The Social Security

 

 Definition of Disability

 Social Security Advisory Board

 October 2003
Social Security Advisory Board

An independent, bipartisan Board created by the Congress and appointed by the

President and the Congress to advise the President, the Congress, and the Commissioner of

Social Security on matters related to the Social Security and Supplemental Security Income programs
TABLE OF CONTENTS

INTRODUCTION ............................................................................................................. 1

BACKGROUND ................................................................................................................ 2

I. The Definition of Disability in an Evolving Program

and an Evolving World ................................................................................... 3

A. Adoption of the Definition ..................................................................................... 3

B. Applying the Definition .......................................................................................... 3

C. A Half Century of Change ....................................................................................... 4

II. Work as an Objective of Social Security Disability Programs.......................... 8

A. Vocational Rehabilitation ........................................................................................ 8

B. Ticket to Work and Work Incentives Improvement Act of 1999 ........................... 10

C. Work Activity of Disability Beneficiaries ............................................................. 12

III. Conflicting Policy Objectives ............................................................................. 13

IV. Issues Related to Alternative Program Designs................................................ 23

V. Conclusion............................................................................................................ 26

Appendix A

Approaches of European Countries .............................................................................. 29

Appendix B

SSA’s Previous Employment Support Demonstration Projects ................................... 32

Appendix C

Current and Planned Demonstration Projects .............................................................. 34

Appendix D

Selected Data Related to Social Security Disability Programs .................................... 36

Social Security Advisory Board ......................................................................................... 45
 ...as long as benefit receipt

is conditional on demonstrating a lack of ability to work,

disincentives will be inherent to the system.
When a working-age person suffers a disabling

event, there are, apart from purely medical

considerations, two fundamental needs that arise:

 the need to replace, at least to some

degree, the income lost to the individual

because of the disability, and

 the need to overcome the effects of the

disability to allow the individual to resume as

independent and productive a life as possible.

These objectives have both complementary and

contradictory aspects, and programs designed to deal

with them have adopted a variety of approaches.

When the Social Security Disability Insurance

(DI) program was enacted in 1956, it was intended for

the “totally and permanently disabled,” a population

for whom work was not an option. But over the past

half-century, there have been many changes in the

Social Security disability programs and other

programs, in the economy, in medicine, in

rehabilitative technology, in attitudes about disability

and the disabled. As a result, deciding who should

receive benefits and who should receive other forms

of support has become increasingly complex.

The provisions of law governing the Social

Security disability programs have always included

work-related elements such as incentive features and

rehabilitation requirements. But these programs are

based on a definition that is widely viewed as inimical

to work motivation. While positive incentives can be

added, as long as benefit receipt is conditional on

demonstrating a lack of ability to work, disincentives

will be inherent to the system.

In our January 2001 report, Charting the Future

of Social Security’s Disability Programs: The

The Social Security Definition of Disability:

Is it Consistent with a National Goal of Supporting

Maximum Self Sufficiency?

Need for Fundamental Change, we raised the

question of whether Social Security’s definition of

disability was appropriately aligned with national

disability policy as reflected, for example, in the

Americans with Disabilities Act. We said that there

are many who believe that the Social Security

definition “is at odds with the desire of many

disabled individuals who want to work but who

still need some financial or medical assistance” and

noted that the Ticket to Work program does not

fully address the basic inconsistencies. In that

report, we also reported that at one of our public

hearings, “witnesses stressed that programs and

services are much more effective when they

address what people can do rather than what they

cannot do, and that with the many accommodations

that exist today it is possible to fit many individuals

with disabilities into a satisfying job.”

In this report, we look at the background of the

program and how it has changed, the growing

difficulty of appropriately determining who can and

cannot work, and the various attempts to build in

work incentives. While recognizing that this is a

large and important part of our national income

security system, the Board concludes that the

Nation must face up to the contradictions created

by the existing definition of disability. Our report

briefly catalogs some of the alternative approaches

that might, in some combination, be incorporated

into a revised program. Any such changes must be

made carefully and with due regard for the

importance of this program to the lives of

America’s disabled citizens and to its impact on

other elements of national income security. But the

Board believes that the time has come to seriously

address the definitional issue. We look for this

report to focus attention on that issue, and we

expect to do additional work in this area in the near

future.

1

INTRODUCTION
When the Social Security Act was passed

in 1935, it increased the authorized funding for

the program of grants to the States for

vocational rehabilitation programs and created

a new program of grants to the States for

public assistance programs for the blind. It did

not, however, include any general program of

disability income support either as part of the

payroll-tax funded insurance program or as a

part of the grant-in-aid system supporting State

public assistance programs.

In 1950, the House Ways and Means

Committee recommended adding disability

income support programs to the Act. It

recommended such programs both as a part of

the Social Security social insurance program

and as part of the federally assisted State public

assistance system. In describing the proposed

Social Security disability program, the

Committee viewed it as primarily targeted at

older workers who had chronic impairments

forcing them to leave the workforce early with

a consequent income gap during the years prior

to qualifying for retirement benefits. “The

addition of permanent and total disability

benefits will inject more realism into the

retirement concept, and will effectively

counteract pressures for a reduction in the age

of normal retirement.” (H.Rept. 81-1300,

p. 27). The Committee saw the public

assistance provisions as serving the same basic

purposes for individuals who worked in noncovered employment or who had become

disabled prior to qualifying for Social Security.

It was a program for the “permanently and

totally disabled.” The Senate Finance

The original Social Security disability programs were thus

designed to serve those who had no realistic expectation of a

return to the work force because of the combination of severity

of disability and attainment of near-retirement age.

Committee recommended against including

either program. The legislation as enacted

included the public assistance program but not

the Social Security program.

When the Social Security Disability

Insurance program was added to the law in

1956, the Committee report language even

more explicitly depicted the program as

designed for those who were forced to retire

early by reason of disability, and the new

program limited benefits to those age 50 and

over.

The original Social Security disability

programs were thus designed to serve those

who had no realistic expectation of a return to

the workforce because of the combination of

severity of disability and attainment of nearretirement age. The legislation was not

entirely single minded in that it did include

some provisions for vocational rehabilitation,

but the committee report noted that such

programs were really more applicable to

younger workers. Congress expected that it

could be administered in a way that limited

benefits to those for whom work was not an

option. The disability programs’ definition of

disability continues to embody this

fundamental design concept, but there have

been many changes over the past half-century

which raise questions as to whether that design

continues to be appropriate and sustainable or

whether structural changes in the Social

Security disability programs and other

programs are needed to rationalize the Nation’s

disability policies.

2

BACKGROUND
A. Adoption of the Definition

When Congress, in 1950, created the grantin-aid program for State public assistance

programs for the disabled, it left the States the

discretion of how to determine eligibility.

However, the eligible population was defined,

in the statute, as those who were “totally and

permanently disabled.” When the Disability

Insurance program was enacted in 1956, it

defined disability as the “inability to engage in

any substantial gainful activity by reason of

any medically determinable physical or mental

impairment which can be expected to result in

death or to be of long-continued and indefinite

duration.”

This definition pretty clearly envisions a

program structure that neatly divides those who

have work potential (and are therefore

ineligible) from those who have no work

potential (and are therefore eligible). It

provides income support for the eligibles and

nothing for the ineligibles, who must therefore

look to themselves, their families, or other

programs to meet the needs created by their

less than total and permanent disabilities.

3

This definition pretty clearly envisions a program structure

that neatly divides those who have work potential (and are

therefore ineligible) from those who have no work potential

(and are therefore eligible).

B. Applying the Definition

Even at the time of original enactment, the

theoretical definition had to be applied in ways

that undoubtedly had less than perfect results.

In the program’s first five years (1957-1961),

SSA handled hundreds of thousands of

disability applications each year and, by the

end of that period, had awarded benefits to

nearly a million disabled workers. Dealing

with massive numbers of claims requires the

establishment of standards of proof some of

which are quite objective and some of which

require a great deal of subjective decision

making. For an inherently multi-dimensional

issue such as whether a given individual has

the capacity for substantial work activity, there

will always be a trade-off. The more objective

the standards, the easier the program will be to

administer but the more likely it will be that

individuals will be incorrectly included or

excluded. To give an entirely hypothetical

example, to say that a claimant is automatically

eligible if he or she has had a heart attack

would eliminate the need for labor-intensive

individualized assessment of work capacity for

a large number of applicants but would also

possibly allow on the rolls many who really

I. The Definition of Disability

In an Evolving Program and an Evolving World
could continue working. Changing to a

standard that requires two heart attacks for

automatic eligibility would lower the number

who get on the rolls despite retaining the

capacity for work but would also increase the

number of cases (all those with just one heart

attack) who would have to be individually

assessed.

Former Social Security Commissioner

Robert Ball has written that the Social Security

Administration decided to adopt an approach

under which an individual would be considered

disabled if he or she had a medical condition

which would be of sufficient severity to

preclude an “average” person from working.

The agency developed lists of very specific

medical conditions that were considered to

indicate work-preventing severity. If the

claimant presented medical evidence showing

that he or she had one of the specified

conditions on these lists (or “listings” as they

came to be called), eligibility was established

as long as the claimant was not, in fact,

working. If the individual did not qualify

because of having a condition described in the

medical listings (but did have a disability of

some severity), the adjudication would move to

a more individualized assessment. That

assessment determined whether the limitations

imposed by the conditions would prevent

performing the kinds of work that might be

available in light of the claimant’s age,

education, training, and work experience. In

the early years of the program, over 90 percent

of the cases were decided on the basis that the

claimant’s medical condition was specifically

included in the listings or was of equal medical

severity. Even in those cases, there would be

close-calls in which different adjudicators

might reach different conclusions as to whether

the medical standards were met, but the degree

of subjectivity clearly is more substantial

where the decision moves from entirely

medical standards to an assessment of the

individual’s vocational capacity.

C. A Half Century of Change

Over the past half century, there have been

many changes in the Social Security disability

programs and other programs, in the economy,

in medicine, in rehabilitative technology, in

attitudes about disability and the disabled.

Many of these changes have tended to work at

cross-purposes with the original simple model

of a clear-cut distinction between ability and

inability to work or have tended to complicate

the program in other ways.

Many of these changes have

tended to work at crosspurposes with the original

simple model of a clear-cut

distinction between ability

and inability to work or have

tended to complicate the

program in other ways.

Major changes in the disability law itself

included the extension of eligibility to workers

younger than age 50, and the substitution of a

12-month minimum expected duration for the

previous rule of “long-continued and indefinite

duration.” Both of these changes undercut the

original view of the program as an “early

retirement” system. The adoption of automatic

benefit increases for Social Security in the

early 1970s interacted with the high inflation

rates of those years to rapidly drive up benefit

rates, thus also changing to some degree the

relative attractiveness of work and benefits.

While subsequent amendments corrected the

ongoing and unintended over-indexation,

replacement rates were stabilized at a

somewhat higher level than the rates prevailing

previously. Also in the 1970s, the enactment

and implementation of the Supplemental

4
complexity of the agency’s task and gave it

responsibility for running a disability program

with the same definition but applied to a

population with quite different needs and

characteristics.

A number of other legislative enactments,

many court decisions, and regulatory initiatives

have also significantly affected the nature of

the program even though they did not modify

the base definition of disability. For example,

eligibility was tightened somewhat by

amendments in 1980 requiring a substantial

proportion of pre-effectuation reviews and

mandating minimum levels of continuing

disability reviews. Amendments adopted in

1984 made it significantly more difficult for

the agency to terminate eligibility. Other

elements of the 1984 amendments and their

implementing regulations are also generally

believed to have broadened eligibility,

particularly with respect to claims based on

mental impairments. Other legislative,

judicial, and regulatory changes have

significantly affected such areas as SSI

childhood disability benefits, benefits for

individuals with substance abuse problems,

benefits for non-citizens, the standards for

evaluating pain and other subjective

symptoms, and the reliance to be placed on

evidence from the applicant’s treating sources.

In addition to the changes in the disability

insurance program and the creation of a new

...legislative enactments, many court decisions, and regulatory

initiatives have also significantly affected the nature of the

program even though they did not modify

the base definition of disability.

5

Low

Earner

54.8

50.1

52.6

66.4

64.5

59.9

61.2

61.7

60.2

61.9

Medium

Earner

37.3

34.6

36.8

48.8

47.3

43.7

44.6

45.0

43.9

45.1

High

Earner

31.0

29.9

32.9

44.4

40.8

37.3

38.0

38.4

37.4

38.5

Year

1960

1965

1970

1975

1980

1985

1990

1995

2000

2002

*worker disabled at age 40

Source: Office of the Chief Actuary

 Social Security Administration

Disability Benefit Percentage

Replacement of Career Earnings*

Security Income (SSI) program (federalizing

the prior State assistance programs for the

disabled) massively increased the size and
federal income assistance program for the

disabled (SSI), the integration of medical

coverage with these income-support programs

greatly increased the importance to individuals

of qualifying and retaining eligibility. In 1973,

the Medicare program extended eligibility

(after a 2-year waiting period) to disability

insurance beneficiaries. The Medicaid

program, enacted in 1965, provided medical

assistance benefits to recipients of public

assistance under the State-run grant-in-aid

program of Aid to the Totally and Permanently

Disabled. When that program was converted

to the federal SSI program under 1972

legislation, Medicaid coverage was generally

made available to SSI recipients.1

Another change affecting the disability

programs over the past half-century is the

increasing participation of women in the labor

force. Where a family has two earners, there is

less of an impact on household income when

one earner’s income from employment is

replaced by income from disability benefits.

Social Security benefits make up less than half

Medical advances and

improved rehabilitative

knowledge and technology

have also taken place over

the past 50 years. These

increasingly call into

question the ability of a

program to neatly draw

a line between those

who can and those

who cannot work.

of the income of about 52 percent of disabled

worker families. In 2001, about one-quarter of

disabled worker families had incomes of

$45,000 or more, and about one-quarter had

income below $15,000. (The 2001 official

poverty threshold for a 3-person family was

$14,128.) To the extent the other worker in the

household has employment providing family

medical insurance coverage, the impact of the

2-year waiting period for Medicare may also

be reduced. On the other hand, that factor also

reduces the extent to which Medicare eligibility

might be a major consideration in whether to

apply for or try to retain disability benefit status.

Medical advances and improved

rehabilitative knowledge and technology have

also taken place over the past 50 years. These

increasingly call into question the ability of a

program to neatly draw a line between those

who can and those who cannot work. To some

extent, these changes can be incorporated into

changed standards. But in many cases they may

place increasing stress on the theoretical

definition of disability.

There have also been major changes in the

nature of work and of the workforce. At the

time the program was enacted in the mid-1950s

work in the economy typically involved

significant physical exertion. Over 40 percent

of all jobs were in manufacturing, construction,

or mining. By 2002, jobs in those industries

represented only 18 percent of all jobs. We have

become much more of a service economy where

it is harder to measure the degree to which a

At the time the program

was enacted in the

mid-1950s work in the

economy typically

involved significant

physical exertion.

6

1

 States are permitted to restrict Medicaid coverage to

only those recipients who would continue to meet the

former State assistance standards. However, over 95

percent of SSI recipients are also Medicaid eligible.
medically determinable impairment limits the

individual’s ability to engage in employment.

Increasingly the question of eligibility hinges

on a vocational assessment in which the

decision involves a combination of factors,

namely, the amount of functional capacity

remaining after considering the impairment

and the individual’s age, education, and prior

work experience. For these and other reasons,

in the Disability Insurance program the

proportion of initial allowances based strictly

on medical factors has declined from around

93 percent in the early years of the program to

82 percent in 1983 and to a 2000 level of 58

percent. By the end of the appeals process, the

proportion of allowances based on strictly

medical factors is around 40 percent and,

because of coding deficiencies, possibly even

lower.

Attitudes about disability and work have

also undergone substantial change over the

years. The concept of being able to categorize

an individual as “unable to work” was once not

generally challenged. It was particularly secure

in the context of the original program that was

limited to those age 50 and over and that

operated in a manufacturing economy. Today,

there is much less certainty about the

appropriateness and even feasibility of making

that distinction. One expert on vocational

rehabilitation recently expressed to the Board

the view that one should only feel confident

making a judgment of inability to work in the

case of an applicant who is comatose. While

this view may lie at one extreme, there clearly

has been a marked shift in attitudes among the

disabled and in society as a whole. There is no

longer general support for the basic premise

that one can define a set of medical conditions

that appropriately classify an “average” person

as unable to work. Rather there seems to be

increasing recognition of a fundamental

distinction between the concept of

“impairment” and the concept of “inability to

work.” Changing public attitudes are reflected

to a considerable extent in the adoption in 1990

of the Americans with Disabilities Act that

required employers to make reasonable

accommodations as necessary to enable the

employment of disabled individuals. In its

preamble, that Act condemned “stereotypic

assumptions not truly indicative of the

individual ability of [disabled] individuals to

participate in, and contribute to, society.”

The core definition of disability for the

Social Security program adopted fifty years

ago was inability to do substantial work by

reason of a physical or mental impairment.

That core definition itself remains unchanged,

but the context in which it operates has

changed a great deal, and its validity, both as

an administratively feasible definition and as

an appropriate standard of benefit eligibility, is

increasingly subject to challenge.

That core definition itself remains unchanged, but the

context in which it operates has changed a great deal,

and its validity, both as an administratively feasible

definition and as an appropriate standard of

benefit eligibility, is increasingly

subject to challenge.

7
Despite their core definition of disability as

inability to do any substantial gainful work, the

Social Security programs include elements

aimed at helping or encouraging beneficiaries

to engage in work activity. Such elements

have been incorporated from the very

beginning. The 1956 amendments to the

Social Security Act which created the

Disability Insurance program included in that

program provisions for referring beneficiaries

to the State vocational rehabilitation agencies.

That legislation also added to the grant-in-aid

program of Aid to the Totally and Permanently

Disabled a requirement that State plans include

a description of any services provided to help

applicants or recipients attain self-support.

The original inclusion of such provisions

may have been intended as a counterweight to

the very substantial opposition to the

enactment of the program from those who felt

that emphasis should be on rehabilitation rather

than income support. It may have represented

a recognition that, as a practical matter, the

task of distinguishing those able to work from

those not able to work was not likely to be

fully achievable. It may have represented a

simple judgment that independence and selfsupport are such important human values that

they should never be ruled out.

Whatever the original objective or

combination of objectives may have been, the

programs over their history continued to

include and build upon these original workoriented provisions. Again, different policy

objectives may have driven the changes.

Program experience showed that, at least for

some beneficiaries, rehabilitation was, in fact,

a feasible objective and that, from a financial

perspective, providing rehabilitation services

II. Work as an Objective of Social Security

Disability Programs

8

could be cost effective even if only a quite

small proportion of the caseload participated.

Programmatic changes opening eligibility to

shorter-term disabilities and to younger

workers also made the incorporation of workencouraging features more obviously

appropriate. Changes in medical technology

and in the attitudes of the population generally,

and the disabled population in particular,

undermined the concept that a clear division

could or should be made between inability and

ability to work.

A. Vocational Rehabilitation

The Social Security disability program, as

currently defined and constituted, has as its

major goal the provision of income to those

who are unable to work. The national

Vocational Rehabilitation program has the goal

of assisting the disabled to attain independence

and self-support.

Prior to World War I, there was no formal

national system of addressing the

employability needs of disabled Americans.

With thousands of disabled veterans returning

from that War, the Congress passed a series of

laws dealing with rehabilitation – some

directed specifically at veterans but others

aimed also at the civilian population. In 1920,

the Smith-Fess Act created a federally

matched, State administered program of

Vocational Rehabilitation. The Public Health

title of the 1935 Social Security Act increased

and made permanent the authorized

appropriation for that Vocational Rehabilitation

program. The 1935 Act also provided a grantin-aid program to allow States to provide

public assistance to the blind. The following

year the Randolph-Sheppard Act was passed
Work Incentives for DI Beneficiaries

Trial work period – Beneficiaries may work for nine months (not necessarily consecutive) in a

60-month rolling period without the earnings affecting their benefits. A trial work month is any

month in which earnings are more than $570. When nine trial work months are completed

within a 60-month period, SSA reviews the work to see if earnings are “substantial” (generally,

$800 per month or more, $1,330 per month for blind beneficiaries). If they are, benefits would

continue for a three-month grace period and then stop.

Extended period of eligibility – This 36-month period follows the ending of benefits due to

work. During this period, a beneficiary may receive a benefit for any month in which earnings

fall below $800 per month.

Continuation of Medicare – Beneficiaries who have Medicare hospital insurance and start

working may have at least 81⁄2 years of extended coverage (including the trial work period). After

that they can buy Medicare coverage by paying a monthly premium. Some people with low

income and few resources may be eligible for State assistance with the cost.

Work Incentives for SSI Beneficiaries

Continuation of SSI – Beneficiaries who work may continue to receive SSI payments until their

countable income exceeds the SSI limit.

Continuation of Medicaid eligibility – Medicaid eligibility will usually continue even if

beneficiaries earn too much to receive SSI payments if they cannot afford similar medical care

and depend on Medicaid in order to work.

Earned income exclusion – The first $65 ($85 if the beneficiary has no unearned income) of

any monthly earned income, plus one-half of remaining earnings are excluded from countable

income.

Student earned income exclusion – For students under age 22 who are regularly attending

school and neither married nor the head of a household, up to $1,340 of earned income per

month, to a maximum of $5,410 per year, is excluded from countable income.

Work expenses of the blind – Any income earned by a blind individual that is used to meet

expenses needed to earn that income is excluded from countable income.

Plan for achieving self-support (PASS) – A PASS allows a disabled or blind individual to set

aside income and resources to get a specific type of job or to start a business. The income and

resources that are set aside are excluded under the SSI income and resource tests.

Work Incentives for Both DI and SSI Beneficiaries

Expedited reinstatement of benefits – There is a 60-month period in which a former

beneficiary may request reinstatement of benefits without filing a new application. For DI

beneficiaries, the 60 months follow the extended period of eligibility.

Impairment-related work expense exclusion – The cost of certain impairment-related services

and items that a beneficiary needs in order to work are excluded from countable income for SSI

purposes and are deducted from earnings when determining if work is substantial.

Continued payment under a vocational rehabilitation program – Beneficiaries who

medically recover while participating in a vocational rehabilitation program that is likely to lead

to becoming self-supporting may continue to receive benefits until the program ends.

9
10

to allow blind individuals to operate vending

stands in federal buildings. Major

amendments to the Vocational Rehabilitation

program were adopted in 1943.

During the 1950s, Congress considered

highly contentious legislation to add disability

benefits to the Social Security program. In

1952, the Social Security Act was amended to

“freeze” a worker’s Social Security record

during the years when they were unable to

work due to a disability. While this measure

offered no cash benefits, it did prevent such

periods of disability from reducing or wiping

out retirement and survivor benefits. The 1952

provision, however, was essentially a

“statement of principle” since it contained selfrepealing language that prevented it from going

into effect. The “freeze” provisions were

enacted into law again in 1954 along with a

requirement for the Social Security

Administration to refer applicants to the State

Vocational Rehabilitation agencies. In 1956,

Congress added cash disability benefits to the

Social Security program. The provision for

referring applicants for Vocational

Rehabilitation was modified to withhold

benefits for anyone who refused to accept

available rehabilitation services.

In 1965, the Finance Committee report on

that year’s amendments noted that very few

disability beneficiaries were receiving any

rehabilitation services. To address that issue,

the law was amended to allow payments for

such services from the Disability Insurance

trust fund subject to an overall limit of

1 percent (later raised to 1.5 percent) of the

disability benefits paid in the previous year.

The 1972 legislation establishing the

Supplemental Security Income (SSI) program

included similar provisions (payable from the

general fund) for rehabilitation services to SSI

recipients. The Rehabilitation Act of 1973

mandated a priority to serve persons with

severe disabilities and established affirmative

action programs for severely disabled

individuals.

Despite these changes the number of Social

Security disability beneficiaries rehabilitated

remained quite small. In the late 1970s,

General Accounting Office reports criticized

the programs for both Disability Insurance and

Supplemental Security Income. In the 1981

Budget Reconciliation Act, Congress changed

the funding rules. Instead of reimbursing

Vocational Rehabilitation agencies for the costs

of services provided to Social Security

beneficiaries, reimbursement was paid for such

services only if they actually restored the

individual to employment at a level that

resulted in benefit termination.

This change in the funding mechanism

resulted in an immediate drop in the amount of

funding, but it improved the extent to which

the program resulted in a demonstrable net

reduction in costs. The 1980 Social Security

amendments called for demonstration projects

to test alternative methods of encouraging

employment, and, in the mid-1990s, SSA

began to allow private entities to apply for

rehabilitation funding in cases where a

beneficiary had been referred to the State

Vocational Rehabilitation Agency but that

Agency did not provide services. In 1999, the

system of referral for Vocational Rehabilitation

services (and the penalties for refusing to

participate in such services) were replaced by

the Ticket to Work Act described below. Thus

far, most of the Ticket to Work activity

continues to involve Vocational Rehabilitation

agencies, and the VR reimbursement method is

still used in those areas where the Ticket to

Work program has not yet been implemented.

B.Ticket to Work and Work

Incentives Improvement Act

of 1999

The Ticket to Work and Work Incentives

Improvement Act of 1999 (P.L. 106-170)
11

amended the Social Security Act to create the

Ticket to Work and Self-Sufficiency Program,

a voucher program that allows beneficiaries a

greater choice of vocational rehabilitation and

employment service providers. The new law

also expanded the availability of health care

coverage for working individuals with

disabilities, and included a number of other

provisions designed to help disabled

individuals to continue working or to return to

work.

The centerpiece of the legislation, the

Ticket to Work program, is intended to

increase access to and the quality of

rehabilitation and employment services

available to disability beneficiaries. It provides

eligible Social Security Disability Insurance

and Supplemental Security Income disability

beneficiaries with a “Ticket” which can be

used to obtain vocational rehabilitation,

training, employment services, or other support

services through public and private providers.

The providers can be Employment Networks

(public or private organizations that take

responsibility for the coordination or delivery

of services), or State Vocational Rehabilitation

agencies.

The program is voluntary. When an

individual gets a Ticket, he or she is free to

choose whether or not to use it, as well as

when to use it. Generally, beneficiaries who

are eligible for Tickets include current Social

Security Disability Insurance and

Supplemental Security Income disability

beneficiaries between the ages of 18 and 65.

The Ticket program is being implemented

in phases. Phase I of the program was

implemented in 13 States beginning in

February 2002, and Phase II in another

20 States plus the District of Columbia

beginning in November 2002. Phase III of the

program will be implemented in the remaining

States and territories in November 2003 and

continuing into 2004.

As of July 7, 2003, SSA had mailed about

4.7 million tickets to beneficiaries in the first

 two phases of program implementation.

About 2.3 million tickets were mailed during

Phase I, and 2.4 million during Phase II. SSA

continued to mail tickets in the Phase II States

at the rate of about 250,000 per month through

September 2003. As of July 7, SSA had

enrolled 809 Employment Networks in the

Phase I and Phase II States, with another

109 applications under review.

Participation in the program has been

minimal. As of July 2003, the program

manager for the Ticket program had only

handled 200,000 calls (4.3 percent of the total

number of tickets mailed) from beneficiaries

since the onset of the program. About

20,500 beneficiaries (about 0.44 percent of

those who had been mailed tickets) had

assigned their tickets. Of those, about 18,100

(88 percent) had been assigned to State

Vocational Rehabilitation agencies, and about

2,400 (12 percent) had been assigned to

Employment Networks. Of the tickets

assigned to the State Vocational Rehabilitation

agencies, 11,246 were from beneficiaries who

were new to the system.

As of July 4, 2003 SSA had made over 554

outcome and milestone payments to

Employment Networks, representing 196

beneficiaries working (.004 percent of those

who have been mailed tickets). These

payments total $169,456.

The other key provision of P.L. 106-170

expanded the availability of health care

services to working DI and SSI disability

beneficiaries. The law provided several

enhancements to Medicaid and Medicare

including giving States more options in

providing Medicaid coverage to more people

ages 16-64 with disabilities who work, and

extending full Medicare coverage for 4 1/2

years beyond the previous limit for Social

Security disability beneficiaries who return to

work.
C. Work Activity of Disability

Beneficiaries

Until this year, SSA has not tracked

monthly earnings of Disability Insurance

worker beneficiaries, and full-year data are not

yet available. SSA began in 2001 to break out

data on DI worker beneficiaries whose benefits

have been terminated because of work above

the level of substantial gainful activity. In

2002, 29,000 disabled worker beneficiaries, or

about one-half of one percent of the total, had

their benefits terminated for that reason. About

a third of those terminated had a primary

diagnosis of mental illness.

Despite the many work incentive features that have been

incorporated into the Social Security Disability programs over

the last five decades, the Social Security Advisory Board finds

little evidence that those incentives have substantially

encouraged self-sufficiency in the disabled population.

12

Under the SSI program, returning to work

at the “substantial gainful activity” level does

not cause benefits to stop simply because the

individual has shown a capacity to work.

Since SSI is a means-tested program, however,

benefit levels are reduced because of earnings

and phase out when the combination of

earnings and other income rises above the

income eligibility level. Even after benefits are

reduced to zero, recipients generally continue

to qualify for Medicaid. A little less than 6

percent of all disabled SSI recipients have

some work activity, but two-thirds of those

with earnings have $500 or less in monthly

earnings. Forty-two percent of those with

earnings have a diagnosis of mental

retardation.
Despite the many work incentive features

that have been incorporated into the Social

Security Disability programs over the last five

decades, the Social Security Advisory Board

finds little evidence that those incentives have

substantially encouraged self-sufficiency in the

disabled population. Nor do we find that there

exists much expectation that this situation is

likely to change to any significant degree in the

future. At the same time, the Social Security

Disability programs are an established and

important part of our Nation’s income security

system. They provide vital ongoing income

support and, through their relationship to

Medicare and Medicaid, health insurance for

millions of disabled Americans. In previous

reports, the Board has expressed concerns over

many aspects of the existing disability

programs and has identified a number of areas

in which major improvements are needed. In

testimony before the House Social Security

Subcommittee in May 2002, the Chairman of

the Advisory Board said:

As we have emphasized in our reports,

disability is at the heart of SSA’s many

challenges. It accounts for two-thirds of the

agency’s administrative budget – about $5

billion this fiscal year. Disability benefits will

account for nearly $100 billion in spending this

year, or nearly 5 percent of the Federal budget. 

The current disability structure is seriously

flawed and needs to be reformed in the interests

of both claimants and taxpayers.

The Board’s 2001 report on the need for

fundamental change in the disability program

said “All parts of the disability policy and

administrative structure are under increasing

stress....The disability administrative and

policy infrastructure is weak, and resources are

inadequate to the task.” Some of the concerns

we have previously expressed, especially with

respect to resources and improved systems

support, are beginning to be addressed, but

much remains to be done in those and other

areas. This report raises an issue that we have

mentioned in previous reports but have not

previously addressed fully, and that is the question

of whether the very definition that is at the heart of

the existing disability programs is consistent with

our society’s basic beliefs about disability and work.

Moving away from that definition would very

clearly involve significant programmatic changes.

Given the importance and significance of these

programs any such changes would have to be

carefully developed and carefully implemented. A

first step in addressing this issue would be a

consideration of the competing choices

policymakers would face including the issue of the

extent to which the desired results could be achieved

by changes within the existing programs.

What are the major areas of concern with the

existing program and its relationship to

encouraging self-sufficiency? General issues are

whether the definition of disability is really

administrable or whether it will always be

administered in a way that provides benefits to a

substantial number of impaired people who could

work and/or disqualifies a substantial number of

impaired people who have no realistic prospect of

working. From a work-incentive perspective, the

existing definition is widely viewed as inimical to

work motivation in that applicants, required to prove

inability to work, are likely to be reluctant to engage

in activities that would undermine their claim for

benefits. To the extent that the application of the

definition is difficult and somewhat arbitrary, there

is a question as to whether the program’s benefit

levels and its integration with Medicare and (for

SSI) Medicaid make eligibility an attractive

alternative to available work, especially for lowskilled workers. The difficulty of administering the

definition also raises the question of whether the

program is inherently susceptible to varying award

rates based on subtle messages suggesting tighter or

looser adjudication and to inconsistencies of

administration—geographically, at different levels of

the process, and even from one adjudicator to the

next.

13

III. Conflicting Policy Objectives
Work Disincentives for Social Security Beneficiaries

Definition of disability – The definition of disability requires a person to demonstrate the

“inability to engage in any substantial gainful activity.” Since the system rewards people that

demonstrate they cannot work, applicants may be reluctant to engage in any activity that would

undermine their claim for disability benefits. Work activity after becoming eligible also may

result in a loss of benefits. The trial work period and extended period of eligibility mitigate this

disincentive, but beneficiaries know that, at some point, attempting to work may cause benefit

loss.

Impact on attitudes and motivation – Even apart from the financial disincentive, the desire to

work is an important factor in employment of persons with impairments. To the extent the

current program requires applicants to prove that they cannot work, it may undermine their

motivation and desire for employment.

Availability of health benefits – Beneficiaries receive health benefits (Medicaid for SSI;

Medicare after a waiting period for DI) in addition to their monthly payment. For many

beneficiaries the health benefits may be even more important than cash benefits. Getting a job

that exceeds their yearly benefit amount may not be enough if the job does not also provide

adequate and dependable health insurance coverage.

Delayed and incomplete availability of health benefits – For certain categories of disabilities,

the lack of availability of health benefits may be a significant factor in preventing an individual

from seeking or engaging in employment. Health benefits become available only after the often

prolonged process of establishing eligibility under SSI or DI (and, for DI, only after a 2-year

waiting period). Also, in some cases, the benefits available then may not include the drugs or

other services needed to permit employment.

Delayed rehabilitation services – The Social Security Act provisions designed to encourage and

assist in rehabilitation only become available after the often prolonged period of establishing

eligibility. Vocational rehabilitation experts tend to believe that rehabilitation has the best chance

of success if offered early while the impaired individual still has a strong attachment to working

and may also have a continuing relationship with an employer.

Complexity of work incentives – The number and complexity of the work incentives in the

Social Security programs may be confusing to beneficiaries so that they remain suspicious that

their attempt to do any work will result in termination of their benefits even in situations where

that would not be the case.

All-or-nothing choice – The Social Security definition of disability presents a largely all-ornothing approach to eligibility. Because of the restrictions imposed by the disability or by

vocational deficits, available employment opportunities may offer income that is only marginally

higher (or even lower) than what the individual gains from benefit eligibility. This situation may

have been accentuated in recent years by increasing participation of other family members in the

work force and by increasing benefit replacement rates for lower income workers.

14
Vocational rehabilitation

experts tend to believe that

rehabilitation has the best

chance of success if offered

early while the impaired

individual still has a strong

attachment to working and

may also have a continuing

relationship with an employer.

What could be done within the confines of

the existing program with its definition of

disability as inability to work? More attention

could be paid to policy development and better

systems of quality management to improve the

level of confidence that the current definition

of disability is being appropriately applied.

Work incentives built into the program might

be used to offset to some extent the definitional

contradiction. The Board has heard from

several commenters that there is such a maze

of different incentives that the very attempt to

understand them becomes intimidating and a

source of beneficiary fear about inadvertently

doing something that causes benefit loss or

overpayment liability. On the other hand,

consideration could be given either to

simplification or providing better availability

of counseling. Recent efforts to improve

counseling seem to have had some success, but

the level of confusion and the degree of

success of counseling efforts are both

essentially anecdotal. It would be useful to

have a carefully designed survey to help gauge

the extent of misunderstanding and to identify

the areas which might be most promising for

better public information or simplification.

The Ticket to Work program, now in its early

implementation stages, is itself an attempt to

encourage beneficiary employment. Thus far,

success has been limited and a number of

problems have been identified, but this does

represent an approach to encouraging work

activity and there may be ways to improve it.

There are also demonstration projects that have

been done in recent years and others that are

getting underway addressing possible ways to

give the existing program a more effective

work orientation such as:

 assigning caseworkers to encourage,

monitor, and assist claimants to stay in

the labor force,

 early intervention to provide workoriented services prior to actually

applying for benefits, and

 alternative benefit rules such as a

gradual phase out of benefits in place of

a sharp cutoff.

Is continuing the definition of disability

as “inability to work” important to

maintaining support for the program? The

adoption of the Social Security disability

program was not uncontroversial. Although

there was discussion of such a program as far

back as the 1930s, it was not passed by the

House of Representatives until 1950 and did

not win Senate support even then. It was

enacted into law in the 1956 Social Security

More attention could be paid to

policy development and better

systems of quality management

to improve the level of

confidence that the current

definition of disability is being

appropriately applied. Work

incentives built into the

program might be used to

offset to some extent the

definitional contradiction.

15
Amendments by virtue of a highly contested

Senate amendment opposed by the Committee

of jurisdiction. That amendment, adding a

disability program to the bill, was approved by

only a 2-vote margin. A major concern

expressed in the debate was whether it would

be possible to administer the programs in a

way that limited benefits to those who were

really prevented from working by virtue of

their disability.

The language of the original definition

responded very directly to that concern by

specifying that benefits would be available

only to those who, by reason of a disability,

were unable to engage in any substantial

gainful activity. In 1967, Congress attempted

to make that policy even clearer by specifically

stating that an individual could qualify only if

there was no work that he or she could do that

existed in the national economy even if it did

not exist in the local economy or even if there

was no prospect that the individual would

actually be hired for that work.

What is the realistic potential of the Social

Security disability population for work? Is

nearly everyone who is not comatose a

potential candidate for work? Or is there only

a very marginal group of beneficiaries who

could realistically be expected to work even

with appropriate supports and incentives?

Both views seem to be fairly widely held.

There is no doubt that all, or at least nearly all,

Social Security disability beneficiaries have

serious impairments. Even if one accepts the

premise that, given sufficient motivation,

employment opportunities, and appropriate

support structures, many highly impaired

individuals could work, many would argue that

it is unlikely that very substantial numbers of

Social Security disability beneficiaries would

be good candidates for return to work. On the

other hand, despite improvements in medical

care and advances in rehabilitation, the

incidence of Social Security disability

eligibility has continued to grow. Some would

argue that this is evidence that, despite its

seemingly absolute definition – or perhaps

even because of the perverse incentives that

definition creates – individuals who are

impaired but who have realistic employment

potential are winding up on the benefit rolls

and will continue to do so in the absence of

significant structural changes.

How effective are the current eligibility

processes at drawing the line between the

able and the disabled and is significant

improvement, if needed, possible? As

discussed earlier, there have been many

important developments over the history of

the disability program. Some of these

changes seem likely to have weakened the

ability of the existing processes to draw an

appropriate line between those who are and

those who are not able to work. The

approach of allowing claims because of

medical conditions considered sufficiently

severe to prevent an “average” person from

working may have been a significantly better

decision tool in the early days of the

program. At that time eligibility was limited

to those nearing retirement age and minimal

medical and rehabilitation techniques existed

to assist those with significant impairments

to work despite those impairments. The

huge caseload increases of the past decades

have also forced the Social Security

Administration to move to a less intense

examination of eligibility. Prior to the

1970s, every claim was subjected to two

levels of professional review and decision

makers were required to explain in writing

the reasoning behind their decision. Now

reviews are much more limited and

rationales are brief or non-existent.

As the Board has pointed out in previous

reports, we do believe there can be

improvements. SSA needs to place increased

emphasis on policy development and to

implement a much stronger quality

management system. Many of the policy

standards currently used to determine

eligibility are badly outdated and do not reflect

16
the current state of medical knowledge or the

realities of today’s workplace. In developing

these standards, the agency needs to be sure

that it has sufficient and highly capable policy

staff and that they develop policies which

realistically reflect both the impact of

impairments on capacity to work and the need

to enable adjudicators to apply policies more

objectively.

In a system that has too long operated

under the pressures of inadequate resources, it

is difficult to sort out the problems that are

attributable to administrative limitations from

those that are attributable to inadequate policy

development. And it may be that an outdated

definition of disability is itself a major barrier

to the kind of policy development that would

support more objective and consistent decision

making. Moreover, even though existing

processes for determining eligibility can and

should be substantially strengthened, the

fundamental questions remain about whether it

is appropriate or feasible to base eligibility on

an attempt to equate impairments with inability

to work.

In a system that has too long

operated under the pressures

of inadequate resources, it is

difficult to sort out the

problems that are attributable

to administrative limitations

from those that are

attributable to inadequate

policy development.

and experience to advanced degrees and

extensive experience.

Therefore, a given medical condition may

or may not be “disabling” depending on the

specific functional capacities and how they

interact with the educational and vocational

profile of the affected individual. A medical

condition that precludes highly exertional

physical activity may be “totally” disabling for

an older individual with little education and an

unskilled work history and not disabling for

another individual who is highly skilled and

educated.

In a theoretical sense, accurately

determining eligibility for Social Security

disability benefits would require that each

individual be evaluated to determine how their

medical condition limits their functional

capacity and then how these limitations

interact with each individual’s age, work

history, and education. The end result would

be a decision whether the medical impact on

the individual’s functional capacities makes

work feasible. There would still be difficult

judgments about medical and functional

determinations, but overall the process should

attain the right results in a reasonably

consistent manner.

However, the huge volume of claims

processed in the Social Security disability

program makes it impossible to make highly

individualized medical and vocational

determinations. Consequently, the program

from its very beginnings used screening

devices aimed, in large measure, at enabling

17

The concept of disability has both medical

and functional components. The world of

work has a wide variety of tasks that require a

range of physical and intellectual functional

capacities. The qualifications for different

occupations can vary from little training

...the huge volume of claims

processed in the Social Security

disability program makes it

impossible to make highly

individualized medical and

vocational determinations.
the program administrators to handle massive

caseloads. Very early in the program’s history

a decision was made to create a list of specific

medical conditions that, if present, would

presume that a claimant is disabled. In the

early days of the program this seemed to be a

very adequate tool. Over 90 percent of the

awards were based on these lists (or

“listings”). This only left a relatively small

portion of disability decisions that had to be

given a more individualized assessment that

looked specifically at how the medical

condition limited that individual’s functional

capacities. However, with changes in the

program, in the workplace, and medical

treatment, the ability to make decisions solely

based on the medical listings declined. Each

year an increasing number of decisions had to

be made on an individualized basis that took

into account the claimant’s functional

limitations and vocational profile. As the

number of these more complex determinations

increased, the agency attempted to cope with

the administrative burden by developing a set

of vocational standards that operated roughly

in the same manner as the listings. How the

medical condition affected the individual was

translated into residual capacities to do such

tasks as lifting, sitting, bending, and so on.

These residual capacities were then compared

with a set of vocational standards (called

vocational grids) that took into account the

claimant’s age, education, and work history

(for example, skilled or unskilled) to determine

the disability decision.

In prior reports, the Board has expressed

concern about the policy capacity of the agency

to keep both the medical standards and the

vocational standards up to date. Beyond this

issue is the fundamental question of whether

this approach is the right approach. The

fundamental purpose of the listings was to

simplify the administrative task by setting

medical-only guidelines that would minimize

the need for the more complicated task of

comparing each individual’s remaining

functional capacities against the universe of

real jobs for which he or she had the vocational

background. That worked well in a world where

it was possible to find medical standards that

would cover the vast majority of applicants but

would not result in allowances for a substantial

number of individuals who, in fact, were able to

work. That seemed to have been possible in the

1950s. It is not clear that it is possible today.

In recent years there has been some

discussion of moving towards a system that

would make the assessment of functional

limitations the primary way to evaluate

disability claims. During the 1990s, the Social

Security Administration proposed, but later

abandoned, the idea of moving away from the

listings towards a more functionally based

“index” of conditions for determining eligibility.

Although the complete overhaul was not

implemented, changes in the listings in recent

years have tended to move in the same

direction, incorporating measurements of

functional capacity rather that relying strictly on

medical findings. Some experts have criticized

these changes. They point out that this is

undermining a major purpose of the listings,

which was to make the program’s

administration easier and more consistent by

creating a very objective eligibility screen based

solely on medical findings. However, as

indicated above it is not clear that the listings

are capable of effective screening.

In looking at the question of whether the

definition of disability remains appropriate, one

question that needs further examination is

whether the existing definition is itself the

barrier to developing a more functionally-based

set of eligibility standards that might, under a

differently designed and defined program,

reduce rather than increase the complexity of

administration. Because the current definition is

a one-shot, all-or-nothing proposition, the

standards that are used as screening devices are

somewhat broad in order to cope with the

massive number of claimants. While this

clearly needs more research and consideration

one can hypothesize the possibility of a

18
In looking at the question of

whether the definition of

disability remains appropriate,

one question that needs further

examination is whether the

existing definition is itself the

barrier to developing a more

functionally-based set of

eligibility standards that might,

under a differently designed

and defined program, reduce

rather than increase the

complexity of administration.

19

bifurcated program. This program could have

more narrowly drawn medical standards that

identify individuals with the most serious

disabilities for long-term income support. The

remaining individuals would have functionally

based standards to move them into an

employment-oriented program.

How does a disability program fit into the

overall and greatly changing picture of

income security? The Social Security

Disability programs are large and expensive.

They provide an important level of income

security for both their current beneficiaries and

for all who face the risk of unexpectedly

suffering a severe medical impairment. But the

disability programs do not exist in isolation.

Rather they are but one element in an overall

mix of institutions and programs, which

comprise our national system of income and

health security. The overall Social Security tax

supports not just the retirement program, but

also the disability program. In the past,

unexpected growth in the disability program

has necessitated changing the allocation of that

tax between the two programs. The most

recent report of the Social Security trustees

indicates that such action will likely be needed

again since the exhaustion date for the

disability fund is estimated at 2028, 14 years

earlier than the more commonly cited date for

the combined funds.

...the exhaustion date for

the disability fund is

estimated at 2028, 14 years

earlier than the more

commonly cited date for the

combined funds.

 In considering changes to our disability

programs, it is important that policymakers

attempt to consider the interactions between

those programs and the context they operate in.

Some recent studies, for example, have

reached a conclusion that the rapid growth of

the disability rolls in the 1990s reflects an

interaction between loosening standards of

disability and a shrinking availability of jobs

for low-skill workers. Similarly, increasing

health costs and their impact on employer

sponsorship of health insurance can affect the

incentives for impaired workers to seek either

continued employment or disability benefits.

Policy changes to deal with the financial

problems of the retirement program can also

have important interactions with disability

policy. In looking at the financial status of the

retirement program, one area receiving

attention is the possibility that, with increasing

life spans, it may be appropriate to incorporate

stronger incentives for later retirement. Recent

research indicates that the long-standing trend

towards earlier retirements has recently leveled

off and may even have moderately reversed

course. Sustaining that change would have a

positive impact on the financial status of Social

Security and on the economy generally. To the
20

available if, and only if, they prove to the agency

that they cannot work. If, in fact, the

overwhelming majority of those who wind up on

the rolls are those who really have no realistic

prospects of returning to work, the criticism may

still be important, but if a substantial proportion

of those on the rolls could work, the criticism

may be crucial. Clearly, impaired individuals

will find it harder to work than non-impaired

individuals. Motivation may be (and is

frequently cited as) the single most important

determinant in whether an impaired person

continues in or resumes employment. A system

that primarily rewards those who can prove they

cannot work undermines that motivation. The

way the current program deals with health

benefits aggravates this problem. For many

impaired individuals the availability of health

benefits may be the most important

consideration. But the road to health care goes

through disability benefit eligibility that, in turn,

requires proving inability to work. For some

individuals, this may mean that getting the

medical benefits that might make work possible

is only attainable by establishing that work is not

possible.

Does the disability program, as currently

defined, fail to meet the legitimate needs of a

significant portion of the impaired population?

The current system devotes a substantial amount

of national resources to those who “make the

cut” in the Social Security definition of ability/

Motivation may be (and is

frequently cited as) the single

most important determinant in

whether an impaired person

continues in or resumes

employment. A system that

primarily rewards those who

can prove they cannot work

undermines that motivation.

extent that changes are considered in the

retirement program to reflect and encourage

this trend, the impact on older impaired

workers will also need to be considered. For

example, some proposals have been advanced

for making further upward modifications in the

age of eligibility for retirement benefits. The

consideration of such proposals would need to

take into account the fact that, while the

population in general is enjoying more and

healthier years, there still is a greater tendency

for older rather than younger workers to have

impairments and the ability of older workers to

adapt to new forms of employment tends to be

more restricted.

At the same time, however, broad

assumptions that age in and of itself is a good

predictor of inability to work are being

challenged. Policies aimed at encouraging

employers to make employment opportunities

more available and attractive for older workers

could also appropriately include both older and

younger workers with impairments.

The Social Security Advisory Board’s

legislative mandate includes making

recommendations as to how the Social Security

programs should operate in conjunction with

other public and private systems to “most

effectively assure economic security.” The

Board is currently undertaking a broader study

to examine those issues, but it recognizes that

not only does the question of design,

definition, and administration of the disability

programs need to be addressed in its own right

but it also needs to be addressed in that broader

context.

How can the impact of disability

programs on motivation to work be

improved? One of the most frequently heard

criticisms of the existing system is that it

seems designed to create precisely the wrong

mindset. The adjudication process averages

three months and often takes very much longer.

During this period, the program gives

applicants a clear message that help will be
21

inability to work. While research about the

characteristics of those who are denied benefits

is limited, the studies which have been done

show that many of them do not return to work

and suffer substantial reductions of income.

The Board is aware that a new study based on

agency administrative data is nearing

completion, but more detailed research into

both the work history and other characteristics

of those who are denied benefits is needed.

Such research could help in understanding the

implications of the facially inconsistent levels

of allowances that exist regionally and at

different adjudication levels. It also could help

to determine the extent to which the existing

definition of disability, as it is applied, is

appropriate and the extent to which it is an

artificial construct that does not really separate

the able from the unable, but rather draws a

somewhat arbitrary line that has a questionable

relationship to employability. The results of

such research would be relevant to the question

of whether resources (either new or some share

of the existing Social Security resources)

should be directed to serving more of the

impaired population by modifying the

definition of disability (or its application). For

example, disability definitions along the lines

of workers’ compensation and veterans’

compensation view disability not as an all-ornothing condition but as a continuum in which

income support can be provided in a manner

that reflects the degree of impairment.

Moreover, the current definition’s all-ornothing approach to income support spills over

into focusing rehabilitation efforts in the same

manner. One common observation of

researchers is that the impaired population

have a tenuous attachment to the workforce

and their employability declines rapidly once

they stop working. It is plausible that the

existing program not only does not help those

impaired individuals who are ultimately found

ineligible but actually damages their capacity

for self-help by putting them through a

protracted adjudication process during which

they dare not attempt work and are encouraged

to prove themselves incapable of work.

Should work-oriented services be targeted

on beneficiaries or on applicants? One goal

of vocational rehabilitation provisions in the

disability programs (which has been carried

over to Ticket to Work) is to assure that

services pay for themselves. To do this,

services are necessarily limited to those who

have completed the process and established

their eligibility for benefits so that savings can

be measured by having those claimants

subsequently lose eligibility by virtue of

returning to work. The advantages of this

approach are that it creates a self-policing

system that provides strong incentives for

service providers to concentrate on the kinds of

services that are relevant to restoring

employability. A disadvantage, however, is

that this postpones the provision of services

until the end of the disability adjudication

process, by which time they may be too late to

be effective. It also might disadvantage highly

motivated but more severely impaired

individuals to the extent that providers would

concentrate on more obviously remediable

impairments.

What should be the role of the Social

Security Administration if there is a major

restructuring? The Social Security

Administration is a large entity with enormous

responsibilities for maintaining earnings

histories of all workers, adjudicating claims for

retirement, survivorship, and disability

benefits, and paying monthly benefits to some

50 million beneficiaries. The agency takes tens

of millions of actions each year to maintain the

accuracy of the benefit rolls. Even though the

disability caseload represents only one-fifth of

the beneficiary population, the disability

programs are the most complex and expensive

of the administrative tasks faced by the agency.

In some respects, it would seem to make

sense to give SSA responsibility for any

revised disability program since the agency

already is in existence and has a large presence

throughout the country. However, SSA’s

mission and expertise are in the areas of
22

eligibility determination, benefit payment, and

maintenance of the benefit rolls and earnings

records. Operating a more services-oriented

program which aims to foster the employment

potential of applicants would involve quite

different skills and objectives that might not fit

well with the existing structure and personnel.

The experience with implementing the SSI

program may be somewhat instructive. Even

though that program seemed to represent a

good match with the agency’s basic benefit

payment responsibilities, it presented SSA with

new challenges of operating a program based

on difficult-to-determine factors of income,

resources, and living arrangements.

Operating a more services-oriented program which aims

to foster the employment potential of applicants would

involve quite different skills and objectives that might

not fit well with the existing

structure and personnel.

Implementing that program seriously taxed the

agency’s capacity to provide a high level of

service to both its new and older beneficiaries.

Taking on an entirely different type of

responsibility in the form of an employmentoriented program might be even more

problematic. In any new approach that might

be adopted, there would, of course, be a need

for close coordination between SSA’s

traditional benefit-paying role and the new

employment-related aspects. However, careful

consideration would need to be given to the

appropriate administrative structure to avoid

disrupting the ability of SSA to carry out its

other responsibilities.
For those disabled individuals who could

work, the current program’s definition of

disability is an impediment to their remaining

in the work force. Changing the definition,

however, would not amount to tweaking the

existing program. It would require a major

redesign of all or part of the program. It would

almost certainly have substantial implications

for program costs, caseloads, and

administrative resources. To the extent it

involved changes in eligibility or benefit

levels, a long transition would be needed to

assure that current beneficiaries are not

adversely affected.

Ultimately, policy makers would need to

decide whether the monetary and social gains

from such a major shift of direction are worth

the monetary and social consequences that

might result.

The existing Social Security program

attempts to limit eligibility for benefits to those

who are so disabled that they are unable to do

any substantial work and then provides various

incentives and services aimed at encouraging

work on the part of those who have proven

themselves unable to work. If our society

should decide that it no longer thinks it

appropriate to continue this approach that starts

by defining disability as inability to work, there

are several basic questions that would need to

be answered about any alternative program,

such as:

Changing the definition, however, would not amount

to tweaking the existing program. It would require

a major redesign of all or

part of the program.

 What would be the appropriate

definition (or definitions) of disability?

 Would it increase or decrease the extent

of eligibility and the cost of the

program?

 Would benefit levels differ from the

existing program and in what ways?

 Would it continue to be administered

by the Social Security Administration

and, if not, by what agency or agencies?

 Would it emphasize services or just

provide benefits under a different set of

rules designed to rely on stronger

economic incentives for working?

These are difficult questions and they are,

in many respects, interrelated. Given the

projected large increases in future costs of

entitlement programs under existing law, it

may be difficult to classify as realistic any

proposal which would have significant

additional costs. However, since the existing

definition of disability is stated as “inability to

work,” a change in definition might be seen as

loosening that definition in a way that could

increase the potentially eligible population.

While proponents of such a program might

argue that any increased potential eligibility

would be offset by greater workforce

23

IV. Issues Related to

Alternative Program Designs
24

participation, it is not clear that cost-estimators

would find evidence to support that argument.

If increased costs are to be offset in other ways,

one possibility would be to modify the existing

benefit structure as it applies to new entrants

into the program in such a way as to avoid

increased costs. To the extent that this might

mean that benefit levels would be lower than

existing-law benefits for those who would have

qualified under current law, such a change

would likely encounter significant opposition.

A program design involving intensive services

is likely to be expensive and subject to

considerable doubt as to the effectiveness of

the services. On the other hand, the population

involved is a particularly vulnerable one that

might need individualized assistance.

If Congress wanted to adopt a different

definition of disability, many different

structures and combinations of structures are

possible. Some of the possible elements that

might be considered include:

 Paying benefits based on an essentially

medical definition of what constitutes

a “severe” disability, without requiring

a finding as to the impact of the

disability on each individual’s ability to

work.

 Reducing benefits gradually as earnings

rise rather than cutting them off at a

particular dollar level of “substantial

gainful activity.”

 Divorcing eligibility for health benefits

from eligibility for cash benefit

programs, or perhaps, for certain

categories of the disabled, providing

the health care necessary for

employment rather than cash benefits.

 Dividing the Social Security program

into two programs. A “permanent”

program roughly equivalent to the

existing program would begin only

after a longer waiting period (perhaps

two or three years) or might be

available immediately only to those

with the most severe disabilities. A

new temporary program would be

available during that waiting period.

The temporary program might differ

from the permanent program by such

things as having easier eligibility rules,

different benefit levels, and stronger

and perhaps more individualized

medical and other services needed to

support workforce participation. It

might be available from the earliest

point of disablement (or in the case of

children during the transition to

adulthood). A temporary program

might be administered by a different

agency from SSA with SSA retaining

responsibility for the “permanent”

program. Many variants of this

approach are possible depending on

program objectives and costs.

 Changing the current all-or-nothing

concept of disability eligibility to a

program providing percentages of

disability based (at least for less than

100 percent levels) on very specific

medically determinable criteria.

 Changing the disqualifying event from

“becoming able to work” to something

roughly along the unemployment

compensation lines of failure to seek or

accept work.

This would not necessarily be the same as the

concept of “severe disability” in the current

program.

2

2
25

DEFINITIONS OF DISABILITY

The Social Security Act and the Americans with Disabilities Act (ADA) take

substantially different approaches regarding what is meant by “disability.” The Social

Security Act has a very strict definition that is designed to identify people who are so

disabled that they are unable to work. The ADA has a broader definition designed to

prevent discrimination against disabled people who wish to work.

Social Security definition: The Social Security Act considers people disabled only

if they have an “inability to engage in any substantial gainful activity by reason of any

medically determinable physical or mental impairment which can be expected to result

in death or which has lasted or can be expected to last for a continuous period of not

less than 12 months.” This disability has to be so severe as to prevent them from doing

any “substantial gainful work which exists in the national economy,” whether a specific

job is available or not. The disability must result from a physical or psychological

abnormality that is “demonstrable by medically acceptable clinical and laboratory

diagnostic techniques.”

ADA definition: The ADA prohibits job discrimination against an individual

because of a disability who could “with or without reasonable accommodation” perform

the essential functions of the job. A disabled person in the ADA means a person with a

physical or mental condition that “substantially limits” a life activity, who has a record

of such a condition, or who is “regarded as having” such a condition.

Many other definitions of disability exist in public and private programs. A recent

publication of the Interagency Committee on Disability Research identifies 67 different

statutory provisions defining disability for various federal programs. Many of these are

identical or overlap in various ways, but there clearly are a substantial number of

different definitions.
26

The Social Security disability programs had their origins in the

1950s—a world vastly different from today’s world in several

important respects including the nature of available work, the

educational levels of the work force, medical capacity to treat

disabling conditions, and the nature and availability of

rehabilitative technology.

The Social Security disability programs

had their origins in the 1950s—a world vastly

different from today’s world in several

important respects including the nature of

available work, the educational levels of the

work force, medical capacity to treat disabling

conditions, and the nature and availability of

rehabilitative technology. Over the course of

the past half-century, there have been a number

of changes in the disability programs. But the

core design of the program, rooted in a

definition of disability as inability to do

substantial work, has remained unchanged.

It is clear that the Social Security disability

programs have assumed an important role in

the Nation’s system of economic security.

Each year hundreds of thousands of insured

workers are found to be eligible for Disability

Insurance benefits and today 5.5 million such

workers and their families receive monthly

payments. Another 3.5 million low-income

disabled individuals receive assistance from

the Supplemental Security Income program.

Yet, questions are increasingly raised as to

whether these programs truly reflect our

society’s attitudes toward disability. A dozen

years ago, Congress passed the Americans with

Disabilities Act announcing “the Nation’s

proper goals regarding individuals with

disabilities are to assure equality of

opportunity, full participation, independent

living, and economic self-sufficiency for such

individuals.” The definition of disability in the

Social Security Act often appears to undermine

those goals by providing incentives for

impaired individuals to prove to the agency

and, presumably to themselves, that they are

incapable of any substantial work.

On the other hand, changing the definition

of disability in the Social Security programs

would clearly represent a very major change in

one of society’s fundamental instruments of

economic security. This report has suggested

some of the questions that would need to be

answered, some of the policy issues that would

need to be explored, and some of the options

that might be available if a basic change of

definition were to be pursued.

V. Conclusion
27

There is always an inertia

that attaches itself to the existing ways of doing business.

That inertia is all the stronger when change affects an

institution like Social Security disability that provides

vital income support to a large and vulnerable

population. But the Board believes that this is an issue

that needs attention. The Board finds widespread

dissatisfaction with the existing system.

There is always an inertia that attaches

itself to the existing ways of doing business.

That inertia is all the stronger when change

affects an institution like Social Security

disability that provides vital income support to

a large and vulnerable population. But the

Board believes that this is an issue that needs

attention. The Board finds widespread

dissatisfaction with the existing system. It may

be that, in the end, the existing definition will

be retained, and ways will be found to

administer it in a manner more consistent with

society’s current approach to disability policy.

Or it may be that only a definitional change

will serve to meet the needs of today’s

impaired population in a way that society can

approve. In any case, the problems and

inconsistencies of the existing system are

significant and demand action. The time has

come to address these issues intensively.

 We hope with this report to focus more

attention on these issues. We intend to follow

up with a series of consultations through

reports and/or one or more forum discussions

to get the views of interested parties and

experts on disability and rehabilitation. We

encourage the Administration and the Congress

to carefully consider how the Social Security

Disability programs can better meet the high

goals set by the Americans with Disabilities

Act of assuring the disabled “equality of

opportunity, full participation, independent

living, and economic self-sufficiency.”
28
APPENDIX A

European disability systems are similar to

that in the United States in several ways. Most

long-term disability benefit systems for nonwork-related disabilities consist of a social

insurance program, similar to the U.S.

Disability Insurance program, and a separate

program without prior employment

requirements, similar to the SSI program.

Work injury plans, similar to workers’

compensation in the U.S., provide coverage

against loss of wages due to work-related

injuries or illness.

There are also some major differences.

The provision of universal health care

coverage removes one of the incentives that

disabled people in the U.S. have to claim longterm public disability benefits. In addition,

most European countries have sick-pay plans

that provide coverage against the loss of wages

due to temporary illness. The period of

employer responsibility for sick-pay benefits

varies from country to country, but these plans

maintain the employer-employee relationship.

Sick-pay systems are an important element

in European return-to-work efforts. In some

countries, such as Sweden and the Netherlands,

employers are required to develop plans for the

employees’ return to work. The International

Labor Organization reports, “In most systems,

the critical work resumption threshold has

passed once the disabled worker exhausts the

term of sickness or short-term disability

benefit, or otherwise meets the criteria for a

long-term disability benefit.”

There are also differences among European

programs. Among other factors, programs

differ in the generosity of their benefits and

their requirements to qualify for benefits. As a

result, expenditures on disability programs

vary widely. As Figure 1 shows, the

Netherlands and Poland have had very high

expenditures as a percentage of GDP. The

Netherlands began tightening program

eligibility in 1993, and its expenditures have

fallen. Poland implemented reforms in 1997

that may have a similar effect.

Approaches of European Countries

1990

1999

Disability Program Expenditures as Percentage of GDP, 1990 - 1999

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0

Austria

Belgium

Denmark

France

Germany

Italy

Netherlands

Norway

Poland

Spain

Sweden

Switzerland

UK

Portugal

USA

Figure 1

29
There are also major differences in social

institutions that affect the disability system.

On the continent, there is a tradition of “social

partnership” between labor and management

that is reflected in the institutional structures in

which the labor market functions. For

example, in France, Germany, Sweden, and the

Netherlands, laws control how workers are

hired and how they are dismissed. Englishspeaking countries, on the other hand, place

more emphasis on individual claims and civil

rights. As a result, continental countries

impose obligations on employers to behave in

certain ways toward defined groups, for

instance through quota systems, while Englishspeaking countries are more likely to use

disability discrimination laws that provide

legal recourse to individuals.

EUROPEAN POLICIES

AFFECTING RETURN TO WORK

Wage subsidies and partial benefits

While English-speaking countries tend to

have all-or-nothing benefit systems,

continental European systems tend to provide

partial, as well as full, benefits, depending on

the remaining capacity for work. These

systems permit beneficiaries to combine

earnings with partial benefits. In Sweden, for

example, benefits may be paid at the

25 percent, 50 percent, 75 percent, or

100 percent level, depending on severity.

European countries also use wage

subsidies, recruitment grants, and relief from

national insurance contributions to create jobs

for disabled people and other targeted groups,

such as the long-term unemployed. In France,

for example, disabled workers with reduced

productivity can have their wages

supplemented up to the minimum wage level.

And in the Netherlands, disabled workers who

accept a job with lower earnings than that on

which their disability benefit was based can get

a supplementary benefit.

30

Some subsidies support a trial return to

work. In Sweden, beneficiaries can retain

sickness benefits while testing their ability to

do their previous job or another job to which

they are better suited. Germany provides for

“step-wise” rehabilitation by providing

sickness benefits to supplement wages for up

to six months while employees gradually

increase their working hours.

Quotas

Quota systems provide incentives for

employing disabled people and provide funds

for services for the disabled. France, for

example, uses a quota-levy system. Firms of a

specified size are expected to employ a target

percentage of disabled workers. If they do not,

they are required to pay a levy to a fund that is

used to support the costs to employers of

employing disabled workers and to promote

the employment of disabled workers.

Job protection

Germany, for example, prevents the

dismissal of registered disabled workers

without the approval of an agency of the state.

The Netherlands prohibits the dismissal of

disabled workers for two years, and then only

with the approval of the authorities.

Public provision of rehabilitation services

Germany and Sweden have established a

strong link between benefit payments and

rehabilitation. In Germany, the principle of

“rehabilitation before pension” leads to the

public pension funds’ considering first medical

and then vocational rehabilitation, before the

payment of a pension. The Swedish system

works with employers to help workers regain

lost ability to work.

Sweden, France, and Germany provide

funding for such items as training, adaptations,

wage subsidies, and services needed to return

disabled people to work. The range of in-kind

benefits in Germany includes modifications to

the home and to transport.
Private insurance

While employer-purchased private disability

insurance is more common in the United States and

Canada, the private insurance market has been

growing in the United Kingdom and in the

Netherlands. Private insurers have an interest in

returning beneficiaries to work in order to minimize

their payments.

RECOGNIZED PROBLEMS WITH

RETURN-TO-WORK POLICIES

A recent report of the International Labor

Organization (ILO) noted that return-to-work

policies are “often fragmented, not

coordinated and sometimes even

contradictory,” with little coordination across

policy areas. This lack of coordination makes

it difficult for agencies to maximize their

effectiveness. It also makes it difficult for

employers and disabled people to find their

way through the maze of programs and

providers. The ILO also noted that physicians

play a large role as gatekeepers for both

benefits and rehabilitation, although they tend

to have little training in assessing work

capacity and little knowledge of the

workplace. In addition, it can take months to

complete needed assessments, frequently

delaying interventions for vocational

rehabilitation until the contacts to the former

employer are already broken. Beneficiaries

rarely return to work once they have begun

receiving long-term disability benefits, even in

countries that make use of temporary or partial

benefit awards.

SOME RECENT DEVELOPMENTS IN

RETURN-TO-WORK POLICIES

Several countries have made changes

recently to reduce the prevalence of disability

benefits and to encourage reintegration of

disabled workers into the work force.

Following are examples of recent changes:

31

Benefits

Germany established a new definition of

disability that distinguishes between full and

partial disability, based on the number of hours

a claimant can work. It also requires

temporary grants of benefits.

Assessment

The United Kingdom has tightened its

assessment of claimants’ eligibility for

benefits, with an emphasis on collecting

information on the claimant’s capability rather

than disability.

Incentives

The United Kingdom established a

disabled persons’ tax credit that has the effect

of providing a minimum income to disabled

people who work at least 16 hours a week.

The Netherlands made employer premiums for

disability benefits experience-based.

Employment rights

Germany has established statutory rights to

work assistance, workplace accommodations,

and part-time employment.

Support

The Netherlands has implemented a new

supported employment program and measures

for subsidized employment.

Coordination

Switzerland has established one-stop shops

in each canton, with full responsibility for both

benefit awards and rehabilitation. Sweden

offers a one-stop service for employers and

social insurance offices, through a contractor,

at the county level. The United Kingdom

merged its benefits agency and employment

service to provide more integrated service. It

also integrated supported and sheltered

employment organizations and gave them new

output-based funding provisions.
APPENDIX B

32

Despite its longstanding commitment to

providing VR services to Social Security

disability beneficiaries, each year less than

1 percent of SSDI and SSI disability

beneficiaries leave the rolls because they have

returned to work. In an effort to improve its

performance in this area, SSA – at the direction

of Congress – has studied a number of

approaches aimed at effective delivery of VR

and employment services.

Section 505(a) of the Social Security

Disability Amendments of 1980 authorized

SSA to initiate vocational rehabilitation and

work incentive demonstration projects.

Section 12101 of the Consolidated Omnibus

Budget Reconciliation Act of 1985 later

extended this authority. These demonstration

projects became known throughout the agency

as the “505(a) demonstrations.” Between 1987

and 1989, SSA received more than 600

applications for demonstration grants to

explore innovative ways of providing VR and

employment services to disability

beneficiaries. In order to continue building on

these earlier efforts, Congress extended the

505(a) demonstration authority in 1989, and

again in 1994. Ultimately, SSA awarded 116

grants to a mix of public and private

organizations in 37 States and the District of

Columbia.

In addition to the 505(a) demonstrations,

Section 1110(b) of the Social Security Act

authorized demonstration projects that assist in

promoting the objectives of the SSI program,

including successful rehabilitation leading to

work. These demonstrations became known as

the “1110(b) demonstrations.”

A major outgrowth of the 505(a) and

1110(b) demonstrations is Project NetWork,

initiated by SSA in 1991 to test four different

service delivery models that offered

alternatives to SSA’s traditional VR program.

Project NetWork used a case management

approach that provided participants with a

broad range of rehabilitation services,

including job placement and on-the-job

support. Project NetWork was designed to

fully involve disability beneficiaries in setting

their own employment goals and selecting

service providers that were most appropriate to

their own, personal situation. In conjunction

with Project Network, SSA also initiated a

demonstration project called Able

Beneficiaries Link to Employers, or Project

ABLE, to provide expanded employment

opportunities through an automated referral

system for SSA beneficiaries. The Project

ABLE database linked disabled, job-ready

beneficiaries with federal, State, and local

agencies and private sector employers that

needed their skills and abilities.

The findings from these early

demonstrations – including both Project

NetWork and SSA’s tests of the effectiveness

of using private providers of VR and

employment services – have indicated that

disabled beneficiaries can be referred to a

variety of public and private VR and

employment service providers and, once

referred, beneficiaries do choose to receive

services that lead to job placements. Results

also indicated that more beneficiaries would

return to work if referral for VR and

employment services occurred earlier in the

process – under the present system in most

States – applicants for DI and SSI disability

benefits are referred for VR services only after

it has been determined whether or not they are

disabled. The demonstrations also indicated

SSA’s Previous Employment Support Demonstration Projects
33

that further refinement of the VR system,

including the use of case managers who

specialize in SSA-type clients and use of

specialized VR programs designed for persons

with specific impairments, would increase the

availability, quality, and effectiveness of VR

and employment services.

However, after further analysis of Project

NetWork and Project ABLE by SSA, the

General Accounting Office, and a team of

private economists, SSA determined that, on

the whole, these demonstration projects were

not as successful as they had hoped in helping

people with disabilities to develop and

maintain a significant relationship with the

workforce. GAO, in particular, cited a lack of

statistical validity to the design of these

projects and was critical of the agency for

insufficient follow-up of the participants.

Reviewers generally agreed that it was difficult

to draw conclusions from the experiences that

SSA and participants had operating under these

demonstrations. Both Project NetWork and

Project ABLE were terminated in the mid1990s.

However, as a result of the things that SSA

did learn from Project NetWork and Project

ABLE, the agency implemented an alternate

payment method for VR services in June of

1996. In addition to state VR agencies, SSA

expanded its VR referral and payment program

to allow providers other than the designated

state VR agencies to service disability

beneficiaries by entering into contracts with

qualified providers who responded to SSA’s

Request for Proposals (RFP). An alternate

provider has been defined as any public or

private agency (except a participating state VR

agency), institution, organization, or individual

with whom SSA entered into a contract for the

provision of VR services. Under this alternate

payment program, SSA paid providers for the

services that they provided to SSA’s

beneficiaries if those services resulted in the

individual going to work and earning above the

SGA level for more than nine consecutive

months – essentially the same requirements for

payment as those used to reimburse the state

VR agencies. The option of serving disability

beneficiaries was offered first to the state VR

agencies. If, after four months from SSA’s

referral to the state VR agency, SSA had not

been notified that the individual had been

accepted for services, SSA placed that

individual’s name on a bulletin board that was

available to alternate providers serving

disability beneficiaries with similar

impairments in the same geographical area.

Alternate providers were not required to serve

all persons whose names appear on the SSA

bulletin board.

While the alternate provider program was

never formally terminated, participating

providers viewed these new payment rules as

merely a transition toward their participation in

the Ticket to Work Program that was being

formulated by the agency throughout the late

1990s. With the support of disability and

employment support advocates, the Ticket

legislation was eventually enacted in 1999.

Those providers who had participated in work

support efforts under the alternate provider

program did, indeed, reorganize their efforts

toward becoming employment networks under

the Ticket program. For all practical purposes,

the new work support environment that was

created by the Ticket program supplanted the

alternate provider program. In addition,

Section 505(a) demonstration authority was

subsumed under the new Ticket act in Section

234.
Early Intervention Projects

SSA’s early intervention projects involve

screening DI and SSI applicants during the

application process in an attempt to reach a

quick judgment as to who is (1) likely to be

eligible for benefits based on a disability, and

(2) a good return-to-work candidate. The

formal disability determination process is

bypassed. Those who are found to meet the

test will be given immediate access to benefits

for one year along with Medicare eligibility

without the usual 24-month waiting period.

They will then be provided with rehabilitation

services to see whether they can be placed in

employment that would keep them from

needing to go permanently on the disability

rolls. SSA’s plan is to run several pilot projects

in three States (New Mexico, Vermont, and

Wisconsin) during the next few years and then

to create a larger demonstration project that

will yield nationally valid data. SSA hopes to

start these demonstration projects in 2004.

Disability Navigators

The Department of Labor (DOL) has

established a number of centers throughout the

country for jobseekers called “Career OneStops.” These are places where individuals can

search for jobs, locate public workforce

services, explore alternative career paths,

compare salary data for different occupations,

and get resume writing tips and job interview

strategies. Businesses can also use them to

identify job-ready workers with the right skills.

Recently, SSA and DOL announced that they

plan to place Disability Program Navigators

(similar to case managers) at the One Stops to

work with individuals with disabilities

(especially those connected with the Ticket to

Work program) to link them to local

APPENDIX C

Current and Planned Demonstration Projects

employers, and help them get access to

housing, transportation, health care, and

assistive technologies.

State Partnership Initiatives

In the late 1990s, SSA awarded cooperative

agreements to California, New York, Illinois,

North Carolina, Iowa, Ohio, Minnesota,

Oklahoma, New Hampshire, Vermont,

New Mexico, and Wisconsin to develop

integrated service delivery systems statewide to

help persons with disabilities who want to

work. Each of the participating States

developed its own methodology, but most of

them target mentally ill SSI and/or DI

beneficiaries and establish some form of

benefit, work incentive, and vocational

rehabilitation counseling. The agreements

were awarded for 5 years, at a total cost of

$25 million.

Youth Transition Demonstration Project

The Youth Transition Demonstration

Projects will design, implement, and evaluate

approaches to improving the transition from

school to work for youth aged 14-25 who

receive SSI benefits, DI, or childhood

disability benefits. Projects may also serve

youth at risk of receiving such benefits,

including those with a progressive condition or

a prognosis for decreased functioning and

those who may become eligible for benefits at

age 18, when deemed parental income no

longer applies. Activities of this initiative

reflect two themes: 1) facilitating transition

services and 2) altering SSI’s benefit structure

to increase incentives for youth to pursue

further education.

34
35

SSA will award seven cooperative

agreements at approximately $500,000

annually for up to five years.

Sliding Scale Benefit Offset

SSA plans to test the impact and costs of a

sliding-scale benefit offset for DI beneficiaries,

including a $1-for-$2 benefit offset. Disability

benefits will be reduced by a certain amount

for each dollar a DI beneficiary earns above a

given threshold, probably the current

substantial gainful activity amount ($800).

Currently, beneficiaries are in danger of losing

their entire DI benefit if their earned income is

above SGA, even by $1. This potential

complete loss of benefits and eventually of the

corresponding access to Medicare benefits is

thought to discourage beneficiaries from

attempting to work.
36

There are two separate Social Security

disability programs that share a common

definition of disability: Disability Insurance

(DI) and Supplemental Security Income (SSI).

The Disability Insurance program provides

benefits to disabled workers who have enough

coverage under Social Security to meet the

program’s “fully insured” status requirement

and who also have substantial recent work

under Social Security (generally at least five

years of work in the 10-year period preceding

disablement). There is no minimum age

requirement for disability insurance benefits,

but the insured status requirement results in

very few cases of entitlement prior to age 20.

When disabled workers reach normal retirement

age (currently 65 plus 2 months), they are

converted from DI beneficiaries to Retirement

Insurance beneficiaries. Benefits are also paid

under the Disability Insurance program to

disabled adult children of disabled worker

beneficiaries and also to certain non-disabled

dependents. Disabled adult children of retired

and deceased workers and disabled widows and

widowers also may qualify for benefits on the

basis of disability that are paid from the Old-age

and Survivors Insurance Trust Fund.

The Supplemental Security Income

program provides an income guarantee for lowincome disabled individuals without regard to

whether or not they have any prior work

history. Benefits are payable to children with

disabilities using a special definition requiring

marked and severe functional limitations.

Strictly speaking, benefits are payable at any

age but non-disabled individuals can qualify

for SSI at age 65. Thus, applicants age 65 and

over are, in almost all cases, coded as “aged.”

However, those who initially become eligible

on the basis of disability continue to be coded

as “disabled” even past age 65. As of the end

of 2002, a little less than 15 percent of SSI

disabled and blind recipients were age 65 or

over. SSI payments are funded from the

General Fund of the Treasury on an entitlement

basis but through appropriations acts.

There is also significant overlap between

the Social Security DI and SSI disability

programs in that individuals with small DI

benefit levels and low income from other

sources can qualify for additional payments

from SSI. Generally speaking, however, the

characteristics of the two categories of

beneficiaries are substantially different.

The table on page 36 shows the various

categories of individuals who receive benefits

as a result of their disability or that of a family

member. This table excludes SSI recipients

who are coded as disabled but are age 65 or

over since they would almost all qualify for

SSI on the basis of age even if they were not

disabled.3 The table does include about 25,000

disabled adult children who are age 65 and

over and also get SSI.

3

 In a small number of cases involving alien status,

eligibility for SSI can only be established if the indivdual

is disabled.

APPENDIX D

Selected Data Related to Social Security Disability Programs
Disability Beneficiaries Under

Social Security Act Programs

December 2002

 Social Also Receive Receive

Security SSI SSI Only Total

Disabled Workers

Disabled Adult Children

 -of disabled workers

-of retired workers

-of deceased workers

Disabled Widows

 and Widowers

Other Under-Age-65

SSI recipients

Total Receiving Benefits

Based on Own Disability

Non-disabled Spouses

of Disabled Workers

Minor Children of

Disabled Workers

Total Disability-Related

Beneficiaries

5,535,860

60,760

193,150

494,750

205,870

6,490,390

151,260

1,472,330

8,113,980

798,740

41,830

98,060

157,920

37,540

1,134,090

10,880

41,440

1,186,410

3,618,959

3,618,959

3,618,959

10,109,349

11,732,939

Figure 2 shows the number of individuals getting disability benefits over the history of the

programs. The numbers are not additive, because a significant number of individuals get both

SSI and Social Security disability benefits. The Social Security Administration does not have

data which permits a breakout over the entire period of those getting benefits under a single

program from those getting benefits concurrently from both programs.

Figure 3 shows the costs of the 2 programs in constant (2003) dollars. This chart does

include payments to SSI disability recipients who are over age 65 because historic data is not

available on a basis which excludes them.

37
38

Figure 2

Millions

DI and SSI Beneficiaries 1960-2002

7

6

5

4

3

2

1

0

1960 1980 2002

Figure 3

Federal SSID

Payments

DI Benefit

Payments

1957196019631966196919721975197819811984198719901993199619992002

DI and SSI Disability Federal Payments

CY 1957 - 2002

100

80

60

40

20

0

Billions of 2003 Dollars

SSI age 18 to 64

DI

SSI under 18
AVERAGE AGE 1995 2002

Under 50 66% 62%

50 and older 34% 38%

EDUCATION 1999

0 – 8 Years 28%

9 – 11 Years 24%

12 Years 34%

13 – 15 Years 11%

16+ Years 3%

DIAGNOSTIC GROUP 1995

 All 18-49 50-64

Mental Disorders 59% 68% 36%

Nervous System/Sense Organs 9% 9% 6%

Musculoskeletal 7% 4% 18%

Circulatory 5% 2% 15%

All Other Disorders 21% 17% 25%

2002

 All 18-21 50-64

Mental Disorders 57% 66% 38%

Nervous System/Sense Organs 8% 9% 6%

Musculoskeletal 8% 5% 17%

Circulatory 4% 2% 10%

All Other Disorders 23% 19% 30%

39

Charactistics Of SSI Disabled Adults (age 18-64)

• 48 percent of the disabled adults have 12 or more years of education

• 60 percent of the disabled adults have mental disorders as their diagnostic group.

• The most common diagnostic group for all age categories is mental disorders.

SEX 1995 2002

Men 45% 43%

Women 55% 57%
Characteristics Of Disability Insurance Beneficiaries

• From 1996 to 2002 the percentage of disabled workers who are women increased from 35

percent to 45 percent.

• 75 percent of the disabled workers have 12 or more years of education.

• 47 percent of the disabled workers under 50 have mental disorder as their diagnostic group.

This is a much higher rate of mental disorders than for older disabled workers.

• Musculoskeletal disorders is the most common diagnostic group for disabled workers over 50.

• In 1990 circulatory disorders was the most common diagnostic group (25 percent) for disabled

worker over 50. This has decreased to 14 percent and is now third behind musculoskeletal and

mental disorders.

SEX 1990 2002

Men 65% 55%

Women 35% 45%

AVERAGE AGE 1990 2002

Men 50 51

Women 51 51

AGE DISTRIBUTION Under 30 30-34 35-39 40-44 45-49 50-54 55-59 60-64

1990 4% 6% 9% 10% 11% 13% 19% 28%

2002 3% 4% 7% 11% 14% 18% 21% 23%

1990 2002

Under 50 40% 38%

50 and older 60% 62%

EDUCATION 1998 2001

0 – 8 Years 13% 11%

9 – 11 Years 18% 14%

12 Years 36% 39%

13 – 15 Years 23% 27%

16+ Years 11% 9%

40

DIAGNOSTIC GROUP

Mental Disorders

Musculoskeletal

Circulatory

Nervous System/Sense Organ

All Other Disorders

1990 All

29%

19%

17%

11%

24%

 Under 50

44%

13%

 6%

13%

24%

 50 and Over

18%

23%

25%

 9%

25%

Mental Disorders

Musculoskeletal

Circulatory

Nervous System/Sense Organ

All Other Disorders

2002 All

33%

24%

10%

10%

23%

 Under 50

47%

16%

 4%

11%

22%

 50 and Over

25%

29%

14%

 9%

24%
Growth and Age Structure of The Disability Insurance Rolls

In the last 25 years there has been significant growth of the Social Security disability rolls.

Growth can be measured by absolute numbers, the number on the rolls relative to the number of

insured (prevalence rate), and awards relative to the number insured (incidence rates). All three

measures confirm the there has been very substantial growth despite factors that should have

slowed or reversed this trend. For example, during the 1990s the growth continued despite the

prosperous economy, improvements in medical treatment, and the tightening of the rules for

evaluating drug addicts and alcoholics.

There has been a 36 percent increase in the disability prevalence rate since 1980 and an

increase of 55 percent just since 1990. There are increases in all age categories except for 60-64.

(All age categories show increasing rates between 1985 and 2002.)

(Number In Current Pay per 1,000 Insured)

All 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

1980 28.5 1.7 5.0 9.6 13.9 19.9 32.5 52.0 91.2 154.2

1985 24.2 1.7 4.8 8.8 13.0 17.9 25.8 43.9 74.3 124.2

1990 25.0 1.9 5.6 10.6 15.8 21.3 29.6 44.9 76.6 116.9

2002 38.8 3.4 7.3 12.6 21.1 31.5 43.8 62.6 98.2 146.0

% Increase /

Decrease

(1980-2002) +36% +100% +46% +31% +52% +58% + 35% +20% +8% -5%

There are two important reasons for the overall increase — increased allowance rates and

decreased termination rates.

41

Disability Prevalence Rates
42

Allowance Rates

In 1980, the allowance rate (awards as a percentage of applications) was 31.4 percent. The

allowance rate remained at this level until 1984. Starting in 1984, the allowance rate steadily

increased until it reached a high of 52 percent in 1998. Allowances rates have decreased since

1998, but the 2002 allowance rate of 44.6 percent is still significantly higher than 1980.

Although there are many factors that influence allowance rates, one of the most important is

the increase in the number of claims allowed with mental impairments. This increase can, at

least in large measure, be traced to the 1984 Amendments and the revised criteria for evaluating

mental impairments that were published in the Federal Register in August of 1986. In 1986, 20

percent of disabled workers on the rolls had a mental illness diagnosis. In 2002, that had

increased to 28 percent.

Application rates also affect the rate of growth of the rolls. As Figure 4 shows, the number of

disability insurance applications rose in the early 1990s, dropped somewhat in the mid-1990s,

and rose again at the end of the 1990s and since. To a considerable extent, the increasing

allowance rate offset the lower application rate in the mid-1990s. (This chart is based on the year

of application and includes decisions at all levels.)

Termination Rates

In 1980 the rate of benefit termination (the number per 1,000 beneficiaries) was significantly

higher than in 2002. In 1980 the termination rate was 145 per 1,000 and in 2002 the termination

rate was 85 per 1,000. The significantly higher termination rates for 1980 hold true for the three

primary reasons why benefits are terminated — death, conversion, and recovery (which includes

the return to substantial work activity).

Figure 4 Disability Insurance Applications

- Pending

- Denied

- Allowed

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

1.6

1.4

1.2

1.0

 .8

 .6

 .4

 .2

 0

Millions
43

Termination Rate

(Number of Terminations per 1,000 on the Rolls)

Total Death Conversion Recovery Other

1980 145 48 68 28 1

2002 85 32 39 11 2

The decrease in the death and conversion termination rates is the result of a combination of

factors, including improved medical treatment, the significant increase in the number of young

beneficiaries, and an increase in the number of awards based on mental and other conditions with

lower mortality rates. The reduction in the recovery termination rate can be traced, in part, to the

1984 Amendments. The 1984 legislation established a strict medical improvement standard that

required substantial evidence of medical improvement before benefits could be terminated.

Termination rates can also be adversely affected by limited agency resources, which result in

fewer continuing disability reviews.

As Figure 5 shows, workers at older ages are more likely to be on the disability rolls than

younger workers. This reflects both the fact that older workers are more at risk of disabling

disease and disability and the fact that the disability program standards are designed to make it

easier for older workers to qualify on the basis of vocational factors. However, Figure 6 shows

that the incidence of disability, that is the number of workers per 1,000 insured, has been growing

more rapidly for younger workers over the years since 1985. This trend has been particularly true

of women. Factors which may explain the male-female differential include possible differing

impact of the liberalization of disability standards since 1984 and the increasing participation of

women in occupations formerly performed mainly by men. However, there do not appear to be

any research results available to validate those hypotheses.

Figure 5

DI Beneficiaries, per 1,000 Insured, by Age (2002)

160

140

120

100

80

60

40

20

0

20- 25- 30- 35- 40- 45- 50- 55- 60-

24 29 34 39 44 49 54 59 65
44

Figure 6

250%

200%

150%

100%

50%

0%

-50%

Percentage Increase in Incidence Rates

from 1985 to 2002,

by Sex and Age Group

Male

Female

Total

20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65
The Social Security Advisory Board

Hal Daub, Chairman

Hal Daub is currently a partner with the law firm of Blackwell Sanders Peper Martin in

Omaha, Nebraska and Washington, D.C. Previously, he served as Mayor of Omaha, Nebraska

from 1995 to 2000, and as an attorney, principal, and international trade specialist with the

accounting firm of Deloitte & Touche from 1989 to 1994. Mr. Daub was elected to the United

States Congress in 1980, and reelected in 1982, 1984, and 1986. While there he served on the

House Ways and Means Committee, the Public Works and Transportation Committee, and the

Small Business Committee. In 1992, Mr. Daub was appointed by President George H.W. Bush to

the National Advisory Council on Public Service. From 1997 to 1999, he served on the Board of

Directors of the National League of Cities, and from 1999 to 2001 served on the League’s

Advisory Council. He was also elected to serve on the Advisory Board of the U.S. Conference of

Mayors, serving a term from 1999 to 2001. From 1971 to 1980, Mr. Daub was vice president and

general counsel of Standard Chemical Manufacturing Company, an Omaha-based livestock feed

and supply firm. A former member of the U.S. Army, Mr. Daub is a graduate of Washington

University in St. Louis, Missouri, and received his law degree from the University of Nebraska.

Term of office: January 2002 to September 2006.

Dorcas R. Hardy

Dorcas R. Hardy is President of Dorcas R. Hardy & Associates, a government relations and

public policy firm serving a diverse portfolio of clients. She was Commissioner of Social

Security from 1986 to 1989. Ms. Hardy launched and hosted her own primetime, weekly

television program, “Financing Your Future,” on Financial News Network and UPI Broadcasting.

She has also hosted “The Senior American,” an NET political program for older Americans. She

speaks and writes widely about domestic and international retirement financing issues and

entitlement program reforms and is the author of Social Insecurity: The Crisis in America’s

Social Security System, and How to Plan Now for Your Own Financial Survival. Ms. Hardy

consults with seniors organizations, public policy groups and businesses to promote redesign and

modernization of the Social Security and Medicare systems. She received her B.A. from

Connecticut College, her M.B.A. from Pepperdine University and completed the Executive

Program in Health Policy and Financial Management at Harvard University. She is a Certified

Senior Advisor and serves on the Board of Directors of The Options Clearing Corporation,

Wright Investors Service Managed Funds, and First Coast Service Options. She is also a member

of the Board of Visitors of Mary Washington College and the Board of Rehabilitative Services of

the Commonwealth of Virginia. Term of office: April 2002 to September 2004.

Martha Keys

Martha Keys served as a U.S. Representative in the 94th and 95th Congresses. She was a

member of the House Ways and Means Committee and its Subcommittees on Health and Public

Assistance and Unemployment Compensation. Ms. Keys also served on the Select Committee on

Welfare Reform. She served in the executive branch as Special Advisor to the Secretary of

Health, Education, and Welfare and as Assistant Secretary of Education. She was a member of

the 1983 National Commission (Greenspan) on Social Security Reform. Martha Keys is currently

45
consulting on public policy issues. She has held executive positions in the non-profit sector,

lectured widely on public policy at universities, and served on the National Council on Aging and

other Boards. Ms. Keys is the author of Planning for Retirement: Everywoman’s Legal Guide.

First term of office: November 1994 to September 1999. Current term of office: October 1999 to

September 2005.

David Podoff

David Podoff is a visiting Associate Professor at the Baruch College of the City University of

New York. Previously he was Minority Staff Director and Chief Economist for the Senate

Committee on Finance. He also served as the Committee’s Minority Chief Health and Social

Security Counselor and Chief Economist. In these positions on the Committee he was involved

in major legislative debates with respect to the long-term solvency of Social Security, health care

reform, the constitutional amendment to balance the budget, the debt ceiling, plans to balance the

budget, and the accuracy of inflation measures and other government statistics. Prior to serving

with the Finance Committee he was a Senior Economist with the Joint Economic Committee and

directed various research units in the Social Security Administration’s Office of Research and

Statistics. He has taught economics at the University of Massachusetts and the University of

California in Santa Barbara. He received his Ph.D. in economics from the Massachusetts Institute

of Technology and a B.B.A. from the City University of New York. Term of office: October 2000

to September 2006.

Sylvester J. Schieber

Sylvester Schieber is Director of the Research and Information Center at Watson Wyatt

Worldwide, where he specializes in analysis of public and private retirement policy issues and

the development of special surveys and data files. From 1981 to 1983, Mr. Schieber was the

Director of Research at the Employee Benefit Research Institute. Earlier, he worked for the

Social Security Administration as an economic analyst and as Deputy Director at the Office of

Policy Analysis. Mr. Schieber is the author of numerous journal articles, policy analysis papers,

and several books including: Retirement Income Opportunities in An Aging America: Coverage

and Benefit Entitlement; Social Security: Perspectives on Preserving the System; and The Real

Deal: The History and Future of Social Security. He served on the 1994-1996 Advisory Council

on Social Security. He received his Ph.D. from the University of Notre Dame. First term of

office: January 1998 to September 2003. Current term of office October 2003 to September 2009.

Gerald M. Shea

Gerald M. Shea is currently assistant to the president for Government Affairs at the AFLCIO. He previously held several positions within the AFL-CIO, serving as the director of the

policy office with responsibility for health care and pensions, and also in various executive staff

positions. Before joining the AFL-CIO, Mr. Shea spent 21 years with the Service Employees

International Union as an organizer and local union official in Massachusetts and later on the

national union’s staff. He was a member of the 1994-1996 Advisory Council on Social Security.

Mr. Shea serves as a public representative on the Joint Commission on the Accreditation of

Health Care Organizations, is a founding Board member of the Foundation for Accountability,

Chair of the RxHealth Value Project, and is on the Board of the Forum for Health Care Quality

and Measurement. He is a graduate of Boston College. First term of office: January 1996 to

September 1997; current term of office: October 2000 to September 2004.

46
Members of the Staff

Joe Humphreys, Staff Director

Jack Dalton

Beverly Rollins

George Schuette

Wayne Sulfridge

Jean Von Ancken

David Warner
Social Security Advisory Board

400 Virginia Avenue, SW

Suite 625

Washington, D.C. 20024

Tel: (202) 475-7700

Fax: (202) 475-7715

E-mail: info@ssab.gov

www.ssab.gov