ECONOMIC AND BUDGET ISSUE BRIEF

Social Security Disability Insurance: 

Participation Trends and Their Fiscal Implications

The Social Security Disability Insurance (DI) program 

pays cash benefits to nonelderly adults (those younger 

than age 66) who are judged to be unable to perform 

“substantial” work because of a disability but who have 

worked in the past; the program also pays benefits to 

some of those adults’ dependents. In 2009, the Disability 

Insurance program paid benefits to almost 8 million disabled beneficiaries and about 2 million of those beneficiaries’ spouses and children.1

Between 1970 and 2009, the number of people receiving 

DI benefits more than tripled, from 2.7 million to 

9.7 million.2

 That jump, which significantly outpaced 

the increase in the working-age population during that 

period, is attributable to several changes—in characteristics of that population, in federal policy, and in opportunities for employment. In addition, during those years, 

the average inflation-adjusted cost per person receiving 

DI benefits rose from about $6,900 to about $12,800 (in 

2010 dollars). As a result, inflation-adjusted expenditures 

for the DI program, including administrative costs, 

increased nearly sevenfold between 1970 and 2009, 

climbing from $18 billion to $124 billion (in 2010 dollars).3

 Most DI beneficiaries, after a two-year waiting 

period, are also eligible for Medicare; the cost of those 

benefits in fiscal year 2009 totaled about $70 billion. 

Under current law, the DI program is not financially sustainable. Its expenditures are drawn from the Disability 

Insurance Trust Fund, which is financed primarily 

through a payroll tax of 1.8 percent; the fund had a 

balance of $204 billion at the end of 2009. The Congressional Budget Office (CBO) projects that by 2015, the 

number of people receiving DI benefits will increase 

to 11.4 million and total expenditures will climb to 

$147 billion (in 2010 dollars; see Figure 1). However, 

tax receipts credited to the DI trust fund will be about 

20 percent less than those expenditures, and three years 

later, in 2018, the trust fund will be exhausted, according 

to CBO’s estimates. Without legislative action to reduce 

the DI program’s outlays, increase its dedicated federal 

revenues, or transfer other federal funds to it, the Social 

Security Administration (SSA) will not have the legal 

authority to pay full DI benefits beyond that point.4

A number of changes could be implemented to address 

the trust fund’s projected exhaustion. Some would 

increase revenues dedicated to the program; others would 

reduce outlays. One approach to reducing expenditures 

on DI benefits would be to establish policies that would 

make work a more viable option for people with disabilities. However, little evidence is available on the 

effectiveness of such policies, and their costs might more 

than offset any savings from reductions in DI benefits.

CBO A series of issue summaries from

the Congressional Budget Office

JULY 22, 2010

1. In this brief, the term “disabled beneficiaries” refers to people with 

disabilities who are receiving benefits from the DI program as a 

result of their own disability and whose DI benefits are calculated 

on the basis of their work history. (Such beneficiaries are also 

referred to as “disabled worker beneficiaries,” “disabled workers,” 

or “disabled insured beneficiaries.”)

2. Unless otherwise specified, all years are calendar years. 

3. Supplemental Security Income (SSI) is the other major federal 

program that provides cash benefits to people with disabilities; it 

serves only those people with disabilities who have low income 

and few assets. In fiscal year 2009, SSI outlays totaled $45 billion, 

of which about 90 percent went to people who were disabled, 

including children and elderly people. About 16 percent of disabled beneficiaries also receive SSI benefits. [For information 

about SSI as well as additional background on the DI program, 

see Congressional Research Service, Primer on Disability Benefits: 

Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), CRS Report for Congress RL32279, February 2, 

2010.] In addition, disabled veterans and people with workrelated injuries and disabilities receive benefits through two 

smaller programs.

4. For further discussion of Social Security’s financing and trust 

funds, see Congressional Budget Office, Social Security Policy 

Options (July 2010), pp. 3–5.
2 CONGRESSIONAL BUDGET OFFICE

ECONOMIC AND BUDGET ISSUE BRIEF

Figure 1.

Social Security Disability Insurance Outlays and Number of Beneficiaries

(Billions of 2010 dollars) (Millions of people)

Source: Congressional Budget Office.

Note: Outlays are calculated under current law, even after exhaustion of the Disability Insurance Trust Fund, and are adjusted for inflation 

using the consumer price index for all urban consumers. 

How Does the Disability Insurance 

Program Work?

The DI program provides income to nonelderly adults—

those younger than the full retirement age—who have 

worked in the past but who are deemed unable to work 

now because of a medical condition that is expected to 

last more than a year or to result in death.5 Disabled beneficiaries receive monthly payments based on their past 

earnings for as long as they remain in the program. Some 

family members of disabled beneficiaries, including certain spouses, minor children, and disabled adult children, 

are also eligible for benefits. If disabled beneficiaries 

remain disabled and live to the full retirement age, they 

then transfer to the Social Security retirement program. 

Entry into the Program

To be eligible for the DI program, workers must have a 

sufficient record of work. Generally, people over the age 

of 30 must have worked during one-quarter of the years 

since they were 21 and during 5 of the past 10 years; 

younger workers are subject to slightly different rules.6

Eligibility for benefits also requires that workers have 

monthly earnings below a threshold known as the “substantial gainful activity amount”—currently $1,000 a 

month, or $1,640 for blind beneficiaries—for at least 

the past five months. The rules governing the program 

place no limit on the nonwage income or assets of 

DI beneficiaries. 

The DI program is intended to provide income to people 

who can no longer perform substantial work because of a 

disability. But the dividing line between those who can 

and cannot perform such work is not always clear. Some 

people who are employed have medical conditions that 

would allow them to qualify for the program if they 

stopped working (for instance, people who are deaf). By 

the same token, some disabled beneficiaries could probably work and would leave the DI rolls if they found a 

suitable job. The specific laws, regulations, and administrative procedures used to determine a worker’s medical 

eligibility for the program have a big effect on the num1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

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60

80

100

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180

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(Left axis)

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(Right axis)

Actual Projected

5. The full retirement age (currently, 66) is the age at which a 

person becomes eligible for unreduced Social Security 

retirement benefits.

6. See “How We Determine Disability Insured Status,” 20 C.F.R. 

404.130, at www.ssa.gov/OP_Home/cfr20/404/404-0000.htm. 
ECONOMIC AND BUDGET ISSUE BRIEF

SOCIAL SECURITY DISABILITY INSURANCE: PARTICIPATION TRENDS AND THEIR FISCAL IMPLICATIONS 3

ber of DI beneficiaries, as do workers’ decisions about 

whether to seek DI benefits. 

Typically, applicants are considered to be disabled if they 

have a condition that appears on SSA’s “listings of impairments” or if they are judged to be unable to perform substantial work for medical reasons that are not included in 

those listings.7

 Initially, determining whether an applicant’s disability qualifies him or her for benefits is the job 

of the Disability Determination Services (DDSs), which 

are agencies funded by SSA but administered by the 

states. Of the applications for benefits that the DI program received in 2005 (the most recent year for which 

nearly complete data are available), 39 percent were 

approved at the DDS level.8

Even with explicit rules about the medical conditions that 

make a person eligible for DI benefits, determining 

whether an individual applicant has such a condition is 

often difficult and necessarily subjective. Moreover, differences in administrative policies among the DDSs and 

in the circumstances of their applicants appear to have 

a large effect on decisionmaking. For instance, in 2004, 

the percentage of all initial claims for disability benefits 

approved at the DDS level varied from about 25 percent 

in Tennessee and Mississippi to more than 50 percent in 

Hawaii, New Jersey, and New Hampshire.9

If a DDS rejects an application, the applicant may appeal 

the decision and request a hearing before an administrative law judge. Of the applications received in 2005 and 

rejected by DDSs, appeals were filed in one-third of the 

cases, and in three-quarters of the appealed cases, the initial decisions were reversed.10 In recent years, the number 

of appeals has greatly outstripped the ability of administrative law judges to process cases, leading to large backlogs and long delays.11 For example, in fiscal year 2000, 

judges issued decisions an average of 300 days after an 

appeal was filed; processing time reached 514 days at the 

end of fiscal year 2008. 

Over the past few years, SSA has received significant 

increases in funding to tackle the backlogs of DI claims. 

As a result, the average processing time for an appeal 

has fallen to 442 days. Maintaining that improvement 

will be difficult, though, because the number of applications for DI benefits increased by 21 percent between 

2008 and 2009 and applications so far this year are running 4 percent higher than in 2009. The surge in applications, propelled in part by a shortage of job opportunities 

attributable to the weak economy, will probably result in 

longer delays in processing future appeals unless further 

increases in funding are provided. 

Benefits in the Program

Average monthly benefits for disabled beneficiaries were 

$1,065 in May 2010. Benefits for spouses and children 

were lower, averaging around $300 per month. Disabled 

beneficiaries usually receive the same amount of benefits 

each month, boosted by annual cost-of-living adjustments, for the rest of their lives. 

DI benefits, like all Social Security benefits, are tied to 

a worker’s past earnings through a progressive formula. 

7. Simply having a listed condition does not make an applicant 

medically qualified for benefits. The listings describe in detail 

the specific medical criteria that make a condition “severe enough 

to prevent an individual from doing any gainful activity.” See 

Social Security Administration, Disability Evaluation Under 

Social Security (Blue Book), SSA Pub. 64-039 (September 

2008), at www.ssa.gov/disability/professionals/bluebook/

listing-impairments.htm.

8. Social Security Office of Retirement and Disability Policy, “2005 

Longitudinal Disability Claims and Appeal Data” (unpublished 

analysis, April 30, 2009). Some approvals resulted from appeals 

conducted within a DDS, a process known as “reconsideration.”

9. Those differences partly reflect differences among those states in 

the types of medical impairments that applicants have, but they 

also stem from differences in approval rates for a given impairment. For example, the share of applicants with mental disorders 

who were approved for benefits varied from about 30 percent in 

North Carolina to almost 90 percent in North Dakota. See 

John D. Stobo, Michael McGeary, and David K. Barnes, eds., 

Improving the Social Security Disability Decision Process (Washington, D.C.: National Academies Press, 2007), pp. 58–62.

10. Several factors may help explain that high reversal rate. First, 

unlike what happens in the DDS process, applicants usually 

attend hearings and may present their case directly to the judge. 

Second, applicants are likely to have retained a lawyer for the 

appeal, whereas the federal government has no such representative 

at the hearing. Third, applicants are permitted to submit additional medical evidence at the hearing, so the judge’s decision may 

be based on new information. Fourth, an applicant’s condition 

may have worsened since the initial decision by the DDS. Finally, 

only applicants who believed they had a strong case would be 

expected to appeal. 

11. When a delay occurs in the approval of a DI claim, the amount of 

benefits a person receives over his or her lifetime is not reduced: 

Payments missed during the application process are paid in a 

lump-sum payment after a person’s application for benefits is 

approved. For many people, however, a long wait for those payments presents a financial hardship.
4 CONGRESSIONAL BUDGET OFFICE

ECONOMIC AND BUDGET ISSUE BRIEF

That is, workers who have higher earnings receive larger 

benefits, but the replacement rate—the portion of earnings that benefits replace—declines with earnings.12 For 

example, a 55-year-old worker who has had earnings 

equal to the nationwide average (in 2008, $41,000) during all of his or her working life and who becomes disabled this year will receive monthly benefits of $1,544, 

replacing 45 percent of those earnings. Yet if that person’s 

earnings had been half as much, the benefit would have 

been $993, replacing 58 percent of earnings. Because the 

benefit formula is linked to the growth of average earnings nationwide, average initial DI benefits grow at 

approximately the same rate as average earnings.

Disabled beneficiaries are also eligible for health insurance through Medicare after a two-year waiting period. 

The recipients generally find those benefits particularly 

valuable: People who have qualified for disability insurance are less likely than other workers to have been 

offered health insurance through an employer, and they 

also tend to need a great deal of health care.13 In 2009, 

Medicare spending per disabled beneficiary enrolled in 

that program averaged about $10,500, which is equivalent to more than 80 percent of the amount of DI benefits that the average disabled beneficiary received that 

year.14

Exit from the Program

Disabled beneficiaries leave the DI program’s rolls for 

three main reasons: They reach the full retirement age 

and transfer to the Social Security retirement program; 

they die; or they are found to be no longer disabled, in 

some cases because they have returned to work. Each 

year, about 7 percent of disabled beneficiaries leave 

the program. Of those, almost half transfer to the retirement program, about 40 percent die, and about 10 percent—less than 1 percent of all disabled beneficiaries—

are judged to be no longer disabled. 

SSA periodically reexamines cases by conducting continuing disability reviews (CDRs) to determine whether 

beneficiaries are still eligible for DI benefits. Outlays for 

CDRs are expected to total about $330 million in fiscal 

year 2010. The frequency of the reviews varies, depending on a beneficiary’s characteristics. Beneficiaries classified as “medical improvement expected” are generally 

supposed to have a CDR every 6 to 18 months; in contrast, those classified as “medical improvement not 

expected” are supposed to have one every 5 to 7 years.15

Less than 1 percent of CDRs result in the termination of 

a beneficiary’s benefits.

Benefits eventually end if a person returns to work and 

earns more than the program’s limit of $1,000 a month. 

To encourage people to return to work, SSA allows exceptions to that limit. For example, beneficiaries who return 

to work continue to receive DI payments for nine 

months, no matter how much they earn.16

Why Has the Number of Disability 

Insurance Beneficiaries Grown?

Changes in some characteristics of the working-age population, changes in policy, and changes in employment 

opportunities all contributed to the rise in the number of 

DI beneficiaries in recent decades. Other changes dampened that increase.

12. Most recipients do not pay taxes on DI benefits, but they did pay 

taxes on their earnings. So, net of taxes, replacement rates would 

usually be higher than the before-tax rates discussed here. 

13. Jonathan Gruber and Jeffrey Kubik, Health Insurance Coverage and 

The Disability Insurance Application Decision, NBER Working 

Paper 9148 (Cambridge, Mass.: National Bureau of Economic 

Research, September 2002).

14. On average, Medicare spending per capita is roughly the same for 

disabled beneficiaries and for elderly beneficiaries. See Department of Health and Human Services, “2009 CMS Statistics,” 

Tables I.1 and III.5, at www.cms.hhs.gov/Research-GenInfo/

02_CMSStatistics.asp.

15. General Accounting Office, Social Security Disability: Reviews of 

Beneficiaries’ Disability Status Require Continued Attention to 

Achieve Timeliness and Cost-Effectiveness, GAO-03-662 (July 

2003).

16. See Social Security Administration, “SSDI and SSI Employments 

Supports,” in A Summary Guide to Employment Supports for Individuals with Disabilities Under the Social Security Disability Insurance and Supplemental Security Income Programs (Red Book; 

2010) at www.ssa.gov/redbook/2010/ssdi-and-ssi-employmentssupports.htm. SSA also provides a “Ticket to Work” program, 

under which beneficiaries may request employment or vocational 

rehabilitation services. Very few do; see Mathematica Policy 

Research, Inc., Evaluation of the Ticket to Work Program: Ticket to 

Work at the Crossroads—A Solid Foundation with an Uncertain 

Future (Princeton, N.J.: Mathematica Policy Research, Inc., September 2008).
ECONOMIC AND BUDGET ISSUE BRIEF

SOCIAL SECURITY DISABILITY INSURANCE: PARTICIPATION TRENDS AND THEIR FISCAL IMPLICATIONS 5

Changes in the Characteristics of the 

Working-Age Population 

The number of DI beneficiaries depends in part on the 

size and characteristics of the working-age population. In 

the past several decades, the aging of the workforce and 

increases in the number of women working have boosted 

the number of people receiving DI benefits.The effects of 

changes in the general health of the population, in contrast, are less clear. 

Aging of the Workforce. The aging of the baby-boom 

generation (people born between 1946 and 1964), and 

consequently of the workforce, has led to an increase in 

the share of people who enter the DI program. Older 

workers are far more likely than younger ones to qualify: 

More older people suffer from debilitating conditions; 

also, they face less strict qualification standards because 

they are assumed to be less able to adapt to new types 

of work. Among people whose work history would qualify them for benefits, about 2 of every 1,000 people ages 

30 to 34 began receiving DI benefits in 2008, compared 

with about 17 of every 1,000 people ages 60 to 64.17

Increased Employment of Women. Growth in the share of 

the working-age population that is disability insured—

that is, in the share of those age 20 and older, up to the 

full retirement age, whose work history qualifies them 

to apply for disability insurance—has been spurred by a 

rise in the number of employed women. The disabilityinsured share expanded from 62 percent in 1970 to 

73 percent in 1990 and then roughly stabilized; it was 

75 percent in 2009. Between 1970 and 2009, the share of 

working-age women who were insured grew from 41 percent to 72 percent; for men, the share fell from 83 percent to 77 percent.18

The increased number of women who are employed and 

the subsequent increase in the share of those who are disability insured have resulted in more disabled beneficiaries and a rise in outlays for the DI program. At the same 

time, the increase in the number of working women has 

also boosted revenues for the DI program through the 

payroll taxes collected on their earnings.

Changes in the Health of the Population. How changes in 

the general health of the U.S. population between 1970 

and 2009 have affected the number of disabled beneficiaries is unclear. Mortality rates declined steadily during 

that time, which suggests that the overall health of the 

population improved and fewer people might have 

received DI benefits than would otherwise have been the 

case. For instance, the introduction of more effective 

treatment for HIV in the late 1990s substantially 

improved the health of many infected people, resulting in 

a drop in the number of HIV-positive disabled beneficiaries.19 But a declining mortality rate also suggests that 

fewer people died from medical conditions that might 

once have been fatal. Advances in health care that allow 

people to live longer after the onset of a disability increase 

the amount of time that someone receives benefits from 

the DI program, producing a rise in the number of beneficiaries in a given year.20

Changes in Federal Policy

The size and cost of the DI program increased dramatically during the early and mid-1970s (see Figure 1 on 

page 2). The Social Security Disability Amendments of 

1980 attempted to contain that growth and apparently 

succeeded, for the number of DI beneficiaries subsequently declined. In the Disability Benefits Reform Act 

of 1984, however, policymakers reversed some of the 

more restrictive policies associated with the 1980 legislation; in particular, they expanded the ways in which a 

person could medically qualify for the DI program. The 

law’s easing of the medical eligibility criteria led to 

renewed growth in the number of people who participated in the program and in the program’s outlays. In 

17. Personal communication to CBO staff from SSA’s Office of the 

Actuary.

18. CBO based those calculations on Social Security Administration, 

“Statistical Tables: Disability Insured Workers—Estimated Number of Workers Insured in the Event of Disability, by Age Group 

and Sex, on December 31, 1970–2010” (July 1, 2010), at 

www.ssa.gov/OACT/STATS/table4c2DI.html.

19. Social Security Administration, Office of the Chief Actuary, Social 

Security Disability Insurance Program Worker Experience, Actuarial 

Study 118 (June 2005), p. 11.

20. Between 1980 and 2008, the mortality rate for disabled beneficiaries fell by 40 percent, or twice as fast as the decline in the rate for 

the general population. Still, the rate for disabled beneficiaries—

about 3 percent in 2008—remains about five times higher than 

the rate for the general population. 
6 CONGRESSIONAL BUDGET OFFICE

ECONOMIC AND BUDGET ISSUE BRIEF

1996, policymakers temporarily boosted spending for 

continuing disability reviews. Because the average reduction in benefits associated with a CDR is significantly 

greater than the cost of the review itself, the increased 

spending for CDRs helped lower overall spending for the 

DI program from what it would otherwise have been. 

Nevertheless, annual outlays continued to rise.

Easing of Eligibility Criteria. Under the 1984 legislation, 

the focus of the disability standards that people had to 

meet to be eligible for DI benefits shifted from a list of 

specific impairments to a more general consideration of 

an individual’s medical condition and ability to work. 

Applicants could now qualify on the basis of the combined effect of multiple medical conditions, each of 

which taken alone might not meet the criteria. The legislation also allowed symptoms of mental illness and pain 

to be considered in assessing whether a person qualified 

for benefits, even in the absence of a clear-cut medical 

diagnosis.21

The easing of the eligibility criteria has interacted with 

the workforce’s changing demographics to increase the 

average time spent in the program: People now are claiming DI benefits at younger ages, and they are less likely to 

die as a result of their qualifying condition. For example, 

the share of beneficiaries with mental or musculoskeletal 

disorders has increased in recent decades, from less than 

40 percent in 1986 to about 60 percent today.22 That 

growth has contributed to an increase in the length of 

time beneficiaries spend receiving DI benefits, because 

those conditions are less likely than many other qualifying conditions to result in death.23 In addition, the 

average age of new beneficiaries fell—from 51 in 1980 

to 48 in the early 1990s—before increasing slightly to its 

current level of about 49. 

In addition, the increase in the full retirement age has 

caused DI beneficiaries to shift from the DI program to 

the retirement program later than participants did in previous years. Between 2002 and 2009, the age at which 

that shift occurred rose from 65 to 66; it is scheduled to 

rise further, to age 67, by 2027.24 Because of the earlier 

age of entry to the program, lower mortality rates, and 

the higher age for shifting to retirement benefits, the 

share of disabled beneficiaries moving from the disability 

to the retirement rolls each year has fallen substantially, 

dropping from 7 percent of disabled beneficiaries in 1980 

to about 31⁄2 percent in 2008.

Changes in the Frequency of Continuing Disability 

Reviews. CDRs tend to reduce the DI program’s outlays, 

because the average reduction in benefits associated with 

a CDR is significantly greater than the average cost of the 

review. Yet in many cases, the DI program does not carry 

out the targeted number of CDRs because of limited 

administrative resources.

In 1996, responding to a backlog of more than 4 million 

reviews, lawmakers authorized $4 billion in additional 

CDR funding, and the backlog was eliminated by the 

end of 2000. That special funding was not maintained, 

however, and the number of reviews declined, dropping 

by 65 percent between fiscal years 2004 and 2008. In 

response, lawmakers have increased the funding dedicated to CDRs over the past few years, but according to 

SSA’s estimates, by the end of September of this year, a 

backlog of 1.5 million reviews will remain. SSA’s Office 

of the Inspector General has estimated that DI outlays for 

2011 will be between $556 million and $1.1 billion 

21. See Frank S. Bloch, “Medical Proof, Social Policy, and Social Security’s Medically Centered Definition of Disability,” Cornell Law 

Review, vol. 92 (2006–2007), p. 189; David H. Autor and Mark 

G. Duggan, “The Growth in the Social Security Disability Rolls: 

A Fiscal Crisis Unfolding,” Journal of Economic Perspectives,

vol. 20, no. 3 (Summer 2006), pp. 71–96; and Social Security 

Administration, Social Security Disability Insurance Program 

Worker Experience.

22. Social Security Administration, Social Security Bulletin: Annual 

Statistical Supplement (various years), and Annual Statistical Report 

on the Social Security Disability Insurance Program (various years). 

23. Musculoskeletal disorders include, for example, disorders of the 

spine (such as osteoarthritis that compromises a nerve root or the 

spinal cord), certain amputations (for instance, of both hands), 

and the major dysfunction of a joint, which affects the ability to 

ambulate effectively or perform fine and gross movements effectively. Details are available at www.ssa.gov/disability/professionals/

bluebook/1.00-Musculoskeletal-Adult.htm#1.01%20Category

%20of%20Impairments,%20Musculoskeletal. 

24. When the full retirement age was 65, a person who entered the 

DI program at age 51 and remained in it would have received 

DI benefits for 14 years. However, for a person who entered the 

program today at age 49 and remained in the program until the 

scheduled full retirement age of 67, that period would be 18 years, 

or 29 percent longer. 
ECONOMIC AND BUDGET ISSUE BRIEF

SOCIAL SECURITY DISABILITY INSURANCE: PARTICIPATION TRENDS AND THEIR FISCAL IMPLICATIONS 7

higher than they would have been if all CDRs had been 

completed on a timely basis.25

Changes in Employment Opportunities

An important determinant of whether people apply for 

benefits from the DI program is how those benefits compare with the opportunities for employment in the workforce and the earnings and benefits (for instance, health 

insurance) associated with working. 

Availability of Jobs. When opportunities for employment 

are plentiful, some people who could qualify for DI benefits find working more attractive. Conversely, when 

employment opportunities are scarce, some of those people participate in the DI program instead. Indeed, applications to the program increased during and immediately 

following the recessions that occurred in the early 1990s, 

in 2001, and over the past few years, as did the number of 

people receiving DI benefits (see Figure 1 on page 2).26

Moreover, the number of beneficiaries tends to increase 

even after the economy begins to recover from downturns: Many people who have been out of the labor 

force for extended periods find it difficult to return to 

work, and new beneficiaries rarely leave the DI program 

to return to work simply because the economy has 

improved. CBO projects that as a result of the most 

recent recession, the number of DI beneficiaries will 

continue to rise over the next few years by more than 

otherwise would have occurred, contributing to the 

long-term trend of rising enrollment already under way. 

Availability of Health Insurance. Most disabled beneficiaries and their disabled dependents are covered by Medicare after a 24-month waiting period.27 Therefore, the 

availability of private health insurance for people who are 

not receiving DI benefits probably affects whether some 

of those people apply for benefits.

For people who are not currently offered health insurance 

in their job and who do not expect to have such coverage 

in the future, the eventual eligibility for Medicare that 

comes with participation in the DI program may be quite 

valuable and probably encourages them to apply. But for 

workers who have health insurance through their job, the 

appeal of eventual Medicare coverage is generally weaker: 

If they stopped work, they would probably spend at least 

part of the Medicare waiting period without health insurance or would face high costs to purchase it.28

The recently enacted health care legislation is likely to 

influence the application rates for DI benefits, but 

whether it will result in more or fewer beneficiaries is difficult to predict.29 Among other changes, the legislation 

will make it easier for people with health problems to buy 

their own insurance; it will also provide new subsidies for 

individually purchased coverage and expand eligibility for 

Medicaid. On the one hand, applications to the DI program might decline, because people who do not have 

employment-based health insurance will find it easier to 

obtain subsidized coverage without applying for DI benefits. On the other hand, applications to the DI program 

might increase, because people who would lose employment-based health insurance if they left their jobs to 

apply for DI benefits will be able to obtain subsidized or 

lower-cost coverage while awaiting eligibility for Medicare.

Value of DI Benefits Relative to Earnings. The DI benefit 

formula is progressive, so benefits replace a larger share of 

earnings for people whose earnings are relatively low 

before they become disabled. Furthermore, the growth of 

initial DI benefits is tied to the growth of overall average 

wages, the pace of which has tended to be faster than the 

growth of wages for less-skilled workers during the past 

few decades. Thus, for less-skilled workers, average initial 

DI benefits grew faster than did the earnings they could 

have received by remaining in the workforce. That 

25. Social Security Administration, Office of the Inspector General, 

Full Medical Continuing Disability Reviews (March 2010), at 

www.ssa.gov/oig/ADOBEPDF/audittxt/A-07-09-29147.html.

26. The recessions of the early 1980s were not associated with an 

increase in the number of beneficiaries. However, the 1980 legislation that constrained growth in the DI program had just been 

implemented.

27. People with end-stage renal disease or amyotrophic lateral sclerosis 

(also known as Lou Gehrig’s disease) qualify for Medicare immediately. Disabled beneficiaries with low income and few assets may 

qualify for Medicaid coverage sooner (through the SSI program) 

than they qualify for Medicare. 

28. Some of those individuals would have the option of continuing 

their employment-based insurance as allowed under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), 

but they would have to pay the full amount of the premium without any contribution from their employer. 

29. The relevant legislation is the Patient Protection and Affordable 

Care Act (Public Law 111-148) and the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152).
8 CONGRESSIONAL BUDGET OFFICE

ECONOMIC AND BUDGET ISSUE BRIEF

circumstance probably increased the number of DI applicants from that group.30

Possible Approaches to Changing the 

Disability Insurance Program 

CBO projects that under current law, the Disability 

Insurance Trust Fund will be exhausted in 2018. At that 

point, legislative action would be necessary to avoid a 

sudden drop in the amount of benefits paid. Of the alternatives available to address that fiscal imbalance, some 

would increase revenues dedicated to the DI program or 

reduce outlays by adjusting the program’s rules (such as 

the benefit formula or the definition of disability). Others, much broader in scope, would aim to make work a 

more viable option for people who could qualify for 

DI benefits under current law. 

Alternatives for increasing revenues for the DI program 

include increasing payroll or other taxes. In addition, policymakers could choose to redirect a portion of the payroll tax dedicated to Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund to the Disability 

Insurance Trust Fund, as was done in the 1990s. However, redirecting resources from the OASI trust fund to 

the DI program would advance the date on which the 

OASI trust fund itself would be exhausted.

Alternatives that would reduce DI outlays include reducing benefits, performing CDRs more frequently, implementing stricter definitions of work-limiting disabilities, 

or providing benefits only to individuals with little 

income and few assets. The effects of any one of those 

options on DI outlays could vary widely, depending on 

the way the change was structured.

Approaches for modifying the program might also 

include steps to strengthen incentives for people with 

disabilities to continue to work. For example, early intervention programs—to help employees likely to apply for 

DI benefits identify viable job alternatives, including less 

demanding positions—could help those employees stay 

in the workforce. Policies might also provide incentives 

for employers to offer additional support to people with 

disabilities beyond that mandated by the Americans with 

Disabilities Act (for example, by making special accommodations, such as retraining or allowing a period of 

leave for rehabilitation). Or the federal government 

might provide added support more directly by paying a 

portion of a disabled worker’s wages.

Allowing people with disabilities to receive partial disability benefits for conditions that precluded full-time 

employment but allowed part-time employment could 

also encourage people to stay in the workforce. That 

approach would allow people with less severe disabilities 

to receive benefits, but it would pay them less than people 

with more severe disabilities would receive, on average. 

Some workers who would not be eligible for DI benefits 

under current law would be eligible under such an 

approach, which would increase outlays. However, over 

time, the existence of the option might persuade some 

people who would otherwise leave the workforce and collect full DI benefits to remain in the workforce part time 

and collect smaller benefits—thus reducing DI outlays.

Changes made with the intent of lowering the DI program’s future outlays might have other consequences for 

the federal budget. For example, if lawmakers established 

stricter eligibility requirements or provided substantially 

smaller benefits in the DI program, spending for Supplemental Security Income would increase. Similarly, an 

early intervention program might reduce spending for 

DI benefits but raise costs to the federal government 

overall, because such an option would result in some 

spending for interventions directed toward people who 

would not have applied for DI benefits in any case. 

30. See Autor and Duggan, “The Growth in the Social Security 

Disability Rolls,” pp. 80–83.

This brief was prepared by Molly Dahl and 

Noah Meyerson. It and other CBO publications are 

available on the agency’s Web site (www.cbo.gov).

Douglas W. Elmendorf 

Director