But no direct data are
available on this question.

Though not the pattern policy makers would like to see, the relatively
low work rate of SSI recipients constitutes good news regarding the
potential for payment reforms to induce more people to combine work and
benefits without paying unduly for recipients who already reach this
milestone. It suggests that "buying the base"---SSA's largest cost
concern for the Ticket program and any expansion to it---cannot cost
terribly much in relation to the potential for benefit savings as added
recipients move into work. On the other hand, benefit exit through work
prior to Ticket---the "buying the base" concern for the main Ticket
program---was much smaller on an annual basis, around 2 or 3 percent. So
more people will be part of the "base" bought with a partial benefit
payment plan, but volume alone does not determine SSA's costs in this
regard; they depend as well on the payment amounts provided to ENs for
each respective population.

We have no way to anticipate how many of the 92.5 percent of recipients
not working in a given year will be able to do so once ENs are induced
to accept tickets from people they see as unlikely to fully exit SSI.
Nor do we know whether the overall employment rate of SSI recipients has
already moved up under current Ticket to Work rules as ENs serve the
non-workers thought capable to moving completely off benefits.

[Earnings and Benefit Amounts]{.underline}. In 1999 the 7.5 percent of
SSI recipients who worked earned an average of \$279 per month, or at
most \$3,350 per year for those who worked in every month. Given that
3,646,000 people age 18 to 64 received SSI benefits that year due to
disability or blindness, the upper bound on combined annual earnings for
partial benefit recipients is \$870 million (.075 x 3,646,000 x
\$3,350), a non-trivial amount. Of the roughly 275,000 individuals who
combined earnings with SSI benefits in 1999, 10.5 percent earned over
\$1000 per month.[^27] At the opposite end of the spectrum, 48 percent
of working recipients earned less than \$200 dollars per month in 1999.
The remaining 41.5 percent earned between \$200 and \$1,000 per month.
Clearly, the partial benefit recipient group contains a diverse lot of
individuals, with very different actual earnings---and perhaps potential
earnings---in the pre-Ticket era. This means that payment rules have be
established for a broad range of initial earnings and potential future
earnings levels.

Unfortunately, data on SSI benefit amounts for working recipients could
not be found in any publications at SSA or from any other source the
author was able to identify. From the range of monthly earnings amounts
just reported, however, it is likely that the target population for
partial benefit payment reform is also quite diverse in terms of monthly
benefit amounts.

[Characteristics of Earners]{.underline}. In terms of demographic
characteristics, those who worked for pay while on SSI in 1999 were more
likely than other SSI cash recipients to be

-   men

-   under the age of 40

-   well educated

-   relatively new to SSI

-   recipients of both SSI and SSDI benefits, the latter implying a
    considerable (though low paid) work history

-   individuals with mental retardation or congenital anomalies

All of these traits except the last associate with higher earnings
potential in the general population and among SSI recipients. This
suggests that new participants brought into Ticket through expanded EN
payment rules may be better equipped for employment success than the
caseload in general...and perhaps much better equipped if providers are
selective in the tickets they accept. However, it is hard to predict
from pre-Ticket data how much the partial benefit recipients brought
into Ticket will look like this group. If most of the clients made
eligible for provider reimbursement work when they enter Ticket, those
served under partial-benefit rules should tilt in this direction
(assuming that 1999 data are still valid). But they may not, depending
on who in the already-working population wants to work with an EN and
which of those ENs are willing to accept. If Ticket participation rates
are quite low for those meeting both of these criteria, participants
from this pool could differ strikingly from the full group from which
they are drawn in terms of baseline characteristics. On the other hand,
to the extent that recipient participation depends on provider
preferences, the higher earnings potential associated with the above
traits might skew the participant group even more in the direction
shown.

There is another reason why the partial-benefit cases added to the
Ticket rolls through enhanced payment incentives might look quite
different than the profile of those previously working, and potentially
lean in the opposite direction. SSI recipients drawn into the program by
new rules may come predominantly from those who *did not work at all* in
pre-Ticket days. This is the 90+ percent of recipients more likely to be
women, over 40, less educated, long-term SSI recipients, not concurrent
beneficiaries of SSDI, and have a variety of disabilities other than
mental retardation or congenital anomalies. On the other hand, the
option of starting work under Ticket may appeal most strongly to
recipients similar to those already working; this would happen, for
example, if the added workers already possessed most of the motivation
needed to work based on the traits they have in common with existing
workers.

Given the varied indictors provided by this assessment, it is difficult
to anticipate whether the added people served by Ticket if reimbursement
is expanded will (i) be those for whom newly-provided investments in
employment assistance are likely to be successful and socially efficient
and/or (ii) constitute the "most deserving" of previously unserved SSI
recipients. Both of these considerations factor into the desirability of
any particular partial benefit system.

Appendix C

Assessment of Alternative Bases for Initiating EN Payments in a Partial
Benefit Reduction Payment Plan

The text identifies the two intertwined aspects of defining the trigger
level at which EN payments begin in a partial benefit reduction payment
plan for Ticket to Work:

the type of threshold that must be met for payments to begin and the
specific indicator variable with which attainment of the threshold is
measured. Exhibit 5 in this appendix depicts the most likely options in
each instance, crossing the three ways of setting a threshold described
in the text (rows of the matrix) with three main candidate indicators
(columns)---SSI benefit amount, monthly countable earnings, and monthly
hours worked.

The first threshold standard considered---any movement in the right
direction following ticket assignment to a particular EN---has the
drawback of triggering payments for trivial improvements in recipient
circumstances unless some minimum improvement is set. Absent a minimum,
SSA and the EN involved would have to do a great deal of paperwork for
the sake of very small payment transactions. The second trigger avoids
this problem by staying with a movement-in-the-right-direction trigger
but requiring a minimum, non-trivial amount of movement before the first
EN payment goes out. While it will be difficult---and necessarily
somewhat arbitrary---to establish the minimum dollar or hours-worked
improvement necessary for payment, this trigger has substantial
advantages over the first in terms of operational costs and burdens. It
also gets the right message out to providers: "You have to improve
things at least this much (e.g., \$50 per month) before you can begin
recovering your costs through SSA payments."

A problem with "gaming" the system may arise under the second approach,
however. When approached by recipients with relatively large initial
earnings seeking to assign their tickets, a provider may encourage them
to *reduce* their work effort for one month and then assign the
ticket.[^28] This would make initial benefit amounts artificially high,
so that simply returning to pre-existing work arrangements in the months
following assignment would lower benefits and look like an improvement.
Here, the EN will have made no effort to help the client in his or her
work and SSA will have received no benefit savings in return for the
Ticket payments issued. Though one cannot anticipate how common this
pattern might become, there are several reasons to think a recipient
working for limited wages might go along with this ploy proposed by an
EN...or simply find herself or himself in a down-and-up cycle without
ever thinking about it:

-   Reducing work in the month of assignment may be made a condition for
    entry at some EN organizations, if the provider chooses to be
    selective and strategic in picking its clients. If the recipient has
    been turned down before in attempting to assign her/his ticket, this
    kind of suasion may prove effective.

    ![](media/image5.wmf){width="5.99375in"
    height="4.329861111111111in"}

-   The provider might offer to "make up for" the low earnings month by
    giving the recipient some of the increased revenues that
    result,[^29] either just initially or on an ongoing basis;

-   The recipient may have no direct control over his or her earnings
    amount each month, yet the organization that serves as the EN does;
    for example, this could happen if a provider of supported employment
    becomes an EN and uses its control over SSI recipients' work
    schedules and paychecks to achieve the earnings decline/benefit
    increase it seeks in the month of ticket assignment; and

-   Month-to-month variation in SSI benefit amounts due to fluctuating
    earnings may already be common and at times sizeable, leaving the
    opportunity for an EN not to influence these amounts but to alter
    the timing of ticket acceptance to obtain clients in months of
    relatively low earnings and high benefits.

Unless partial benefit payment rules are set to preclude an EN
benefiting from a single poor month at the point of ticket acceptance,
all of these scenarios will be perfectly legal and may not be
distasteful to the providers or ticket-holders involved.[^30] One step
to preclude all but the last scenario is to consider the month a ticket
was issued to the recipient by SSA as the baseline point for measuring
and rewarding change. No EN, nor even the recipient him/herself, could
see a way to "game" this system until it is too late to manipulate the
SSI benefit amount in the month of ticket issuance. ENs could still
decide whether to accept a ticket based on circumstances at that time
(and presumably would favor those ticket-holders who were at high levels
of economic dependence at that time and had since improved), but they
could not *make* that situation more common through strategic behavior.

The final trigger considered releases the first EN payment when a
sufficiently good outcome occurs, irrespective of the degree of
improvement this represents over baseline. This has the drawback of
providing equal rewards to ENs that overcome very different levels of
challenge. It should be much easier to get a client to a threshold
amount of, say, \$300 or less in monthly SSI benefits if that client
starts at \$350 than if the client starts at \$500 or \$552 (the maximum
federal benefit for people with no countable income). This creates an
incentive to serve the least dependent SSI recipients that present
themselves, among those one expects to remain at least partially
dependent over a long stretch. The most disadvantaged partial benefit
recipients---those with the highest initial benefits, or equivalently
the lowest countable income---may benefit little from this kind of
reform. Ironically*, this is the very trigger mechanism today's Ticket
program uses to initiate outcomes-only payments* (and to continue
milestone-outcome payments beyond 12 months): get benefits down to a
certain level---in that case \$0, not \$300---and EN payments begin.
Many of the potential disadvantages of such a system, particularly its
arbitrariness and built-in "cream skimming" incentives for providers,
are well known.[^31] SSA buys into the same problems if payments to ENs
for partial benefit recipients use this same type of trigger---monthly
SSI benefits equal to or below a fixed threshold level common to all
partial benefit Ticket participants. Moving the threshold above \$0 by
providing payments for partial benefit recipients does not affect this
undesirable feature.

Actually, adopting a benefit threshold of \$300 or some other amount
above \$0 does change the broad characteristics of the payment plan
slightly...and in an unwanted direction. Once an SSI monthly benefit at
or below \$300 suffices to start reimbursement *ENs can start receiving
payments immediately without seeing their clients main any improvement,
as long as they pick their clients carefully*. A sure-fire moneymaking
strategy is to sign up recipients whose monthly benefits are already
below \$300. Eligibility to begin receiving payments starts immediately,
at the point of ticket assignment. (Note that this is also true of the
current milestone-outcome payment system: recipients do not need to
*improve* their earnings to the SGA level for the initial milestone
payment to take place---they could be there already when the recipient
assigns her/his ticket.) The same generic ticket mechanism does not
produce this fiscally and motivationally shaky result when the threshold
is \$0 in the outcomes-only payment system because anyone already at
this benefit level, those not receiving SSI cash benefits at baseline,
are ineligible to receive or use tickets in the first place*.* And of
course there are no eligible participants who begin *below* that
particular threshold.

This aspect of the exceed-fixed-threshold trigger says that it could
only be adopted if restricted to recipients whose initial benefits are
*above* the chosen threshold. However, restrictions of this sort limit
the inclusiveness and value of any new payment system. Avoiding a fixed
threshold trigger in the first place seems the better course.

The same points and concerns---and conclusions---apply when considering
systems that trigger a first EN payment off of earnings rather than
monthly benefit amounts: if the requirement is to produce an earnings
gain, it needs to be a nontrivial gain; if a fixed earnings threshold
will determine first payment eligibility, those recipients already
earning that much will have to be excluded from the partial benefits
payment approach. So we are again left with only one attractive option,
a "sufficient improvement" trigger. How large an improvement to require
depends on what indicator measure we choose, a topic discussed in
Appendix D.

Appendix D

Indicators that Could Trigger EN Payments in a Partial Benefit Reduction
Payment Plan

This appendix compares recipient earnings to benefit amount as the basis
for triggering EN payments for recipients who combine work and benefits.
Total, or gross, earnings cannot serve as the trigger, since no reliable
measure of gross earnings exists on the one source available to monitor
achievement of the trigger level---SSA's Supplemental Security Record
(SSR) database. Thus, if SSA uses a measure of earnings to trigger EN
payments, it will necessarily be the "countable earnings" variable on
the SSR used to calculate cash benefit eligibility and amounts.[^32]

As noted in the text of Section 3, the choice between countable earnings
and benefit amount as the basis for initiating payments depends on their
relative practicality and simplicity of use. Both have substantial
drawbacks in this respect, though on balance countable earnings seems
the better choice. At first, this might not appear to be the case. The
countable earnings concept used to determine the amount of SSI benefit
paid is not easy to compute. It depends not only on gross earnings, but
also on the influence of different SSI work incentive set-asides of
certain types of earnings. These hinge both on how the money is earned
and how the money is *spent*.[^33] Due to incomplete information in
these areas, the "countable earnings" variable in the SSR database used
to administer SSI benefits---from which a countable earnings payment
trigger would have to be calculated---has uneven reliability.[^34]

In contrast, SSA benefit amount as an EN payment trigger has the
advantage of reflecting the "money going out the door" to the recipient,
independently of anything else that might have happened or been
misreported or miscalculated to produce that payment. However, using SSI
benefit amount as the trigger for EN reimbursement has one potentially
large disadvantage: benefit levels change for reasons other than work
and earnings. Unearned income also counts when calculating benefit
amounts, an amount that can change over time independently of any
improvement in work results produced by EN services. An efficient
partial benefit payment plan would not reward providers for such a
change. Yet any EN payment system that keys off benefit amount will
necessarily pay providers on this basis, rewarding benefit declines not
of their making.[^35]

No option remains if one wants use benefit declines as the payment
trigger but to look at the detailed sources of countable income each
month and how they change, so as to reward only changes resulting from
increased earnings. This would be a prohibitively costly and complex
exercise when simplicity and clarity to beneficiaries ranks high in the
payment design. We conclude therefore that, despite its limitations,
countable earnings should serve as the basis for triggering the first EN
payment for each client. This variable is among those needed to parse
the various sources of benefit decline each month---and the only source
Ticket to Work seeks to act on---so why not just go to it directly even
when of less than perfect reliability?

Appendix E

Determination of Monthly Provider Payment Amounts: Basis, and Variation
over Time and among Individuals

The final paragraphs of Section 3 of the text raise three questions
concerning EN payment amounts in a system that rewards providers for
increasing the countable earnings of their clients without eliminating
SSI benefits entirely. This appendix answers those questions.

[Should Provider Payment Amounts Be Based on Changes in Countable
Earnings?]{.underline}

In the text discussion, decreases in SSI benefit amounts were rejected
as the basis for triggering a first EN payment because benefits can go
up and down for reasons that are neither coded in SSA's administrative
data system nor related to earnings. Changes in unearned income from
month to month would have the greatest confounding influence of this
sort. This makes benefit level equally unsuited for calculating EN
payment amounts. We need to focus instead on earnings.

In exploring possible payment triggers, we settled on a standard that
requires a minimum increase in countable earnings since the month of
ticket assignment. The same indicator---increase in countable earnings
since the month of ticket assignment---would provide a good basis for
computing monthly payment amounts. In particular, it moves in step with
reductions in SSI benefits through earnings, ignores benefit changes
caused by changes in unearned income, and can be measured from the SSR
data system used to administer the SSI program. The last factor is
essential if we want EN payments to vary by individual rather than stay
constant as a percentage of average SSI benefits as in the current
Ticket program (see next subsection).

[Should EN Payment Amounts Vary among Clients and/or Over
Time?]{.underline}

Reimbursing ENs the same amount for all SSI recipients who meet the
initial payment threshold has many drawbacks. Many of these have been
raised in the literature that examines payment rules fir the existing
Ticket program. First and most fundamentally, a system paying a uniform
amount to all providers in all months for each successful client would
sometimes pay an EN more than SSA can recoup through benefit
reductions.[^36] In such an approach, clients with the smallest initial
SSI benefits generate payments as large as those generated by
high-benefit recipients and exceeding any possible SSI benefit savings
that could be achieved. For example, an SSI recipient drawing just \$20
per month in cash assistance can trigger a provider payment many times
that size (\$196 at present) by leaving benefits, clearly a losing
proposition for SSA financially. The same thing could happen using
uniform payments for partial benefit recipients: both large and small
countable earnings gains would generate the same fixed EN payment. It
could also happen if payment amounts for a given recipient are made
constant over time: months with smaller countable earnings gains
compared to baseline would generate smaller reductions in SSI benefits
yet require the same dollar payment to the provider.

A possible way to solve this problem is to make the fixed EN payment so
small that anyone who meets the earnings gain requirement would return
at least that much to SSA in benefit savings. But this would greatly
diminish the new payment plan's ability to attract ENs to serve less
work-ready clients.

Uniform payments to all ENs in all months would also increase the cost
to SSA of "buying the base"---i.e., paying providers for recipients who
would have increased their earnings anyway.[^37] If instead EN payments
key off the *size* of the earnings gains achieved by a given individual
in a given month, the cost of "buying" the least financially successful
members of the "base" would come down considerably. However, the SSA
savings so generated would have to be compared to the added cost of
making *larger* payments to ENs for clients whose earnings gains
*exceed* what might be chosen as the common payment level such as a
percentage of the national average benefit.

Finally, the partial benefit clients most likely to be served with fixed
provider payments are those who ENs think can most easily reach the
labor market benchmark required for payment. If Ticket provides a fixed
amount of revenue regardless of the type of client involved, uniform
payments encourage ENs to focus on the differential expenditures needed
to get different types of recipients to the common earnings gain
requirement. Since partial benefit recipients with more limited labor
market prospects tend to be the most costly to serve, this would
interfere with bringing Ticket services to the more disadvantaged
portions of the SSI caseload. In addition, with payments fixed as long
as the client meets the original payment threshold ENs will have no
incentive to assist clients to an even higher level of earnings once the
threshold is met (except of course clients thought capable of leaving
SSI entirely and thus generating even larger payments under the
outcomes-only or milestone-outcome systems.

Taken together, these considerations suggest that a far better EN
payment system for partial benefit recipients would vary payments across
individuals and over time to reflect the size of earnings gains achieved
in a given month compared to earnings in the month of ticket assignment.

Appendix F

Relating Countable Earnings Gains to Different Gross Earnings Starting
Points: Where Do We Find the Hardest-to-Serve in a Graph of Countable
Earnings Gains?

This appendix explains the assertion in Section 4 of the text that the
hardest-to-serve SSI recipients are likely to have the smallest
countable earnings *gains* when different types of individuals are
served by Ticket ENs. This assertion allows us to see the incentives to
serve different types of recipients in the partial benefit reduction
plan described there and depicted again here in Figure 1 from the text.
To make this leap, something must be added to the diagram that links
countable earnings gains on the horizontal axis to a measure of clients'
limited potential for success in employment at the outset---the essence
of the hard-to-serve notion. Once such a connection is established, we
can relate the potential EN payment amounts plotted vertically in Figure
1 to the types of clients most likely to generate them. By this means,
designers of a partial benefit reduction payment plan can seek to avoid
paying ENs more when they serve better-off recipients rather than
harder-to-employ individuals.[^38]

Gross earnings at baseline provide the best proxy for potential future
earnings gains, and give a direct measure of the need for labor market
assistance at program entry. Presumably, SSI recipients who already earn
more have the greatest potential to increase their earnings when
assisted by an EN and have a less extreme need for employment assistance
than those starting with lower gross earnings. But how do *changes* in
countable earnings in Figure 1---and hence the size of EN
payments---relate to different gross earnings starting points? Figure 2
provides a link between these two measures, based on a hypothetical
increase in gross earnings. It shows how the gain in countable earnings
caused by a \$400 increase in gross earnings relates to a recipient's
gross earnings starting point. In conjunction with Figure 1, this
informs how EN payment size might vary with differences in clients'
initial earnings and future earnings potential under different payment
rules.

Gross earnings, measured along the horizontal axis of Figure 2, move
upward toward the right-hand side of the graph. The countable earnings
amounts that correspond to each level of gross earnings are measured on
the vertical axis and reflect the solid sloping line connecting gross
earnings with countable earnings. As can be seen, countable earnings
stay at \$0 for the first \$85 in gross earnings[^39] due to SSI's
initial earnings set-aside of \$85. Once gross earnings pass this
threshold, however, countable earnings rise dollar for dollar until
gross earnings reach the benefit exit point for a person with no
unearned income, \$1,189. Additional gross earnings beyond that point do
not

![](media/image1.wmf){width="6.884722222222222in"
height="5.344444444444444in"}

![](media/image6.wmf){width="7.247222222222222in" height="5.1375in"}

affect the amount of earnings countable in computing SSI benefits, since
benefits have reached \$0.

The more complex part of Figure 2, the smaller labeled line segments
below the sloping line, are needed to convert earnings levels into
*changes* in earnings between the month of Ticket entry and the current
month. We need to break the line down in segments to sort this out.
Where gross earnings rise but countable earnings do not---the flat
stretches of the line before reaching \$85 in gross earnings and after
passing \$1,189 in gross earnings---there should be no EN payment, since
SSA cannot realize any benefit savings in those cases. Everywhere else
the size of the countable earnings change, and hence the level of
payment to the EN, depends on both the gross earnings starting point and
the gross earnings change.

The smaller line segments illustrate how the starting point affects the
change in countable earnings, assuming a \$400 increase in gross
earnings for recipients starting at different levels of gross earnings.
We impose the \$400 span on the horizontal axis at various places and
ask how much countable earnings rise in each instance. The answer
depends on the level of gross earnings at which the ticket-holder began.
Three different scenarios are considered: clients who start at \$0 in
gross earnings (client A), \$500 in gross earnings (client B), and
\$1,000 in gross earnings (client C). The horizontal line segments below
the continuous upward sloping line represent each of these hypothetical
individuals and are labeled accordingly. (Note that the line segment for
client A lies on the horizontal axis, reflecting its \$0 countable
earnings starting point, and is not separately visible.)

Client A illustrates how an increase of \$400 in gross earnings can
translate into a smaller increase in countable earnings. As gross
earnings rise from \$0 toward \$400 the first \$85 do not count in the
SSI benefit computations; they are not considered countable earnings
under SSI rules. As indicated by the height of the sloping line at the
righthand endpoint of this segment, designated with a vertical
double-headed arrow, countable earnings reach only \$315 because of this
set-aside. In contrast, client B gets the full effect of her or his
\$400 increase in gross income: a \$400 increase in countable earnings.
This occurs because the entire gross earnings increase falls in a range
where there are no earnings set-asides for purposes of calculating SSI
benefits. Client C, like client A, experiences a smaller increase in
countable earnings than in gross earnings---this time because gross
earnings pass the cut-off point for SSI benefits to cease well before
the \$400 increase is completed, at \$1,189. None of the further
increase in gross earnings along this segment "counts" for computation
of SSI benefits, since benefits have ended (reached \$0). Thus, for this
particular \$400 rise in gross earnings, the rise in countable income
stops at \$189, at which point a client who started with \$1,000 in
gross income hits \$1,189 and SSI benefits cease.

Further illustrations could be done in Figure 2 showing how countable
earnings change with gross earnings gains of other sizes and starting
points. Generally speaking, clients who start at higher gross earnings
levels (e.g., client C) experience smaller countable earnings gains for
a gross earnings gain of \$X, since that gain is enough to take them to
the benefit exit point. Fortunately, we do not need to understand the
highly varied relationship between the two earnings measures for these
individuals because they go off benefits entirely. New partial benefit
rules do not need to be applied to these cases, since existing \$0
benefit rules govern EN payments for those leaving cash assistance. We
shall need to ensure that their payment amounts---\$196 in every
case---mesh well with payments to recipients not reaching the exit
point, but for now we can set these cases aside.

This leaves only the very left-hand portion of Figure 2 as a place where
countable earnings increases vary for a given gross earnings increase.
Recipients who begin with less than \$85 in gross earnings will not see
their countable earnings go up as fast as their gross earnings. The vast
majority of these people will not be working at all and drawing full SSI
benefits. Thus, they begin with no (\$0) gross earnings. Countable
earnings changes will be attenuated by \$85 for these recipients because
of this initial set-aside in calculating benefits. Anyone that starts
between \$0 and \$85 will experience a somewhat smaller attenuation.
Above that point, gross earnings gains translate dollar-for-dollar into
countable earnings gains for almost all recipients who both begin and
stay on SSI benefits.

A noteworthy feature of this translation is that it converts people with
very different starting points into a common amount of countable
earnings change. Cases in Figure 2 that show, say, a \$300 increase in
countable earnings can come from anywhere on the initial gross earnings
spectrum. They will include recipients who began with no earnings and
increased to \$385, people who began at \$888 and rose to \$1,188, and
everyone in between. Thus in terms of reimbursement, the illustrated
payment system---as well as any other system using countable earnings as
the basis for determining EN payments---creates somewhat smaller
incentives to serve recipients that begin with the largest labor market
challenges and very small or \$0 earnings than it does for those with
less severe workplace challenges and a modest amount of earned income.

One factor further differentiates recipients of partial benefits from
one another: the *cost* to ENs of achieving an increase in countable
earnings of any given size. Those with greater labor market difficulties
and lower initial earnings presumably will be the more difficult to
advance by \$300 (or any other fixed amount). This means spending more
on rehabilitation and employment services,[^40] leaving ENs with a
potentially strong incentive to favor less-disadvantaged ticket-holders
for cost reasons. If providers are unwilling to exceed their usual
spending levels to get the hardest-to-serve to move forward as far as or
somewhat farther than other partial benefit recipients, those
participants will be disproportionately concentrated at the low end of
the gross and countable earnings gain scales.

Appendix G

Optimal Payment Structures for Achieving Different Combinations of
Partial Benefit Reduction Program Goals

Section 4 of the text identifies the four primary goals associated with
creating a partial benefit reduction payment plan for ENs:

1.  Avoiding incentives that tempt ENs to stop assisting recipients
    short of reaching their full employment potential;

2.  Never making EN payments that exceed the associated benefit savings
    to SSA;

3.  Giving ENs as much incentive to serve the hardest-to-employ
    recipients as possible; and

4.  Getting more providers to serve as ENs and to accept tickets.

As noted in the text, conflicts exist between these goals. Balancing
them will require a hybrid provider payment plan combining aspects of
several different plans, each ideal for pursuing one or more---but not
all---of these objectives. To arrive at this hybrid design we must first
determine the best payment structure to support each combination of
goals that *do not* have conflicting design implications. Figure 3 does
this, combining three different versions of Figure 1 from the
text---three different ways of converting countable earnings gains into
EN payments---on a single page. We consider each of these designs in
turn.

The first two goals---avoiding incentives to halt services and keeping
all payments below the associated benefit savings---can be pursued
simultaneously as long as goals 3 and 4---maximizing incentives to serve
the hardest-to-employ and increasing the number of ENs---are ignored. A
payment design that does this appears in the upper left-hand corner of
Figure 3. In this set-up all payments fall below the SSA savings they
accompany. Savings on SSI benefits are represented in the picture by the
lower of the two straight slanted lines, derived by reference to the
higher line of the two.[^41] The EN payment, shown on the lowest sloping
line, never exceeds the benefit savings shown at the same point on the
horizontal axis (i.e., the same countable earnings gain).

![](media/image7.wmf){width="7.7375in" height="5.447916666666667in"}

Moreover, along its full length, the EN payment line rises at
successively higher countable earnings gains. Because it rises steadily,
there is no incentive for ENs to halt services at any point just to
avoid a decline in reimbursement. In addition, the maximum possible
earnings gain prior to leaving benefits, \$1,188, produces a payment
below what an EN receives when a recipient leaves SSI cash benefits
entirely. The latter equals 40 percent of the average national SSI
benefit in the previous year and is shown in the diagram on the vertical
axis as \$196.[^42] A value higher than the largest possible partial
benefit payment assures that ENs will want to help clients reach this
final program objective.

A second pairing of compatible goals appears in Figure 3's upper
right-hand corner. Here, all ENs are rewarded more generously than
before at all levels of benefit reduction to achieve goal 4---maximizing
provider participation in the partial benefit reduction payment plan. We
can raise payments to this level because goal 2 concerning net effects
on SSA's budget (benefit savings minus EN payments) has been dropped;
indeed EN payments exceed SSA's benefit saving at every point. However,
this design still meets goal 1---avoiding incentives to stop services
prematurely---by moving payments steadily upward as countable earnings
increases get larger. This is true up to the point where benefits reach
\$0 and current provider reimbursement terms take over at \$196 per
month. This payment level is well above \$196 for much of the right-hand
end of the EN partial benefit payment line, leaving providers with no
incentive to move clients in that range completely off
benefits---indeed, with a financial incentive to *not* do so.

Only one other combination of goals can be pursued without internal
conflict, goals 3 and 4---incentives to serve the hardest-to-employ and
expansion of the number of ENs accepting tickets from partial benefit
recipients. As in the previous case, payments are set at a generous
level in this instance to expand provider interest. They are depicted in
the lower left-hand corner of Figure 3. In this graph, the EN payment
line starts high and slopes *downward* as larger and larger earnings
gains are achieved. While encouraging more providers to open their doors
to the hardest-to-serve (who, as argued in Appendix F, will be
relatively more numerous in the low earnings gain range) it creates
strong perverse incentives for providers to try to keep earnings gains
as small as possible for every client (once the \$50 minimum gain is
achieved to allow any payments at all) to maximize their revenues. Net
fiscal effects on SSA are again ignored, and in the left-hand portion of
this diagram EN payments exceed SSI benefit savings.

# References

Berkowitz, Monroe. 2003. "The Ticket to Work Program: The Complicated
Evolution

of a Simple Idea." *Paying for Results in Vocational Rehabilitation:
Will Provider*

*Incentives Work for Ticket to Work?* ed. Kalman Rupp and Stephen H.
Bell.

Washington, D.C.: The Urban Institute.

Frank, Richard G., and Thomas G. McGuire. 2003. "Setting Payments in the
Ticket to

Work Program: Applying Experience from Capitation Payments in Health

Insurance." *Paying for Results in Vocational Rehabilitation: Will
Provider*

*Incentives Work for Ticket to Work?* ed. Kalman Rupp and Stephen H.
Bell.

Washington, D.C.: The Urban Institute.

Huynh, Minh, and Paul O'Leary. 2003. "Issues Affecting Alternatives to
the Ticket to

Work Incentive Structure." *Paying for Results in Vocational
Rehabilitation: Will*

*Provider Incentives Work for Ticket to Work?* ed. Kalman Rupp and
Stephen H.

Bell. Washington, D.C.: The Urban Institute.

Lewin Group. 2002. *Evaluation Design for the Ticket to Work Program:
Design Report*.

Falls Church, VA: The Lewin Group.

Livermore, Gina A. 2003(a). "Proceedings of the Employment Network (EN)
Summit:

Summary of Work Group Recommendations." Unpublished working paper

prepared for the SSA Ticket to Work and Work Incentives Advisory Panel.

Washington, D.C.: Cornell Center for Policy Research.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. 2003(b). "Wage Reporting and
Earnings-Related Overpayments in

the Social Security Disability Programs: Status, Implications, and
Suggestions for

Improvement." Unpublished working paper prepared for the SSA Ticket to
Work

and Work Incentives Advisory Panel. Washington, D.C.: Cornell Center for

Policy Research.

Livermore, Gina A., Mark Nowak, David Stapleton, John Kregel, Ellen
Bouchery, and

Asaph Glosser. 2003. *Evaluation Design for the Ticket to Work Program:*

*Preliminary Process Evaluation.* Falls Church, VA: The Lewin Group.

Newcomb, Chad, Suzanne Payne, and Mikki D. Waid. 2003. "What Do We Know

about Disability Beneficiaries' Work and Use of Work Incentives prior to

Ticket?" *Paying for Results in Vocational Rehabilitation: Will
Provider*

*Incentives Work for Ticket to Work?* ed. Kalman Rupp and Stephen H.
Bell.

Washington, D.C.: The Urban Institute.

Orr, Larry L. 2003. "What Can Ticket to Work Learn from Other
Performance-Based

Payment Systems?" *Paying for Results in Vocational Rehabilitation:
Will*

*Provider Incentives Work for Ticket to Work?* ed. Kalman Rupp and
Stephen H.

Bell. Washington, D.C.: The Urban Institute.

Rupp, Kalman, and Stephen H. Bell. 2003(a). *Paying for Results in
Vocational*

*Rehabilitation: Will Provider Incentives Work for Ticket to Work?*
Washington,

D.C.: The Urban Institute.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. 2003(b). "Provider Incentives and
Access in the Ticket to Work

Program: Implications of Simulations Based on the Project NetWork Field

Experiment." *Paying for Results in Vocational Rehabilitation: Will
Provider*

*Incentives Work for Ticket to Work?* ed. Kalman Rupp and Stephen H.
Bell.

Washington, D.C.: The Urban Institute.

Salkever, David. 2003. "Tickets without Takers? Potential Economic
Barriers to the

Supply of Rehabilitation Services to Beneficiaries with Mental
Disorders."

*Paying for Results in Vocational Rehabilitation: Will Provider
Incentives Work*

*for Ticket to Work?* ed. Kalman Rupp and Stephen H. Bell. Washington,
D.C.:

The Urban Institute.

Stapleton, David C., and Gina A. Livermore. 2003. "A Conceptual Model
and

Evaluation Strategy for the Empirical Study of the Adequacy of
Incentives in the

Ticket to Work Program." *Paying for Results in Vocational
Rehabilitation: Will*

*Provider Incentives Work for Ticket to Work?* ed. Kalman Rupp and
Stephen H.

Bell. Washington, D.C.: The Urban Institute.

Ticket to Work and Work Incentives Advisory Panel. 2001. *Advice Report
to the*

*Commission of the Social Security Administration on the Notice of
Proposed*

*Rulemaking for the Ticket to Work and Self Sufficiency Program*.
Washington,

D.C.: Ticket to Work and Work Incentives Advisory Panel.

Wehman, Paul, and Grant Revell. 2003. "Lessons Learned from the
Provision and

Funding of Employment Services for the MR/DD Population: Implications
for

Assessing the Adequacy of the SSA Ticket to Work." *Paying for Results
in*

*Vocational Rehabilitation: Will Provider Incentives Work for Ticket to
Work?* ed.

Kalman Rupp and Stephen H. Bell. Washington, D.C.: The Urban Institute.

[^1]: The author is a principal research associate in the Income and
    Benefits Policy Center at the Urban Institute. He would like to
    thank Lisa Ekman, Susan Webb, and Bernard Wixon of the Ticket to
    Work and Work Incentives Advisory Panel and staff who provided
    guidance during early stages of the work; the members of the
    Advisory Panel attending the August 2003 Panel meeting in Detroit
    who gave additional input; and especially Panel members Stephen
    Start, Torrey Westrom, and Libby Child, along with Marie Strahan and
    Bernard Wixon from the Panel's staff, for reading and helping to
    improve a previously very hefty and dense version of the paper.
    Special thanks is owed as well to David Stapleton of the Cornell
    Center for Policy Research for many valuable suggestions and ideas
    contributed to the initial discussion and later revision of the
    paper's content. Responsibility for the end result rests solely with
    the author.

[^2]: The requirement of \$0 in cash benefits before providers receive
    their first reimbursement for a given client applies to Ticket's
    outcomes-only reimbursement option. Under the alternative
    milestone-plus-outcomes system---providers choose which of these two
    systems they prefer---a provider receives some payment in the first
    month that a Ticket participant's earnings reach the substantial
    gainful activity (SGA) level (\$800 in 2003) and for up to 12 total
    months of SGA employment in total---whether cash benefits continue
    or not. Further payments under the milestone-outcomes system---which
    constitute 75 percent of the long-term reimbursement a provider can
    receive---do require recipients to leave SSI cash assistance
    altogether, and are issued only in months when cash benefits equal
    \$0 due to earned income as opposed to other reasons (e.g., failing
    the SSI asset test). State vocational rehabilitation agencies have
    the option of opting out of Ticket and submitting their service
    costs for a given SSI recipient to SSA for full reimbursement, as
    long as the recipient earns SGA wages or higher for nine consecutive
    months; none of this reimbursement hinges on the end of cash
    benefits. This paper deals with only the first two options, which
    can apply to all Ticket to Work providers not just state vocational
    rehabilitation agencies. See Huynh and O'Leary (2003) for a concise
    summary of these different reimbursement systems.

[^3]: See for example Salkever (2003, page 349) and Wehman and Revell
    (2003, page 386).

[^4]: The other three groups are Social Security Disability Insurance
    (SSDI) beneficiaries and SSI recipients (i) with a need for
    high-cost accommodations, (ii) with a need for ongoing support and
    services, or (iii) who earn a sub-minimum wage. These last two
    groups may overlap considerably with those who work and receive
    partial cash benefits.

[^5]: As noted above, SSI cash recipients can briefly generate payment
    under the milestone-outcome payment option currently in place.
    However, lifetime payments under this payment are capped at
    **\$**2,004 if the individual never does leave benefits and confined
    to a 12-month period. Here we examine whether larger or longer-term
    payments to ENs than provided by this system are justified for
    clients combining SSI benefits and work.

[^6]: The 13-month total includes nine months of SSDI's "trial work
    period" (TWP) and three added months, plus the first month in which
    cash benefits are not paid. In the first nine of these months,
    earnings need only exceed SSDI's TWP standard of \$570 rather than
    the SGA level of \$800.

[^7]: That level, known as "substantial gainful activity" or (SGA), is
    not as high a level as the earnings required to leave SSI entirely.

[^8]: For example, see Salkever (2003), Livermore et al. (2003), and
    proposals from the May 2003 summit convened by the Ticket to Work
    and Work Incentives Advisory Panel on increasing EN participation
    (Livermore, 2003(a)).

[^9]: See for example Wehman and Revell (2003), page 362.

[^10]: See for example Frank and McGuire (2003), pages 169-171, who
    focus particularly on government savings on health insurance
    coverage.

[^11]: Evidence on the prevalence of, and reasons for, part-time
    employment among SSI recipients is not easily obtained. For example,
    the most extensive source of recent information on the work patterns
    of SSI recipients (Newcomb et al, 2003) does not provide any
    information on part-time jobs. Nor is any information available on
    self-employment among SSI recipients, a category also of interest
    later in the paragraph.

[^12]: This is especially the case once the various SSI work incentive
    provisions (which ignore certain components of earnings when
    calculating benefits and allow a more gradual decline in benefits as
    earnings rise under the 1619(a) provisions) are taken into account.

[^13]: Recent research illustrates the difficulties SSA has in
    consistently determining if EN payments are due when the conditions
    for eligibility reimbursement work off a conceptually simpler
    concept---reduction of cash benefits to \$0. See Livermore
    (2003(b)).

[^14]: See Berkowitz (2003), pages 19-20.

[^15]: Berkowitz (2003) also strikes this theme for the Ticket program
    as a whole.

[^16]: See Berkowitz (2003), pages 17-18.

[^17]: Going back to the pre-Ticket era, rather than looking at where
    things stand given the current Ticket program has both a conceptual
    and a practical advantage. On the conceptual level, it will compile
    a "baseline" that reflects long-standing and comparatively
    well-understood phenomena in the SSI program nationally (the only
    geographic unit for which work data are available), rather than the
    new work and benefit patterns that emerge in specific states due to
    Ticket's staggered implementation and ever-changing administrative
    procedures. On the practical side, the most recent comprehensive
    data on work patterns of SSI recipients comes from 1999, a point
    prior to implementation of Ticket to Work in any state.

[^18]: To the extent that the motivation for reimbursing ENs for partial
    benefit clients stems from the views of Ticket's creators---the U.S.
    Congress---it might be necessary to consider a narrower service
    population. As noted previously, Congress identified those who work
    and receive partial cash benefits as a hard-to-serve group needing
    special attention in the program. Though this reference is somewhat
    ambiguous, it seems to be speaking to the subset of SSI recipients
    who *already* (i.e., at the time the legislation was written)
    combine work and partial benefits, not to those who might *become*
    partial benefit recipients further down the line---either because of
    services provided by an EN or some other factor affecting earnings.
    It is probably not necessary to dig into legislative intent to
    resolve this matter. If most of the motivations and expected
    benefits of extending Ticket to partial benefit recipients apply to
    all recipients that the current payment rules do not favor, the most
    useful reform---the one with the widest value---would encourage ENs
    to serve this *entire* group, not just those already combining work
    and partial benefits.

[^19]: See The Lewin Group (2002) for details of the evaluation plan.

[^20]: One could instead reduce the emphasis on budget neutrality by
    arguing that government payments in excess of the SSI savings
    returned are acceptable if other social goals are achieved---goals
    judged more important than just minimizing taxpayer burden. This
    perspective may be worth considering in the Ticket redesign
    deliberations. A good example of how much this can matter comes from
    the arena of welfare reform which, though prompted by budgetary
    concerns, has caused more government money to be spent on low-income
    families rather than less---principally for more subsidized child
    care, education and training services, and make-work-pay measures
    such as the Earned Income Tax Credit. Yet political support for this
    reform, now in its seventh year---on the part of both legislators
    and the public---remains strong. This may be because of the value
    taxpayers put on getting more people to work, helping people to help
    themselves even if this increases costs to taxpayers. The same may
    be true regarding policies to increase the work involvement of
    recipients of federal disability benefits: the public may be willing
    to pay more than the budgetary returns in order to see social goals
    such as universal inclusion in the economic mainstream and the value
    of work for its own sake upheld.

[^21]: Orr (2003, p. 236), building on the theoretical analysis of Frank
    and McGuire (2003), calculates that the socially optimal level of EN
    payments in the current Ticket system is four to five times higher
    than currently paid. He argues that *all* of the earnings gains
    needed to get an SSI recipient from the maximum benefit of \$552 a
    month down to \$0 have social value, if not to SSA then to the
    recipient herself or himself. This suggests that paying 40 percent
    of the benefit savings produced---which themselves are but half of
    the earnings increase achieved---is far too low as a basis for EN
    payment in the existing Ticket program or in other payment systems
    that might be added.

[^22]: Figures 2 and 3 appear in appendices.

[^23]: The 45 degree line would indicate benefit savings equal to
    countable earnings increases---i.e., a \$1 decline in benefits for
    every \$1 increase in earnings.

[^24]: That these cases are not reimbursed for outcomes achieved may be
    viewed as a violation of the Ticket philosophy. Yet others might say
    that the underlying social objective is still adhered to: pay for
    results where there is a solid hope of producing them; where more
    constrained circumstances call this possibility into question (e.g.,
    for the hardest-to-employ ticket-holders) pay for the social
    inclusion and enhanced equity produced by serving those least likely
    to advance in the labor market. The author is grateful to David
    Stapleton for this insight.

[^25]: Efforts here include the May 2003 Employer Network Summit (see
    Livermore, 2003(a), and other conference materials published by SSA)
    and SSA's Adequacy of Incentives Advisory Panel created by the
    original Ticket Act.

[^26]: A thorough search of published articles and SSA data
    supplements---along with discussions with knowledgeable researchers
    in the area---produced no examples of longitudinal data that could
    be used to accurately predict outcomes under different partial
    benefit payment methodologies. No data were found over time
    regarding number served, initial and longer-term employment and
    benefit costs, or financial risks for the government.

[^27]: These were mostly recipients whose benefit cut-off was extended
    above the SGA level by SSI's 1619(a) work incentive provision.

[^28]: The author is indebted to David Stapleton for raising this issue
    and suggesting the various scenarios discussed in this paragraph.

[^29]: Stapleton and Livermore (2003, p. 75) raise the potential for EN
    revenues to be shared with recipients within the regular Ticket
    program, to the benefit of both parties and SSA's disadvantage if no
    long-term improvements are generated.

[^30]: An example of this type of behavior is already (and unabashedly)
    taking place in the standard Ticket program, with the internet
    "provider" TakeCharge offering to pass along to the recipient the
    majority share of any EN payments received should the individual
    choose to assign her or his ticket to TakeCharge and later manage to
    go off benefits on her/his own, with the internet firm doing nothing
    but providing a conduit for the money. This suggests that some
    degree of "gaming" is inevitable in a partial benefit payment system
    as long as financial incentives exist to assign tickets in poorer
    than average months.

[^31]: See, for example, the various papers and commentaries contained
    in Rupp and Bell (2003(a)).

[^32]: Reliance on countable earnings also has two conceptual advantages
    over reliance on gross earnings even if a measure of the latter were
    available. First, a system based on countable earnings will mesh
    better with existing Ticket provider rules, which either directly or
    indirectly base provider payments on countable earnings rather than
    gross earnings. (Current outcomes-only payments to ENs depend
    entirely on countable income---including its countable earnings
    component---reaching the point that beneficiary payments end; gross
    earnings do not enter into this determination. Similarly,
    milestone-outcome payments relate EN reimbursement for the first 12
    months to achieving the SGA level of earnings, which is defined in
    terms of countable earnings. It then switches to \$0 benefits as the
    criterion for further provider payments, which depends on countable
    income as well.) This will be particularly important when we
    consider how EN payments under new partial benefit rules might be
    made to segue smoothly into existing payment rules when recipients
    reach \$0 in benefits. Second, the use of countable earnings for EN
    payment eligibility purposes already has precedent and wide provider
    support...in the front-end payment standards of the
    milestone-outcome system.

[^33]: For example, impairment related work expenses (IRWEs) paid by the
    recipient are deducted from countable earnings, as is the first \$85
    in earned income regardless of its use.

[^34]: Moreover, countable earnings can be manipulated by recipients to
    "hide" as much of their earnings as possible from benefit
    calculations by putting earnings into various non-countable
    categories of income such as Impairment Related Work Expenses
    (IRWEs) or deposits to Plan for Achieving Self Support (PASS)
    accounts. However, there is no reason to think such behavior will
    increase if provider reimbursement is tied to countable earnings,
    since recipients have a strong interest in "gaming" the countable
    income system already for their own benefit. The increased incentive
    of enhancing EN payments should add little to this motivation.

[^35]: The current Ticket program avoids this difficulty by basing all
    EN payments on the *end* of cash benefits---i.e., on reaching
    \$0---and the SSR data system does capture the reason for the final
    step to \$0 benefits*.* However, this reason gets full credit for
    all benefit reductions leading up to exit, even when other sources
    of increased income or changes in family composition account for
    most of them. In this sense, the EN payment trigger for the current
    Ticket reimbursement system is conceptually flawed. It bases EN
    reimbursement on the reason for the *final* step from positive to
    \$0 benefits. This is in part a data limitation, since reasons for
    benefit decline prior to reaching \$0 are not coded in the database.
    But countable earnings is, allowing EN payments for benefit exit to
    key entirely off changes in this measure.

[^36]: Rupp and Bell (2003(b)) make this point concerning existing
    Ticket rules, which pay ENs 40 percent of the average national SSI
    benefit for each client that earns his or her way off cash
    assistance. Those who began with benefits below 40 percent of the
    average benefit could not possibly generate savings equal to this
    expenditure even if able to completely eliminate cash assistance for
    a prolonged period.

[^37]: The author is grateful to David Stapleton for making this point.

[^38]: In effect, we seek to avoid a situation that many perceive as a
    major stumbling block of the current Ticket program: by paying ENs
    the same dollar amount for every exiter, it encourages ENs to accept
    tickets from those thought to be easy to remove from the rolls at
    the expense of the harder-to-employ.

[^39]: We assume here that the individual has no unearned income.

[^40]: Higher service costs for the hard-to-employ are discussed in
    Wehman and Revell (2003).

[^41]: The higher line has a height equal to the countable earnings
    increase shown on the horizontal axis---i.e., it angles up at 45
    degrees. From this, the lower line is set as half that height,
    representing the savings to SSA produced by the countable earnings
    gains on the horizontal axis. (SSI benefits fall by \$1 for every
    \$2 increase in countable earnings.)

[^42]: The jump to the EN payment amount for those who leave SSI cash
    assistance can occur at any point along the (partial benefit
    recipient) EN payment line depicted in the graph, depending on the
    recipient's countable earnings at baseline. Those with higher
    initial earnings will leave benefits after relatively small earnings
    gains and so will jump to the full exit payment level near the left
    end of the partial benefit payment line. Those with lower initial
    earnings will need comparatively large earnings gains to leave
    benefits; they will make the jump toward the right end of the
    payment line.