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97–902 2016

S. HRG. 114–174 

ENSURING SUCCESS FOR THE SOCIAL SECURITY 

DISABILITY INSURANCE PROGRAM AND ITS 

BENEFICIARIES 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 4, 2015 

Printed for the use of the Joint Economic Committee 

( 
(II) 

JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

SENATE 

DANIEL COATS, Indiana, Chairman 

MIKE LEE, Utah 

TOM COTTON, Arkansas 

BEN SASSE, Nebraska 

TED CRUZ, Texas 

BILL CASSIDY, M.D., Louisiana 

AMY KLOBUCHAR, Minnesota 

ROBERT P. CASEY, JR., Pennsylvania 

MARTIN HEINRICH, New Mexico 

GARY C. PETERS, Michigan 

HOUSE OF REPRESENTATIVES 

KEVIN BRADY, Texas, Vice Chairman 

JUSTIN AMASH, Michigan 

ERIK PAULSEN, Minnesota 

RICHARD L. HANNA, New York 

DAVID SCHWEIKERT, Arizona 

GLENN GROTHMAN, Wisconsin 

CAROLYN B. MALONEY, New York, Ranking 

JOHN DELANEY, Maryland 

ALMA S. ADAMS, PH.D., North Carolina 

DONALD S. BEYER, JR., Virginia 

VIRAJ M. MIRANI, Executive Director 

HARRY GURAL, Democratic Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS OF MEMBERS

Hon. Daniel Coats, Chairman, a U.S. Senator from Indiana .............................. 1 

Hon. Carolyn B. Maloney, Ranking Member, a U.S. Representative from 

New York .............................................................................................................. 12 

WITNESSES

Mr. Patrick O’Carroll, Jr., Inspector General, Social Security Administration, 

Washington, DC ................................................................................................... 4 

Dr. Mark Duggan, The Trione Director of the Stanford Institute for Economic 

Policy Research and The Wayne and Jodi Cooperman Professor of Economics, Stanford University, Stanford, CA ............................................................... 6 

Ms. Rebecca Vallas, Director of Policy, Poverty to Prosperity Program, Center 

for American Progress, Washington, DC ............................................................ 8 

SUBMISSIONS FOR THE RECORD

Prepared statement of Hon. Daniel Coats, Chairman, a U.S. Senator from 

Indiana .................................................................................................................. 36 

Prepared statement of Hon. Carolyn B. Maloney, Ranking Member, a U.S. 

Representative from New York ........................................................................... 36 

Report titled ‘‘Chart Book: Social Security Disability Insurance’’ ................ 39 

Report titled ‘‘Understanding the Increase in Disability Insurance Benefit 

Receipt in the United States’’ ...................................................................... 63 

Prepared statement of Mr. Patrick O’Carroll, Jr., Inspector General, Social 

Security Administration, Washington, DC ........................................................ 90 

Prepared statement of Dr. Mark Duggan, The Trione Director of the Stanford 

Institute for Economic Policy Research and The Wayne and Jodi 

Cooperman Professor of Economics, Stanford University, Stanford, CA ......... 97 

Prepared statement of Ms. Rebecca Vallas, Director of Policy, Poverty to 

Prosperity Program, Center for American Progress, Washington, DC ............ 112 

Questions for the record for Mr. Patrick O’Carroll, Jr., submitted by Representative Maloney and responses .................................................................... 134 

Questions for the record for Dr. Mark Duggan submitted by Representative 

Maloney and responses ........................................................................................ 137 

Questions for the record for Ms. Rebecca Vallas submitted by Representative 

Maloney and responses ........................................................................................ 140 

Questions for the record for Dr. Mark Duggan submitted by Senator Amy 

Klobuchar and responses ..................................................................................... 147 

(1) 

ENSURING SUCCESS FOR THE SOCIAL 

SECURITY DISABILITY INSURANCE PROGRAM 

AND ITS BENEFICIARIES 

WEDNESDAY, NOVEMBER 4, 2015 

CONGRESS OF THE UNITED STATES, 

JOINT ECONOMIC COMMITTEE, 

Washington, DC. 

The Committee met, pursuant to call, at 2:31 p.m. in Room 106 

of the Dirksen Senate Office Building, the Honorable Daniel Coats, 

Chairman, presiding. 

Representatives present: Paulsen, Schweikert, Grothman, 

Maloney, Delaney, Adams, and Beyer. 

Senators present: Coats, Lee, Cotton, Cassidy, Klobuchar, and 

Heinrich. 

Staff present: Connie Foster, Harry Gural, Paige Hanson, Colleen Healy, Kristine Michalson, Viraj Mirani, Brian Neale, Thomas 

Nicholas, Brian Phillips, Stephanie Salomon, and Aaron Smith. 

OPENING STATEMENT OF HON. DANIEL COATS, CHAIRMAN, A 

U.S. SENATOR FROM INDIANA 

Chairman Coats. The Committee will come to order. We are delaying here just a bit. I’m just saying I feel like the referee at an 

NFL game waiting for the signal from my staffer who is on the 

phone with the House. 

We have to obviously set these meeting schedules with some advance notice in time and lock them in. It just unfortunately happens that the House seems to be teeing off its voting schedule at 

the same time we hold these meetings. 

So we are trying to see where they are. We know several Members will be coming over from the House and joining us, but I think 

we ought to get started. We can go through some of the opening 

statements. 

As I speak, Members are arriving. 

I would like to thank Senator Cotton here, first, for asking the 

Committee to take up and see how we can improve the Social Security Disability Program. Following the Ranking Member’s opening 

statement, after mine, if she arrives, I am going to call on Senator 

Cotton to also deliver a brief opening statement. And then we will 

go back to Regular Order and recognize individuals on a bicameral 

bipartisan basis. 

The SSDI Program was originally created as a safety net for primarily older workers whose disabilities prevented them from working. In subsequent decades, we have witnessed an expansion of the 
2 

program eligibility accompanied by a sharp increase in the number 

of claimants. 

As of today, nearly 9 million Americans receive Social Security 

Disability Insurance benefits, including almost 5 percent of working age adults. In total, SSDI accounts for about 15 percent of benefits paid through the Social Security Administration. 

Interestingly enough, 1.3 million of those beneficiaries are under 

the age of 40—not the original intent I think of the program, but 

one example of how the program has been expanded. 

While the SSDI Program was originally crafted to maintain the 

principles of rehabilitation and return to work, statistics show that 

this rarely happens today; and the program’s underlying structure 

disincentives provide disincentives for many from working. 

The Bipartisan Budget Act passed by Congress last week did 

take some steps toward improved SSDI Program operations. For instance, the SSDI Program will begin to test an alternative to the 

program’s current disincentives to work. Let’s hope that test program shows some positive results and can help us in putting permanent provisions in place that give us more efficiency and effectiveness of this program. 

The bill that we passed also includes program integrity reforms 

such as enhancing fraud enforcement and deterrence measures, as 

well as requiring regular case reviews to confirm claimant eligibility. 

So it is a start to correct a disturbing and ever-growing problem 

with SSDI. And while these actions are useful, they do not address 

the long-term solvency questions facing this program. 

As a result, last week’s budget agreement only temporarily 

shored up the program by redirecting funds from the Old Age and 

Survivors’ Trust Fund. Robbing Peter to pay Paul is hardly the 

way to address a fiscal issue, especially when the Old Age and Survivors’ Trust Fund is also headed toward the very same financial 

insolvency problems as SSDI, even though that may be years down 

the road. 

Today we want to examine how we can achieve a more efficient 

and a more effective Social Security Disability Insurance Program. 

We hope to learn about measures to assist the successful transition 

of individuals to the workplace which impacts their personal well 

being as well as the fiscal sustainability of the program. 

We must also ask how current administrative processes can be 

reformed. The current SSDI program review and appeal system is 

burdened by a backlog of increases, risk of fraud, and slow awards 

of benefits to individuals who need them. 

The SSDI Program is also plagued with improper payments. Just 

last week, the Government Accountability Office revealed at least 

$11 billion in overpayments over the last 10 years. 

The Social Security Administration Inspector General, who is 

here with us today, found in June that 44.5 percent of sampled 

claimants received an overpayment. 

The waste, fraud, and abuse of SSDI is unacceptable. Yet another mismanaged and failing federal program. There is clearly 

much work to be done to improve the administration of this program and protect taxpayers’ dollars from being wasted through 

fraud and abuse. 
3 

I want to welcome our witnesses and thank them for being here 

today to discuss how we can address all these issues, and leave 

hopefully with a better understanding of steps we should consider 

to improve the SSDI program for both current and future claimants. 

I now would like to recognize Senator Cotton for his statement, 

and then we will resume with the introduction of the witnesses and 

allow you to go forward with your testimony. 

Senator Cotton. Thank you, Mr. Chairman, and thank you to 

our witnesses for your appearance today. 

The Social Security Disability Program is critical to Arkansas, as 

my State has some of the highest rates of disability in the Nation. 

I want to focus on how we can help improve this program by 

helping those who can recover return to work. 

Social Security Disability is open to applicants with temporary 

disabilities. Disability judges estimate between 15 and 30 percent 

of beneficiaries should recover, but almost no one exits the program 

anymore. 

In the 1980s, up to 6 percent of beneficiaries returned to work 

every year. Now it is less than one-half of one percent. The odds 

of a disability recipient returning to work today are about the same 

as playing roulette and hitting black eight times in a row. 

There is nothing compassionate, in my opinion, about condemning someone who can recover to a lifetime of disability status 

and poverty-level income. I intend to introduce legislation to fix 

this problem. 

In my bill, those eligible for disability but expected to recover can 

receive rehabilitation training and can earn wages while on the disability program. After a few years, this group can exit the program 

and return to work, or reapply if still disabled. 

Increasing the return-to-work rate by even one percentage point 

will save hundreds of billions of dollars over time. Also, fewer people will receive benefits, more people will pay into the benefit program, and more people will benefit from the dignity of work. 

It is time to reform the Social Security Disability Program to 

help those who can recover, and to protect those who cannot. 

I am looking forward to discussing these issues with our panel 

today. Thank you all for joining us, and thank you again, Mr. 

Chairman. 

Chairman Coats. Thank you. I would like to introduce briefly 

our witnesses. 

Mr. Patrick O’Carroll, Jr., currently serves as the Inspector General for the Social Security Administration, having been appointed 

on November 24, 2004. Mr. O’Carroll received a Bachelor of Science 

from Mount St. Mary’s College and a Master of Forensic Sciences 

from George Washington University. He also attended the National 

Cryptologic School and the Kennedy School at Harvard University. 

Dr. Mark Duggan is the Trione Director of the Stanford Institute 

for Economic Policy Research, and the Wayne and Jodi Cooperman 

Professor of Economics at Stanford University. He is a research associate at the National Bureau of Economic Research, and serves 

on the Editorial Board of the American Economic Journal. Dr. 

Duggan received his BS and MS degrees in Electrical Engineering 
4 

at the Massachusetts Institute of Technology, and his Ph.D. in Economics from Harvard. 

Ms. Rebecca Vallas—is that correctly pronounced? 

Ms. Vallas. Val-las. 

Chairman Coats. Vallas—I’m one for three on this. I apologize. 

[Laughter.] 

Ms. Vallas is Director of Policy Research for the Poverty to Prosperity Program at the Center for American Progress. Before joining 

the Center for American Progress she served as Deputy Director of 

Government Affairs at the National Organization of Social Security 

Claimants’ Representatives. Ms. Vallas received her Bachelor’s Degree from Emory University and her Law Degree from the University of Virginia. 

I welcome our witnesses, and I think we will just go in the order 

of introduction. We look forward to hearing your testimony. If you 

can confine it roughly to the five-minute rule, it gives us, my colleagues here and I, a better opportunity to enter into a dialogue 

and address questions. 

Mr. O’Carroll. 

[The prepared statement of Chairman Coats appears in the Submissions for the Record on page 36.] 

STATEMENT OF MR. PATRICK O’CARROLL, JR., INSPECTOR 

GENERAL, SOCIAL SECURITY ADMINISTRATION, WASHINGTON, DC 

Mr. O’Carroll. Good afternoon, Chairman Coats and Members of 

the Joint Committee. 

Thank you for the invitation to testify today. Last year SSA provided about $144 billion in Disability Insurance, or DI, to about 11 

million people. However, there is much more to the story of the DI 

Program than just those numbers. 

Given the importance of the safety net for millions of people who 

depend on it, SSA must ensure the integrity of this critical program. The Agency can do this by continuing efforts to improve 

service to its beneficiaries and stewardship over taxpayer funds. 

My written statement includes many of our recommendations for 

how we believe SSA can best achieve these goals. These recommendations can be summed up in three main points, as I will 

explain. 

The first point: DI Program policy is complex and should be modernized to reflect medical advances and the current occupational 

environment. For example, some of SSA’s listings of impairments 

which are used to ensure that disability decisions are medically 

sound have not been updated in many years. 

Without regular updates, the listings lose their effectiveness as 

a screening tool. The Dictionary of Occupational Titles is outdated 

and should be replaced. SSA needs occupational data tailored for 

its disability programs. 

When SSA learns a beneficiary has work activity, stopping benefits is difficult and time-consuming. Simplifying these policies could 

have a positive effect. 

And on return-to-work efforts, SSA should develop specific goals 

and analyze costs and benefits to assess these projects. 
5 

The second point: SSA must continue efforts to make timely and 

accurate claims decisions. On average, disability claimants will 

wait more than 100 days for an initial decision on their claim. If 

they appeal, they will wait about 500 more days for a hearing. 

Additionally, SSA’s level of pending initial claims stands at about 

620,000, while more than 1 million claimants are awaiting a hearing. We have paid close attention to SSA’s efforts to reduce wait 

times and pending levels. 

At the initial level, SSA should refine policies and procedures to 

improve efficiency through automation. It should reduce processing 

time and make accurate and consistent decisions. 

And at the hearing level, SSA should continue to expand the use 

of the video hearings, emphasize quality decision-making, and ensure timely decisions. 

The third and final point: SSA should regularly review beneficiary information to ensure that people remain eligible for DI payments. SSA does this through continuing disability reviews, or 

CDRs. For many years we’ve identified medical CDRs as a highly 

effective guard against paying benefits to people who no longer are 

disabled according to SSA’s Guidelines. 

Medical CDRs provide a 9-to-1 return on investment, according 

to SSA. Although the Agency completed almost 800,000 CDRs last 

year, a backlog of 726,000 remains. 

SSA also performs work CDRs to review beneficiary earnings and 

prevent overpayments. A change in federal wage reporting processes for employers from annual to quarterly would identify substantial gainful activity more quickly. 

Also, SSA can improve payment accuracy by verifying self-reported information about wages or other benefits, such as Worker’s 

Compensation or government pensions. 

We have recommended that SSA pursue data-matching agreements with other government agencies to obtain such claimant 

data. 

Finally, improving the DI program is a multi-faceted challenge 

for SSA. It is critical that Congress and SSA continue to focus on 

the program’s management and long-term sustainability. My office 

has long held that SSA must strike that critical balance between 

service and stewardship. 

I appreciate your interest in improving the DI program. We look 

forward to collaborating with SSA and our oversight committees on 

the best ways to do this effectively. 

Thank you again for the invitation to testify, and I will be happy 

to answer any questions. 

[The prepared statement of Mr. O’Carroll appears in the Submissions for the Record on page 90.] 

Chairman Coats. Well thank you. Thank you for a succinct 

presentation here, and we will look forward to getting into the details of what you have described. 

Dr. Duggan. 
6 

STATEMENT OF DR. MARK DUGGAN, THE TRIONE DIRECTOR 

OF THE STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH, AND THE WAYNE AND JODI COOPERMAN PROFESSOR OF ECONOMICS, STANFORD UNIVERSITY, STANFORD, CA 

Dr. Duggan. Chairman Coats and Members of the Committee, 

it is an honor to be here with you today. 

My name is Mark Duggan. I am the Wayne and Jodi Cooperman 

Professor of Economics at Stanford University, and the Trione Director of the Stanford Institute for Economic Policy Research. 

The SSDI Program represents an extremely important part of 

our Nation’s safety net, as it protects workers and their families 

from the risk of disability that prevents or greatly inhibits a person’s ability to work. 

I show in the first figure in my testimony enrollment in the SSDI 

Program grew steadily from the mid-1980s until the present day, 

with 2.2 percent of adults aged 25 to 64 receiving SSDI benefits in 

1985, rising to 5.0 percent by 2014. 

In my testimony today I will briefly summarize the factors that 

are responsible for the growth in SSDI enrollments since the mid1980s. I will then discuss some of the implications of this growth 

for the U.S. labor market. And finally, I will conclude by discussing 

the potential for changes to SSDI to increased employment and economic well being among individuals with disabilities. 

One contributor to the growth in SSDI enrollment since the mid1980s has been the aging of the Baby Boom Generation. Individuals in their 50s and early 60s are significantly more likely to receive SSDI benefits than their counterparts in their 30s and 40s. 

However, as the first table in my testimony demonstrates, the 

percentage of adults receiving SSDI has risen sharply even within 

age groups. Consider adults in their 50s. 

In 1989 4.3 percent of adults in this age group were receiving 

SSDI benefits. By 2014, this had almost doubled to 8.3 percent. 

A second contributor to the growth in SSDI has been an increase 

in the fraction of women who are insured for SSDI benefits. To be 

insured for SSDI, a person must have worked in at least 5 of the 

10 most recent years. Because employment rates have increased 

among women since the 1980s, the fraction of women insured for 

the program has risen as well. 

This explains why SSDI has growth more rapidly among women 

than among men during this period. 

A third determinant, a third and more important determinant of 

the growth in SSDI since the mid-1980s has been an increase in 

the award rate caused by a liberalization of the program’s medical 

eligibility criteria, resulting from 1984 legislation. 

I show in the second figure of my testimony there has been a 

substantial increase since that time in award rates for mental disorders and diseases of the musculoskeletal system. This rise is important because, as shown in recent research, the employment potential of SSDI recipients with these more subjective conditions can 

be substantial. 

I outline several additional factors in my written testimony that 

have contributed to enrollment growth in the SSDI program. 
7 

While providing valuable insurance to tens of millions of Americans, SSDI reduces the incentive to work both for individuals on 

the program and for those applying for SSDI benefits. 

To receive an SSDI award, a beneficiary must be deemed unable 

to engage in substantial gainful activity defined by the Social Security Administration to be $1,090 per month. Once on the program, 

an SSDI recipient has little incentive to return to work as earnings 

above the SGA threshold will lead to a termination of benefits. 

The growth in SSDI enrollment since the 1980s has coincided 

with a substantial reduction in employment rates among individuals with disabilities. For example, from 1988 to 2008 the employment rate of men in their 40s and 50s with a work-limiting disability fell from 28 percent to 16 percent. 

The steady increase in SSDI enrollment in recent years has reduced labor force participation in the U.S. below what it otherwise 

would be. While there are of course many factors to influence labor 

force participation, previous research indicates that SSDI is an important factor as well. 

The disability determination process used by the SSDI program 

awards benefits to individuals deemed unable to engage in substantial gainful activity. This reduces the incentive to work among 

those who have filed an initial application for SSDI and among 

those appealing a rejection. 

In recent years, nearly 40 percent of SSDI awards were made on 

appeal, and the time between the initial application and the ultimate decision is substantial for those appealing initial rejections. 

This was problematic because those initially rejected are likely to 

be in better health on average than those receiving an initial 

award, and thus likely to have higher employment potential. And 

the longer that a person remains out of the work force, the more 

their earnings’ potential declines. 

Therefore, even if an applicant never receives an SSDI award, 

the application process can permanently harm his or her employment prospects. 

One way to improve incentives in SSDI is to intervene sooner for 

individuals with work-limiting conditions so that they can continue 

working. The payoff to keeping an SSDI applicant in the work force 

is high. The average present value of an SSDI award is approximately $300,000. 

While many awarded SSDI benefits are completely unable to 

work, previous research makes clear that a substantial fraction 

could work. 

More generally, increasing employment among individuals with 

disabilities could improve their economic well being and increase 

their autonomy while reducing the fiscal strains on Social Security. 

Past efforts to achieve this goal within Social Security, within 

SSDI, have unfortunately had little impact. The lack of progress in 

improving work incentives in SSDI stands in marked contrast to 

the Temporary Assistance to Needy Families program. Reforms introduced in the mid-1990s, along with expansions in the Earned Income Tax Credit at that time, led to substantial gains in employment among past, current, and potential future TANF recipients, 

and to a steady drop in program enrollment and expenditures. 
8 

Based on my own research and that of many others, I believe 

that similar progress is possible within the SSDI Program. 

I thank you again for the opportunity to testify today. 

[The prepared statement of Dr. Duggan appears in the Submissions for the Record on page 97.] 

Chairman Coats. Dr. Duggan, thank you very much for your 

testimony. 

Ms. Vallas. 

STATEMENT OF MS. REBECCA VALLAS, DIRECTOR OF POLICY, 

POVERTY TO PROSPERITY PROGRAM, CENTER FOR AMERICAN PROGRESS, WASHINGTON, DC 

Ms. Vallas. Thank you, Chairman, and thank you Members of 

the Committee, for the invitation to be here today. 

My name is Rebecca Vallas. I am the Director of Policy of the 

Poverty to Prosperity Program at the Center for American 

Progress. 

Imagine that tomorrow while you are cleaning out your gutters 

you fall off of a ladder. You suffer a traumatic brain injury and spinal cord damage, leaving you paralyzed and unable to speak. Unable to work for the foreseeable future, you have no idea how you 

are going to support your family. 

Now imagine your relief when you realize that an insurance policy that you have been paying into all your working life will help 

keep you and your family afloat. That insurance policy is Social Security. 

I have seen first hand more times than I can count what this 

program means in the lives of its beneficiaries because, prior to 

joining the Center for American Progress, I spent several years as 

a Legal Aid attorney, helping workers who had experienced a lifechanging disability or illness access the benefits that they had 

earned. 

Social Security protects more than 9 in 10 American workers and 

their families. And all told, more than 160 million American workers are protected. Of those, about 8.9 million, including more than 

1 million Military Veterans, receive DI, as do about 2 million of 

their spouses and dependent children. 

DI is coverage that workers earn. With every hard-earned paycheck, American workers pay into the system through payroll tax 

contributions which serve more or less as insurance premiums. DI 

benefits are incredibly modest, typically replacing less than half of 

prior earnings, and the average benefit in 2015 is less than $300 

per week, just over the federal poverty line for an individual. 

But DI is vital to the economic security of disabled workers and 

their families. And for more than 8 in 10, DI is their main or only 

source of income. To qualify, as we’ve heard, a disabled worker 

must be unable to engage in substantial gainful activity due to a 

severe physical or mental impairment or combination of impairments expected to last at least 12 months, or to result in death. 

Now unpacking that, in practice what this means is that a worker must not only be unable to do his or her past jobs but also unable to do any other job that exists in the entire national economy 

in significant numbers at a level where he or she could earn even 

$270 per week. 
9 

According to the OECD, the SSDI program and its disability 

standard is the strictest eligibility criteria for a full disability benefit in the entire OECD. 

As we have heard from Chief Actuary Goss repeatedly in testifying before Congress, this standard, this strict standard remains 

the same whether or not job openings are plentiful at the time. 

Now the vast majority of applicants are denied under the strict 

standard, and those who qualify often have multiple serious impairments. Many are terminally ill, and one in five beneficiaries die 

within five years of receiving benefits. 

For those whose conditions improve, Social Security’s policies include an array of strong work incentives and protections to encourage beneficiaries to attempt to return to work. That is described 

more fully in my written testimony as well as the proposal included 

in the Senate—in the budget deal. 

However, most beneficiaries live with such debilitating impairments and health conditions that they are unable to work at all. 

And even denied applicants exhibit extremely low work capacity 

after being denied, reflecting the strictness of DI’s eligibility criteria. 

The reasons for the program’s period of rapid growth which has 

now come to an end are well understood, and they are chiefly demographic, as we heard from Dr. Duggan. The Baby Boomers entering the high-disability years of their 50s and 60s, and the rise 

in women’s labor force participation. 

In sum, this is a program for hard-working Americans who have 

worked all their lives but who by and large are no longer able to 

do substantial work. 

The typical beneficiary in fact worked 22 years before needing to 

turn to benefits. I will quickly note, in closing, that the recently 

passed bipartisan budget deal strengthens the Disability Insurance 

Program in several important ways. 

In addition to preventing sharp across-the-board benefit cuts that 

would have been devastating to beneficiaries’ financial security, the 

budget deal also includes a number of important measures to enhance program integrity, putting cooperative disability investigation units, or CDIs, in all 50 states, as well as cap adjustments to 

support more continuing disability reviews. We can discuss this 

more in the Q&A, I am sure. 

Additionally, the budget deal restores SSA’s DI Demonstration 

Authority so that it can test ways to further strengthen the program, including its work incentives and supports. 

But supporting work for people with disabilities is more than 

about the Disability Insurance Program. As we continue to work together on a bipartisan basis to boost work among people with disabilities, we need to acknowledge the much broader policy landscape affecting those workers and enact public policies to give 

workers with disabilities a truly fair shot. 

And these policies must include insuring paid leave and paid sick 

days, as well as access to long-term supports and services, to name 

just a couple. 

In closing, when it comes to our Nation’s Social Security System, 

the will of the American People is clear: They value it and support 

it highly and want to see it strengthened. 
10 

DI is a core pillar of that system, and it offers critical protection 

against the hazards and vicissitudes that we encounter, including 

life-changing disability and illness. 

Thank you so much for the opportunity to testify today, and I am 

happy to answer any questions that you may have. 

[The prepared statement of Ms. Rebecca Vallas appears in the 

Submissions for the Record on page 112.] 

Chairman Coats. Thank you. I appreciate that. I am going to 

turn now to opening questions. 

Mr. O’Carroll, let me start with you, if I could. As you know, 

GAO last week sent out the information relative to the improper 

payments totaling, they said, nearly $11 billion over a 10-year period of time. 

Would you—then following up from that, as I noted in my opening statement, you did some sampling of that and came up with a 

statistic that 441⁄2 percent of sampled claimants received over-payments. Could you give us some more details about this over-payment situation and what we need to do to try to avoid this and put 

this on a much better path? 

Mr. O’Carroll. Yes, Chairman. A couple of things on it. I guess 

the first one is that, as you had mentioned, in the GAO report 

where it was talking about the $11 billion. 

As we keep saying with SSA paying out billions of dollars, when you say $1 billion, in percentages it might not be a high percentage, but our concern is that when you are dealing with the billions 

of dollars that go out in payments, then the overpayments become 

a large dollar amount. 

And to the normal taxpayer and citizen, a billion dollars is a lot 

of money. We are very concerned about that, and we are concerned 

about the percentage of overpayments in SSA. 

And so we did a study on it, and we looked at people that were 

on benefits for 10 years. And in that 10-year period, they came on 

benefits. They went off benefits. They went back to benefits. And 

in that time period, we found that 45 percent had overpayments, 

and underpayments, there were improper payments. 

And we brought those to SSA’s attention, and we asked them to 

focus on those areas in terms of identifying the improper payments 

and fixing them in the future. 

So we have been trying to give information through our audit 

work to SSA on different ways to prevent overpayments and improper payments in general. 

Chairman Coats. And what are some of those ways that you 

are going to attack this? I mean, what needs to be changed? And 

do you need legislative authority to do it? 

Mr. O’Carroll. Well, a lot of what can be changed is in terms 

of the information that SSA is being given by people that are applying for benefits. 

A lot of times that information is not being checked. So amongst 

other things we are telling SSA is to be using other databases that 

are out there, and to be taking a look to see if people have resources that they are not reporting; to be also checking, with other 

government agencies. 

The biggest one really is comparison of information between government agencies. One government agency has information about 
11 

a person and does not share it with the other one because of concerns over the Computer Matching Act. But there is a lot of data 

analysis and information out there that can be used that would be 

very effective in preventing improper payments. 

Chairman Coats. It was not that long ago that I was speaking 

on the Floor about some waste that occurred between the Unemployment Insurance Agency and the Social Security Disability. 

There was a significant number of people who were drawing checks 

from both entities. 

I mean, either you can work, or you cannot work. Either you are 

disabled, or you are not disabled. And yet people were applying for 

and receiving checks from both agencies. It is one thing—you would 

think you could pick up a phone, or send a note, but today all we 

have to do is push a computer button basically to establish some 

type of link between the two before a decision is made as to the 

integrity of the applicant and the claim and being paid by one of 

the agencies, but not both of the agencies. 

And so there appears to be a lot of dysfunction. Of course you 

were talking about the ability to facilitate these checks before the 

decisions are made, and these claimants before the decisions are 

made. So I appreciate what you have said in that regard. 

You also talked about facilitator fraud—in your opening statement which I read—facilitator fraud investigations. Can you describe what they are and to what extent they impact the program, 

and what steps possibly could be taken to address that? 

Mr. O’Carroll. Yes, Chairman. That is one that is very important to me, because there are people out there in positions of trust 

that the agency relies on for information. And if those people decide to defraud the government, they already have an edge on 

being trusted and their information being taken. 

So as an example we have found that in some cases former Social 

Security employees that understand the way the system works 

then conspire with unscrupulous medical providers and attorneys, 

where they will use improper information and facilitate getting a 

person on benefits. 

And then the word goes out that this is the way to do it, and it 

becomes almost like an underground conspiracy where by word of 

mouth you are being told if you want to get on disability when you 

are not disabled, go see this person. They will introduce you to a 

doctor. That doctor will then introduce you to an attorney that will 

then represent you. 

And so we have made that a priority of ours. We have, in about 

10 different locations now, a pilot where we are going out just trying to work cases on facilitators that are doing this. We have asked 

for increased penalties against these people that the government 

trusts, so that the word will get out there: Don’t break that trust 

and try to defraud the government. 

Chairman Coats. Well I commend you on that work, and we 

thank you. I am awfully glad that we have inspector generals that 

are looking into these kinds of things. You may need some legislative authority relative to the penalties, or relative to having the resources available for these investigations, but it undermines the 

confidence and trust of the American Taxpayer, the American Public, when they see this kind of fraud taking place, this kind of fa-
12 

cilitation for this, when we hear examples of people gaming the 

system. 

They are not disabled, yet they are drawing checks. They are unemployed and they are drawing checks from the Unemployment Insurance at the same time, saying they are able to work but they 

cannot find jobs. And so it continues to really undermine the integrity of these programs. 

As Ms. Vallas said, there are legitimate claimants out there that 

need these payments and claims to provide for themselves. They 

qualify under the standards and criteria of the Disability Insurance 

fund. And yet the public becomes very skeptical in terms of the inability of the government to run an efficient, effective program and 

weed out the billions of dollars of fraud. 

So we thank you for your work for that. I am a little over my 

time. Our Ranking Member has arrived. I know the House has a 

way now of scheduling votes every time they see there is a Joint 

Economic Committee hearing, but we welcome you and I will turn 

to you for your opening statement. 

Representative Maloney. I am going to put my opening statement in the record and read it into the record at the end of the 

hearing, because I feel that we do not know when votes are going 

to be called again and we need to just keep going. 

I certainly want to be associated with all the statements, being 

against any type of waste, fraud, or abuse that games the system 

or hurts the credibility of the system. And if we can put a man on 

the Moon, we have got to have some computer system where we 

could check whether or not there are duplicate applicants and some 

of the problems that the IG raised. 

But I want to know how hard it is, or how easy it is, to get SSDI. 

And I would like to hear your thoughts on it, Ms. Vallas. But first 

could you tell us briefly why you are familiar with the process, and 

then tell us the process and any ideas of how to make it more fair 

and more fair to people who need it, and also to stop any type of 

abuse. Because any abuse undermines the credibility and the ability of people who really need the service to get the service. 

[The prepared statement of Representative Maloney appears in 

the Submissions for the Record on page 36.] 

Ms. Vallas. Thank you so much for the question. 

So you asked why I am familiar with the process. Well I mentioned in my opening statement that I was a Legal Aid attorney 

for a number of years, and I worked directly with individuals with 

significant disabilities who needed help accessing the benefits that 

they had earned through this system. 

So that was how I learned how the program works. And it was 

my first exposure over a number of years to the various layers of 

the process. 

So the way that the process works is that an individual applies 

for benefits. They must go through an initial determination stage. 

And this is done by the state agencies called Disability Determination Services. 

They are funded by SSA. They are governed by national policies 

and procedures. The vast majority of people at this stage are denied. And just about one-third, or even a little bit less than onethird, are actually awarded benefits at this level. 
13 

And in order to mount a claim for disability benefits, it is not 

about just signing up. It is not about getting a doctor’s note, as it 

might be made to sound sometimes in the media. It requires 

mounting every piece of medical evidence that you possibly can. 

And sometimes the files that I would help my clients to accumulate 

could be almost as tall as I am—I am not a tall person, but tall 

files. 

And the reason for this is that it is incredibly, incredibly hard 

to demonstrate that you meet that really strict definition of disability that we have been talking about today. 

If you are denied at that initial level, what you then have to do 

is file an appeal. In some states there is a level called reconsideration, which is a paper review of that case. In some states there 

is no reconsideration level and you need to go to a hearing before 

an administrative law judge. 

And unfortunately, as the Inspector General mentioned, we are 

seeing catastrophic backlogs right now with more than a million 

people waiting to see an administrative law judge. And people can 

wait as long as two years. And unfortunately, as a result, thousands of American workers are dying each year waiting for the 

benefits that they earned. Not something that we tolerated in the 

VA system, and I would hope something that we would not tolerate 

in the Social Security system. And purely the result of under funding that system. 

Representative Maloney. And how would you respond to the 

IG’s statement that there are doctors out there waiting to fill out 

the forms, that there are basically mills out there that are processing them. And basically how likely is it that a person will have 

their application accepted? 

You are saying it is very difficult to get accepted. But say out of 

10 people how many would have their applications accepted? 

Ms. Vallas. So fewer than 4 in 10 applicants are approved even 

after all levels of appeal. And I did not even mention going past 

the ALJ stage. There’s the Appeals Council, and then even federal 

court. After all of those layers, fewer than 4 in 10 people are approved. 

Representative Maloney. And how do our disability benefits 

compare with other countries? 

Ms. Vallas. So in addition to having the strictest definition of 

disability in the world, we also have incredibly meager benefits. I 

mentioned that the benefits average less than $300 per week, and 

replace less than half of prior earnings for the typical beneficiary. 

So it can be incredibly difficult to make ends meet. Even though 

these benefits are very vital, they are incredibly modest and they 

barely keep people out of poverty. And that compares internationally to many nations have replacement rates as high as 80 percent 

of your prior earnings. 

Representative Maloney. Okay, is my time expired? 

Chairman Coats. Six seconds. 

[Laughter.] 

Representative Maloney. I’ve got six seconds left. So basically 

how much will he or she earn in the system? Basically, how much 

a month would you say? 
14 

Ms. Vallas. On average, it’s $1,165 per month, which is just over 

the federal poverty line for one person. 

Representative Maloney. My six seconds are up. 

Chairman Coats. Thank you. 

Senator Cotton. 

Senator Cotton. Thank you, Mr. Chairman. 

Mr. O’Carroll, I want to go back to a point you made about the 

facilitators of disability applications. I remember as a kid growing 

up in Arkansas, billboards, the back pages of yellow pages, cable 

TV ads, lawyers would advertise for big-rig accidents, or medical 

malpractice, and so forth. Now it seems like all those ads are about 

disability. You know, ‘‘Call this number, I’ll get your disability 

check for you.’’ 

What is your perspective on why that legal advertising shift has 

happened, at least anecdotally to me in Arkansas, over the last 20 

years? 

Mr. O’Carroll. Well I’d say anecdotally, the word is out there 

that your odds of getting onto benefits are higher if you are represented by someone. And that’s more than just anecdotal information. The record is out there, if you are represented, you’re going 

to probably have somebody assisting you in getting your records together and everything else. 

So the word is out there that you’ve got a better chance. The 

ones that we are concerned with are the ones that the word is out 

there, if you go to this person, he or she knows how to scam the 

system and get this doctor that would exaggerate what your injuries are. 

For example, we had a case in one of our districts where we sent 

an undercover agent in. The agent went in, and was introduced by 

a facilitator to a doctor. The doctor said to our agent: Hey, are you 

having trouble with your back? And the agent said, well, not really. 

Why? And he said, well, let me send you over to a specialist and 

we’ll have him take a look at your back. And we took an X-ray of 

the agent’s back before she went to the specialist. 

She goes to the specialist. We get an X-ray back from the specialist that has like an S-curve in the back, which had been normal 

according to government doctors. And that X-ray was what was 

used for her disability claim. 

And then when she went back to the doctor, he said to her, don’t 

you feel depressed now that you know your back is so bad? And, 

he said, let me send you to another doctor to attest to the fact that 

you have mental problems over it. 

And so, that is the type of word that gets out there that 

facilitators will help you. 

Senator Cotton. Let’s shift to the statistical evidence here, Dr. 

Duggan. You presented some fairly rigorous evidence here that 

shows that only about 40 percent of the rise in disability insurance 

is due to things like population growth, or the Baby Boom, or 

women entering the work force in the last three or four decades, 

all of which are healthy and predictable. 

Could you explain a little bit more about those findings, and the 

import of the findings for us? 
15 

Dr. Duggan. I’ll be happy to. I think it is helpful to just look 

at some of the numbers that I have summarized in the first table 

of my testimony on the second page. 

You can see there, it is true that SSDI enrollment has growth 

as more people have reached their 50s and 60s, where enrollment 

rates are higher, and as more women have entered the work force. 

But a bigger factor is that, sort of looking at a specific individual 

with specific characteristics over time, their likelihood of being on 

SSDI has gone up quite significantly. So let’s take men, for example, men in their 50s. 

So from that table, and this is pretty simple. This is just the 

number of SSDI recipients in the numerator, and the number of 

men 50 to 59 in the denominator. And you can see that in 1989 

that fraction was 5.8 percent. So, and we don’t—and there has not 

been an increase in the fraction insured for the program among 

men in their 50s. And so for 25 years later, that has growth by 50 

percent, from 5.8 percent to 8.7 percent. That is a pretty large increase. 

Similarly, if you look for women the increase has been from 2.9 

percent to 7.9 percent. It is true that the fraction of women insured 

for the program has grown, but that cannot begin to explain the 

magnitude of that increase. 

So a much bigger contributor to the growth in SSDI enrollment 

has been, that if you look within a specific category, look at men 

in their 50s, look at women in their 40s, and so forth, controlling 

for those things, so it is not vulnerable to that sort of compositional 

change, there has been this quite significant increase. And that is 

sort of taking a snapshot of things from the mid-1980s to today. 

Senator Cotton. In Arkansas we have looked at disability enrollment rates vs. population growth. Our State has 75 counties, 

and there is almost an exact inverse relationship. As the county’s 

population declines, disability insurance enrollment goes up. 

Do you have any thoughts on why that might be the case? 

Dr. Duggan. I think it is the case, so it is—previous research 

that I have done and that others have done have sort of demonstrated a link between economic conditions and applications for, 

and ultimately awards for the program. 

So, for example, if you look at the third figure of my testimony 

you can see that the unemployment rate and the SSDI application 

rate moved together quite closely. And so in general it tends to be 

the case that places where the population is declining, those tend 

to be places where the local economic conditions aren’t so great. 

And in general when local economic conditions are declining, you 

see a big, a pretty significant uptick in applications to the program. 

And it is pretty clear from Figure 3 that—the connection between 

economic conditions and applications for the program. 

Senator Cotton. Thank you. My time has expired. 

Chairman Coats. Senator Klobuchar. 

Senator Klobuchar. Thank you very much, Mr. Chairman. 

Inspector General, those who are seeking disability insurance already are experiencing a level of hardship most Americans do not. 

And then there is an average wait time of 114 days before an initial decision on a claim. 
16 

You talked about increased funding to help with that. How much 

of a decrease in wait times can we expect from this increase in disability determination services staff? 

Mr. O’Carroll. Well unfortunately I didn’t talk about the extra 

funding for SSA on that. One of our dealings with SSA is that I 

am monitoring what SSA does with the appropriation that they 

get, and the decisions that they make. And one of the things that 

we are always trying to do is get a balance between service and 

stewardship. 

We are trying to get SSA, one, to keep the wait times down. But, 

two, to make sure, while keeping the wait times down, that they 

are also doing as much due diligence as they can to make sure that 

the right person is getting the right benefit. 

Senator Klobuchar. And has there been a trend of increasing 

wait times over the years? And has that changed at all? Or do you 

see it changing? 

Mr. O’Carroll. Well there are a couple of things. Yes, the wait 

times are changing. Two, what we’re telling SSA to do, and what 

we do, is look at the different steps in the process and we rate 

them, and we try to make sure that all of them are doing the same 

delivery to the public. 

What we are finding is that in some states, the wait times are 

lower. And we are trying to address what they are doing in those 

states to try to bring it down in those states, that we are identifying as being longer. 

We try to keep that balance not only on the initial, but also on 

the hearing, level. 

Senator Klobuchar. Okay, thank you. 

Dr. Duggan, just quickly, in your testimony you noted that the 

recently passed Bipartisan Budget Act that I supported would establish demonstration projects to look at improving work incentives 

in the SSDI program. 

How do you think those should be designed? Because I know 

there’s been some problems with them in the past. 

Dr. Duggan. Well as an economist, I think a great way to design 

a project and to really isolate its effect would be to have some kind 

of a randomization in the allocation of the—in the incentives. 

So if it is the case that we have demonstration projects in which 

everyone in an area, or just nationally has the opportunity to sign 

up for changed incentives, let’s say a lower SGA threshold and different phase-out rate, or what have you, if everyone has that option, it is very, very, very difficult to reliably disentangle the effect 

of the incentive change from the very factors that are correlated 

with the decision to opt in. 

So it would be nice if—you know, I am not the one making these 

decisions—but as someone who will probably want to evaluate it 

one day, it would be great if there was a way to randomly—and 

that one can sort of mimic randomization in other ways, but that 

would give more hope. And we really do have a scarcity of evidence 

on the effects of these kinds of reforms. Whereas, in other countries—— 

Senator Klobuchar. We have—— 

Dr. Duggan. Yeah, Norway, for example, has done some stuff recently. 
17 

Senator Klobuchar. Are you going to bring up Denmark? That 

was a Bernie Sanders one. 

[Laughter.] 

Dr. Duggan. Okay. 

Senator Klobuchar. I will follow up with you in writing, because I wanted to ask one question—it wasn’t sarcastic, it was a 

little joke—one question of Ms. Vallas over there. 

And that is, thank you for talking about Veterans in your testimony. As we know, Veterans Day is upon us, and I believe that we 

have an obligation to these women and men who have signed up 

to serve us. And can you discuss what the Social Security Disability Insurance Program means to our Veterans? 

Ms. Vallas. Absolutely. Thank you for the question. 

The Disability Insurance Program is absolutely vital for Veterans, and more than one million of its beneficiaries are Military 

Veterans. 

I will share a story of someone that I’ll call ‘‘Mr. G’’ to protect 

his confidentiality. He is a Military Veteran. He was a tunnel rat 

in Vietnam. And long after his service, he ended up being in a car 

crash, a terrible, debilitating car crash that left him severely injured both cognitively and physically. 

And because it was not a service-connected injury, he was not 

able to access Veterans benefits. But Social Security Disability Insurance was there for him. And because of his DI, he is able to 

keep a roof over his head and food on the table and live independently. 

That is what DI means to Vets. 

Senator Klobuchar. That is a great example. Thank you. And 

thank all of you. And I will follow up as the State with the most 

Scandinavians of any State. I will follow up with you, Dr. Duggan, 

about your analogy with Norway. Thank you. 

[Questions for the record from Senator Klobuchar to Dr. Duggan 

appear in the Submissions for the Record on page 147.] 

Chairman Coats. Thank you, Senator. 

Senator Cassidy. 

[No response.] 

Chairman Coats. Senator Heinrich. 

[No response.] 

Chairman Coats. He’s gone. Let me see if I can catch somebody 

here. 

Congressman Grothman. 

Representative Grothman. I guess I will just ask some general 

questions of Dr. Duggan. We just did pass some things, as you 

know, in the Budget bill, but overall, you know, over time we’ve 

seen this growing, Social Security Disability caseload, and you certainly hear a lot of anecdotal evidence of people on disability who 

you would not think were on disability, or who you do not expect 

are disabled. 

Could you list, if you had your dream bill to kind of get things 

back to where they should be, maybe three top recommendations 

that we could do to get some people back to work, or to get some 

people off the program that probably should not be on the program? 
18 

Dr. Duggan. Sure. I am delighted to answer a question about 

my dreamwork. So I think it is, just to—thanks very much for the 

question. 

I think it is important to recognize that SSDI is a complicated 

program, and it serves many, many very vulnerable individuals 

with severe disabilities. 

I do think that intervening sooner with people before they are on 

the program, so that they do not end up applying for, or do not end 

up enrolled in the program, is—has a lot of promise for the program. 

So David Autor and I in a 2010 proposal put together some ways 

to try to stem the flow of people applying for and ultimately receiving the program. My sense is that intervening sooner with people 

before they apply has even bigger bang for the buck than trying to 

give incentives for people already on the program to return. 

So that is step one. Step one is intervening sooner and designing 

innovative ways to keep people who may consider applying for 

SSDI engaged in the work force and keep them working. Because 

the payoff for that is extremely, extremely high. 

A second one is regarding the Continuing Disability Reviews. It 

is the case that they have been pretty infrequent in recent years. 

There has been an uptick as the Inspector General was mentioning, but they have been at a much lower level in recent years 

than in previous years. 

And I think it is important for the program, for the integrity of 

the program, for us to sort of perform CDRs on people, especially 

those whom we think—where their health is likely to improve. And 

I am not a lawyer, so I do not understand the exact details of 

CDR’s work, but I do think there is a sense that there needs to be 

evidence of improvement, as opposed to the question of is the person disabled today or not. 

There is—I mean I think one thing about the process, about the 

disability application process, it seems plausible that with 21⁄2 million applications per year, sometimes mistakes are made. Clearly 

people who are applying think mistakes are made because they appeal the decisions. 

If a mistake, though, is made and an award is made when a person checks in with a CDR, it is more difficult to reverse that initial 

decision given the way the legislation is currently written. 

So in any case, I just think improvements in the number and 

sort of functioning of CDRs would have a big payoff to the program 

as well. 

And then I think on the ALJ front, as I mentioned almost 40 percent of SSDI awards were made on appeal, if you look at applications in 2010 for which we have relatively complete data. 

And one of the things about the hearings before ALJs is that 

typically a person is there with their representative but there is 

not—SSA is not necessarily—SSA is there in the form of the judge, 

but there is not a person there making the SSA’s case for why the 

decision was made in the first place. 

So I think sort of putting on a level playing field those hearings 

would be useful. That is a third. 

And then I mean just generally I think reforms to increase the 

incentive to work among current SSDI recipients, we can learn a 
19 

lot from I think welfare to—what happened with the TANF program in the 1990s about incentivizing people to return to work. 

And I think there is a way. It is a delicate balance, and it is important to be careful that we do not unwittingly harm people. But 

I think improving the incentives for people on the program, and 

hopefully these demonstration projects through this recent Budget 

Control, this recent budget that was passed, will lead to improved 

financial incentives for those on the program. 

Because right now with the cash cliff, you have a number of people who basically may be able to work but have a strong incentive 

not to because they risk going over the precipice and permanently 

losing their benefits. 

So I think it is—that combination of intervening sooner, CDRs, 

and incentives would be great. 

Representative Grothman. You are a really good witness. You 

gave me exactly a five-minute speech. 

Dr. Duggan. Oh, I’m sorry, I didn’t mean—— 

Representative Grothman. You practiced that last night. 

[Laughter.] 

Dr. Duggan. Thanks. 

Chairman Coats. You will be called back. We keep a list of people who go right at five minutes. 

Congressman Beyer. 

Representative Beyer. Thank you, Mr. Chairman. 

Inspector General O’Carroll, you noted that the Cooperative Disability Investigations have saved a lot of money, over $3 billion 

since—$3—$2.2 billion since 1998, $400 million alone in FY 2015. 

So the latest budget deal gives us a CDI in every state. Will there 

be enough money in these caps to fund them adequately? And how 

much difference will that make in the fraud? 

Mr. O’Carroll. Thank you, Congressman. For two reasons. One 

is, that’s something we’re very proud of in terms of a program that 

we have. With the CDI program, it’s a pre-fact situation. So before 

people start getting benefits, as we had mentioned before, as Dr. 

Duggan had mentioned, once you’re on it, it’s very difficult to take 

a person off it, especially if they scammed in getting it. 

So by having the CDI program before you get on, if there’s a suspicion, we can, investigate to see whether or not, what the person 

is attesting to is correct. 

Oftentimes we’ll validate the claim, if it is correct. But we find 

that CDI works very well. We think it is very good in all the states 

that we have it. 

Expanding it, I’ve got to admit, is going to be difficult for two 

reasons. One is, in the 37 that we have now, we’ve picked the 

states where we have the most cooperation with local law enforcement and the state DDSs. We have a presence of my agents there. 

We are able to roll them out. 

As we start looking at the other states we are going to be running into funding issues. It also becomes an issue in terms of securing cooperation with the states. 

To give you an example, in some states where we use state troopers to assist us, if we take those state troopers off of whatever is 

their regular daily assignment, they can’t replace them. So they 
20 

don’t want to send state troopers for these programs, even though 

it saves a lot of money for the state. 

So we are running into a lot of different resource issues. 

Representative Beyer. Thank you. Thank you, Inspector General. 

And, Ms. Vallas, in your testimony you talked about from 2013 

to 2014 SSDI enrollment declined, and that the share that actually 

qualified is the lowest ever. Does this suggest that we have turned 

the corner on SSDI growth? Or is it closely aligned with either demographic factors or the economy? 

Ms. Vallas. Thank you so much for the question. You are exactly 

right, and another data point that I will mention is that the growth 

in this program right now is the slowest that we have seen in 25 

years. 

So we knew that because of the rise of Baby Boomers into their 

high disability years of their 50s and their 60s, of women entering 

the work force in greater numbers, that we were going to see 

growth in this program. And in fact the actuaries projected back 

in the mid-1990s that 2016 would be the year when we would 

need—when Congress would need to act in order to prevent reserve 

depletion. And they predicted it right on the nose. 

What they could not have predicted, and what they did not predict, was the Recession. It was mentioned earlier that the Recession was alleged to have played a significant role in the growth in 

this program. The fact is, the Recession actually caused only 5 percent of long-term growth in the program. 

And that is largely not because of additional people receiving 

benefits, but actually a reduction in covered workers because of unemployment rates. 

So I just wanted to mention that I think it is important to note 

that while recessions are associated with application increases, 

what they are not necessarily associated with, and what we did not 

see in this past recession, was a rise in awards. We saw a decline 

in awards, as people were properly screened out who didn’t meet 

the strict definition of disability. 

Representative Beyer. Dr. Duggan cited some of his work to 

show that from 1989 to 2014 only a third of the growth of SSDI 

was due to demographic changes. But your written testimony has 

very different conclusions. Can you explain the difference? 

Ms. Vallas. So the paper that I will point you to that I think 

clears up a lot of the confusion about what the drivers of the 

growth have been is by Harvard Economist Jeffrey Liebman and a 

colleague of Dr. Duggan’s. And he took a look at the reasons for 

the program’s growth, and he looked back all the way to 1977. 

He looked using 1980, which was an unusual troth and a historic 

low point in the program because people were being thrown off the 

roles left and right for reasons we can go into if there are more 

questions about this. And he also looked at 1993. And what he 

found is that, whether you look at 1977, 1993, the lion’s share of 

the growth is explained by those demographic factors. 

Representative Beyer. Great. Thank you very much. 

Mr. Chair, I yield back. 
21 

Chairman Coats. Well I’m going to—since you had a little bit 

of time left, I am going to let Dr. Duggan respond to that. I think 

it is important that we hear both sides on that. 

Dr. Duggan. Right. No, I know Jeff Liebman well, and I know 

the study to which Ms. Vallas is referring. And I think it is important, when you think about what is happening with the growth of 

the program, it is really important to think about when do you 

start—when is time zero? 

So if you look from the first figure of my testimony, in 1977, if 

you looked at where SSDI enrollment was, it was growing quite 

rapidly. So basically it was on track to rise to much more than 2.7 

percent, which is where it was then. 

So if basically those award rates had persisted, the program 

would have grown to be much bigger, perhaps as large as it is 

today. But the thing is that in 1977, partly because the award 

rates were so high, there was a sense that the program needed to 

be reformed, and some reforms were undertaken during the Carter 

Administration to tighten up the eligibility standards. 

And you can see that actually the program enrollment started to 

decline in 1978 and 1979 and 1980, and then declined somewhat 

a bit more in the early 1980s. 

Then there was a change in policy in 1984 which increased the 

award rate. So it basically made it easier for people with more subjective conditions, things like back pain, things like mental disorders, to get on the program. 

That 1984 policy change led to an increase in the award rates. 

That increase in award rates had largely played out by let’s say the 

early 1990s, but you had then—the program was out of equilibrium. More people were coming on than were exiting it, so it 

grew. 

And then, so if you take, if you start looking at the program in 

1977 when it was growing really rapidly, or in 1993 when that policy change had taken effect, you can say, oh, the award rate, if we 

just hold the award rate at that level we’re right where we would 

expect to be. But if instead you look in 1985, right after that policy 

change, and you can see this from the figure from the first table 

of my testimony, that really what is driving it is this uptick in the 

award rates. 

And you can see that as well in Figure 2. If you look at sort of 

awards for musculoskeletal conditions. So the most common condition in musculoskeletal is back pain, and you can see there that the 

award rate for musculoskeletal is six times higher. So that’s musculoskeletal awards divided by people insured for the program, six 

times higher today than in 1983, and also substantially higher now 

than it was even in the late 1990s. Whereas things like heart conditions, circulatory neoplasms, cancer, have been pretty flat. 

So I think it is really important. I am very familiar with the 

Liebman study. If you start in 1977 and if you start in 1993, then 

what Ms. Vallas said, the award rates were high in those years, in 

one case before a big policy change to tighten it. In another case, 

after this policy change that had liberalized the criteria. But if you 

start instead in 1985, then it is the case that the majority is driven 

by the growth in the award rates. 
22 

So I apologize for the long-winded, but hopefully that sheds some 

light on it. 

Chairman Coats. Thank you. I just think it is important for the 

record as we look at it after we are done with all this and have 

to make decisions about going forward. 

Congressman Paulsen. 

Representative Paulsen. Thank you, Mr. Chairman. It has 

been referenced that SSDI is a critical and very important safety 

net for millions of Americans with disabilities. Unfortunately because of years of inaction, we came right up against the brink of 

having it be the first trust fund that essentially was set to run out 

of money. 

Now the recent budget deal, which has been referenced several 

times corrects that, it, had some really common sense reforms that 

were included to make sure we strengthen oversight. And integrity 

of SSDI, and a lot of those changes are actually aimed at simplifying the complex web of regulations that currently plague the program. 

Because for a lot of these beneficiaries, it is the confusion and 

the fear of having their benefits cut off that have prevented them 

from even testing out going back into the work force. 

That is despite 40 percent of these beneficiaries indicating they 

would like to return to work. So my question is, Dr. Duggan we 

took corrective action recently, but we have just prolonged—now 

we extended the trust fund until 2022. What happens if we wait 

another six years before we decide to fix SSDI again, versus trying 

to keep the momentum going and adopt some other reforms, preparing for the future? 

Dr. Duggan. Thanks so much for the question. 

So I think that it is, you know, SSDI reform is inevitably somewhat complicated and one needs to be careful about the possibility 

of unintended consequences. 

I do think the budget deal clearly pushes out the expiration of 

the trust fund several years. And that is something that I think is 

agreed is a good thing that that trust fund doesn’t hit zero and we 

see this automatic benefit cut across the board. 

But I do think the program has to a large extent been on auto 

pilot for decades. There have been some changes here and there, 

but I view them as kind of tweaks to the fundamental system. 

And so I think really there are opportunities to significantly reform the program so as to stem the flow of people enrolling initially, and to expedite the flow off of the program among those initially enrolling. 

And I don’t pretend to have all the—you know, a sense of what 

is the absolute perfect way to do that, but I think doing—trying 

hard to improve the work incentives both on the front end and on 

the back end could dramatically improve not just the fiscal health 

of the program but also the economic well being of people with disabilities. 

I mean to me it is really unfortunate that we look from let’s say 

1988 to 2008 employment rates among individuals with disabilities 

fell relative to those without disabilities. And along with that, their 

economic well being declined. And I think there is really a lot of 

scope for improving the incentives to return to work. And I think, 
23 

you know, the welfare reform there were mistakes made, and it’s 

not like every reform that was made was perfect, but I think we 

learned a lot about how to get people engaged in the work force. 

And there are gains not just—I mean, I think it is really important when thinking about the effects on work to think not just 

what’s it going to do next year, or the year after that. It can have 

really big lifetime effects on people’s aspirations, on their psychological health to be working, and also on, you know, their family 

members and so forth. 

So I think there’s really a lot that we can do, and I sort of take 

heart in looking at what happened in the 1990s. And by no means 

was it perfect, but I think incentivizing work—and I think that’s 

especially important when I look—I mean, I sort of feel each 

month, you know, to me the fact that we’ve got a labor force participation rate of 62.4 percent, and we have a demographic change 

that is just going to—it’s like the wind at the back of that thing 

continuing to fall. I think it is really important as a Nation for us 

to do more to get us incentivizing work. 

Representative Paulsen. All the more reason to have it be 

comprehensively looked at sooner rather than later. 

So, Inspector General O’Carroll, real quick, you know I think it 

was referenced earlier, but this GAO Study or report found that 

the Social Security Administration had overpaid beneficiaries who 

returned to work by like $11 billion over 9 years. And the SSA 

wasn’t able to recover like $1.4 billion of it because it was the agency’s fault. 

What can be done to make sure that the SSA is managing this 

program effectively? Do you think some of the changes in the recent budget deal, like allowing the SSA to use payroll provider 

data, is going to help? 

Mr. O’Carroll. Yes, Congressman. One of the things, as I had 

mentioned earlier, is that there’s a lot of available information that 

SSA should start using, from other government agencies. 

An easy example would be that one government agency is sending out a tax refund because a person is working, and at the same 

time SSA is sending out a check because they are indigent. 

That is the type of information government agencies have to be 

comparing. So that’s one of the concerns. 

The other part is, again, is just the due diligence and to be very 

cautious in terms of the benefits that are going out. What SSA 

says, and we applaud, is making sure that the right benefits go to 

the right person. 

And that’s the type of due diligence that we’re looking for to 

make sure that there are enough checks and balances, and that 

they are all being used. 

And that is in this bill that you just talked about. There are different due diligence requirements that we applaud and we like. It’s 

a step in the right direction, to start finding ways to identify where 

taking advantage of the system, and to block it. And then also to 

try to prosecute those who are taking advantage. 

Representative Paulsen. Thank you. 

Chairman Coats. Thank you, Congressman. 

Dr. Adams. 
24 

Dr. Adams. Thank you, Mr. Chairman. Thank you, Ranking 

Member as well, and thank you to all of you for your testimony. 

Mr. O’Carroll, even with the excellent work your office is doing, 

some people still cheat the system. How does the fraud in SSDI 

compare to IRS fraud, or improper payments in other programs, 

government programs? 

Mr. O’Carroll. Wow, Dr. Adams, a very good question. The reason it sets me back is that I had mentioned this earlier when we 

had talked about looking at improper payments with Social Security. 

One of the things we’ve been trying to do is identify what is the 

amount of fraud in SSA’s disability programs. I applaud SSA’s 

anti-fraud initiatives that are very important to them. They are 

making a lot of effort to identify and avoid fraud in the programs. 

But what we would like to do is to be able to estimate the fraud 

rate, so we can tell when we start doing different things and putting more money and more attention into the programs, which ones 

are effective at avoiding fraud. 

And as a result of that, we have looked at other government 

agencies. And unfortunately I can’t give you an answer as to how 

SSA compares to, for example, IRS, in that none of the other government agencies want to go on record saying that this is the 

amount of fraud in our agency. 

We can attest to the amount of improper payments in comparison to some of the other government agencies. SSA’s improper payment level is low, lower than a couple of the higher improper payment agencies. But I can’t give you an answer in terms of saying 

which program has more fraud, one amongst the others. 

Dr. Adams. Okay. 

Mr. O’Carroll. We would like to, and in a year I would like to 

come back and be able to tell you. So we are working with SSA and 

our oversight committees to do that. 

Dr. Adams. Okay. But with diligence and proper oversight and 

sufficient resources, are we making good progress in ensuring that 

this vital program is serving those who need it, and identifying 

those who don’t need it, Mr. O’Carroll? 

Mr. O’Carroll. In most cases, yes. I think those that need it are 

getting the benefits. I think that the system could be perfected so 

that it would be speedier for people to get it, so that there would 

not be a need for as much due diligence and as much attention that 

is being paid. 

As we said before, it is important to make sure that if a person 

is not entitled to the benefits, they don’t get them. And because of 

that, there are a lot of steps in the process. And I applaud them 

because it is keeping the system as good as it can be. But it can 

be better. 

Dr. Adams. Thank you. Dr. Duggan, in keeping on this topic of 

eligibility standards, many critics of the SSDI program say that an 

increase in SSDI cases contributed to a reduction in the labor force 

participation rate. 

So what are your predictions for the labor market and the SSDI 

program in the near term, given the improvements in the economy 

and the changes in the program’s entry and exit rates? 
25 

Dr. Duggan. Thanks so much for the question, Dr. Adams, Congresswoman. So the program has, as Ms. Vallas mentioned earlier, 

has actually flattened out in growth in the program. In fact, in 

2013 to 2014, the percentage of adults 25 to 64 actually declined 

somewhat. 

I talk a bit in my written testimony about the reasons for that. 

One that I think I want to draw your attention to is that there’s 

a recent report from the Technical Panel on Assumptions and 

Methods to the Social Security Advisory Board. 

What they are finding is that it appears that the medical—the 

decision making within SSA is becoming somewhat stricter, which 

is to say a smaller fraction of awards are being made today than 

two years ago, than four years ago, than six years ago. 

And so as Ms. Vallas also mentioned, a fraction of applications 

resulting in an award in 2014 was at its lowest level actually in 

the history of the program. So it is I think—and I don’t know exactly what is driving that, but there has been a decline in the 

award rates for the program. 

And I think that is causing the program to flatten out, along 

with the fact that aging has sort of run its course somewhat. I do 

think that—so I look to that Technical Panel. They tried to project 

where SSDI enrollment was headed, and the actuaries do this as 

well. 

I don’t think, based on current trends, it is set to explode over 

the next 25 years the way that it did over the last 25 years. I think 

that, absent some sort of policy change, it seems plausible that it 

will remain in the neighborhood of 5 percentage points plus or 

minus half a percentage point for some time. 

That is not to say that that necessarily is the right fraction to 

have, but that is I think where it will stay. 

As for the economy, I really hope that the labor force participation rate starts moving in the opposite direction. We have seen— 

you know, I sort of keep hoping for that thing to stop trending 

down. It’s down 3.7 percentage points from several years ago. And 

that is a big deal. So I hope—you know, we have seen steady, consistent job growth but not sufficient job growth to break this trend 

of a declining labor force participation rate. 

So I am hopeful, but I am troubled by the trends that we see in 

that measure. 

Dr. Adams. Thank you. I yield back. 

Chairman Coats. Dr. Adams, thank you. 

The Ranking Member has a UC request here. 

Representative Maloney. I ask unanimous consent to place in 

the record a Policy Futures Report from the Center on Budget and 

Policy Priorities. And also Understanding the Increase in Disability 

Insurance Benefit Receipt in the United States by Jeffrey Liebman. 

And the Policy Futures shows that the disability insurance rules 

largely reflect democratic—demographic factors, and that it is highest among older workers, which is understandable. So both of these 

are important reports for the record. 

Chairman Coats. We will make sure both of those are admitted 

into the record. 

Representative Maloney. Thank you. 
26 

[The report titled ‘‘Chart Book: Social Security Disability Insurance’’ submitted by Representative Maloney appears in the Submissions for the Record on page 39.] 

[The report titled ‘‘Understanding the Increase in Disability Insurance Benefit Receipt in the United States’’ submitted by Representative Maloney appears in the Submissions for the Record on 

page 63.] 

Chairman Coats. Congressman Schweikert. 

Representative Schweikert. Thank you, Mr. Chairman. 

Inspector General, you have commented that SSA’s data sets are 

thin, or their ability to compare to other sets of data. Have you actually had the opportunity to do some geographic testing for why 

there may be a concentration in some areas with much higher acceptance, participation, claim rates than other areas? Have you 

seen that? 

Because there used to be a Member who retired last year named 

Spencer Bachus, and he used to claim that in his State he had two 

counties that had more people on SSDI than actually were holding 

jobs. 

First off, do you use those geographic concentrations to understand outliers and problems within the program? 

Mr. O’Carroll. Yes. The easy answer is, yes, we try to use that 

information. What we’re always looking for is the outlier. We’re 

looking at the bell curves. We’re trying to find which outliers on 

the bell curves are the ones that need attention. 

And that is one of the tasks of an audit staff, looking for those 

irregularities. 

Representative Schweikert. But for you to be able to do your 

job better, you actually need much more communication of data 

sets? 

Mr. O’Carroll. Absolutely. 

Representative Schweikert. Whether they be IRS data sets, or 

much of the private sector data sets that may be used to create 

credit scores, or other things where they are collecting tremendous 

amounts of consumer data down to the individual. If you had the 

ability to match up against those, would that actually give you 

tools? 

Mr. O’Carroll. Yes. It would give us tools. We are trying to use 

it, but we’re not using as much as we could. There’s a lot of information out there; that type of mapping that would help us a lot, 

and we haven’t used it as much as we should. 

Representative Schweikert. Okay, Doctor, I was earlier hearing a little back and forth that was sort of questioning your math. 

But, let’s see. Your Masters is from MIT, and your Doctorate is 

from where? 

Dr. Duggan. From Harvard. 

Representative Schweikert. Okay. So I assume somewhere 

around here you qualify as the freaky smart category of our population. Just because earlier in the year we had one of your kind in 

my office working with us, looking at some of these original data 

sets, and if I remember we were actually looking, saying why is the 

population within the program seems to be flattening out? 

And all of you who remember your quant classes, on the downside of a spike is a mean or a normalization. So from your demo-
27 

graphics, okay, you have a demographic trend moving to actually 

benefits, Social Security, Medicaid, but you also had the downside 

spike. And now you’ve just shared with us that there may have 

been some policy set changes. 

Dr. Duggan. Yes. 

Representative Schweikert. Would those, if I lined those up, 

be pretty explanatory that we’re actually not in the downside, we’re 

just sort of moving back to the mean? 

Dr. Duggan. Yes, thanks very much for the question, Congressman. I think given the current environment, the program is to 

some extent close to being in equilibrium, which is to say given the 

current award rates, the current demographics, what’s coming 

down the pike on the demographic front, I think we are somewhat 

in equilibrium. 

I think that equilibrium rate would be higher if award rates did 

not seem to have gotten tougher. 

Representative Schweikert. But theoretically with our demographics getting older, we should be actually moving in the other 

direction. If I have a substantial portion of my population that’s actually moving into earned benefits right now, shouldn’t actually my 

participation in SSDI actually be falling? 

Dr. Duggan. Yeah, I think if we sort of look ahead and see what 

the proportion, let’s say, of people 25 to 34, 10 years out will be 

relative to the people 55 to 64, I think there may be a bit of that, 

but I don’t think it will—so I think I agree that this could push 

it down somewhat. 

But to some extent the age distribution is somewhat flatter now. 

We’ve got sort of 4 million people at many of these ages, so 61-yearolds, 51-year-olds. 

Representative Schweikert. Hasn’t some of the authorship 

said, though, the change in the way we work also should have also 

flattened out or reduced these numbers, you know, the number of 

folks who are out there actually doing truly hard labor, with the 

automatization, something is just not lining up? 

Dr. Duggan. So, yeah, so if you look at how physically demanding jobs are, I think they have become less physically demanding 

over time. And that is reflected, if you look let’s say at Workers 

Comp as a share of payroll. That has actually come down somewhat. 

Representative Schweikert. I have like 15 seconds, and I 

wanted to throw two questions. The Liebman, that report was out 

last year? 

Dr. Duggan. Yep, or this year. 

Representative Schweikert. I think it was in our office earlier, 

and I think wasn’t the problem with that was it was doing smoothing, even though there had been policy changes, and obviously 

some fairly substantial economic cycles within that—— 

Dr. Duggan. Right. 

Representative Schweikert [continuing]. And you cannot do 

that without doing adjustments to see your trend line? 

Dr. Duggan. Right. 

Representative Schweikert. I mean that was just basically, 

the term ‘‘garbage in/garbage out’’ fits that? 
28 

Dr. Duggan. Yeah. I think very highly of Jeff Liebman. For the 

reasons I mentioned and some others, I think it is important to 

sort of look at the whole study. And I think if you look at it from 

1985, you get a very different story. 

Representative Schweikert. The last thing, and forgive me, 

Mr. Chairman, if a policymaker truly wanted to do the right thing 

here, and a powerful belief that work is incredibly honorable both 

for the human spirit but for just life in general, where do I reach 

and see where there’s been policy adopted where folks who were on 

disability actually had an on-ramp back to what you and I might 

refer to as sort of normality? And what do we have to do policy 

wise to make that practical, both from the rational actor thinking 

themselves economically to even society, and our labor force participation. What would be the approach we should take? Where can I 

find that history? 

Dr. Duggan. So on the front end, I would say improving—so 

right now we have this cash cliff. If you go above $1,090 a month 

in earnings, you risk being terminated from the program permanently. So I think sliding out the benefits somewhat beyond that 

point so that there isn’t this sort of sense of I don’t want to go over 

the precipice, I just want to park below $1,090 and not earn above 

that amount. I think that would be one piece of low-hanging fruit 

that would incentivize work. 

On the front end, though—— 

Representative Schweikert. So it is—— 

Dr. Duggan. Oh, go ahead. 

Representative Schweikert. No, please. 

Dr. Duggan. So on the front end, though, I think there are a 

number of things. So, one, we talk a lot about lag times. So there 

is research, when a person is applying and they are waiting to hear 

back, they are staying out of the labor force because you need to 

not be working if your application is going to be considered unless 

you’re doing—you know, we talked about some program integrity 

type stuff. Those long wait times, especially for the people on appeal, those are problematic because they’re reducing the employment potential even on people who never get on the SSDI program. 

Representative Schweikert. So from both ends. 

Dr. Duggan. Right. 

Representative Schweikert. We seem around here quite willing to do pension smoothing, and we all know how, let’s face it, a 

fraud that is. Maybe we could do something that is actually useful, 

and some pension smoothing on that cliff. 

Dr. Duggan. Right. 

Representative Schweikert. And be—I think benefit smoothing. 

Dr. Duggan. And we can learn something. You know, the population served by welfare, temporary assistance to needy families 

and the SSDI population are somewhat different, so it’s not like— 

but I think learning somewhat from that experience, and trying to 

translate some of that knowledge to this program so that we can 

improve our work incentives both for people—there’s people on the 

program, and then there’s people who might go on the program in 

the future. 
29 

And those are two different groups. And the interventions, moving away from this kind one-size-fits-all approach to approach that 

is somewhat more flexible and nimble I think could, you know, 

really substantially increase employment among, of this group. 

Representative Schweikert. Thank you for your patience, Mr. 

Chairman. 

Chairman Coats. Thank you. I am told Senator Lee is on his 

way back. While he’s not here yet, the Ranking Member would like 

to I think—— 

Representative Maloney. I would like to make some points 

that are in my opening statement. But first, if I could, ask Ms. 

Vallas if she would like to respond to Duggan’s points about work 

incentives. 

There has been a lot of talk about it today. How many can we 

expect to return to work? Personally, I love to work. I’ve got to 

think most people want to work. This is just a problem that is a 

life raft to many people that are out of work. 

But I would like you to respond to his points—and really, realistically in the work that you have done, how many can we expect 

to return to work? 

Ms. Vallas. Thank you so much for the question. I really appreciate it. 

You mentioned that SSDI can be a life raft for people. I think 

what we need to be careful not to do is to blame the life raft for 

the floods. 

So it is important on the one hand to be aware of the work incentives that already exist, and to understand how they work. I think 

it is also important to understand what other types of policies we 

need that do not necessarily lie within the Social Security Disability Insurance Program, and which could help stem that flow of 

people onto the program. 

So just to quickly explain the work incentives that do exist. Individuals receiving these benefits are allowed to earn up to $1,090 

per month and keep every one of those dollars, and not lose a single dollar in their benefits. They are allowed to do that. And about 

one in six beneficiaries do do some work at any given point during 

the year. 

However, fewer than one in six have earnings of even $1,000 

during the entire year. And just 3.9 percent earn more than 

$10,000 during the year. Hardly enough to support themselves. 

So extremely limited work capacity of the vast majority of people 

who are on this program. I would agree wholeheartedly with Dr. 

Duggan that what we need to be doing is looking at earlier in the 

process before people get to the doors of the Social Security Administration. 

And I will read you a quote from the National Council on Disability that I think sums this up really well: 

‘‘Receipt of Social Security Disability Benefits is merely the last 

stop on a long journey that many people with disabilities make 

from the point of disability onset to the moment at which disability 

is so severe that work is no longer possible. All along this journey, 

individuals encounter the policies and practices of other systems involved in disability and employment issues.’’ 
30 

So I welcome this bipartisan conversation about how we can support employment among people with disabilities, but we will be incredibly myopic if we limit our focus only to the DI program. We 

need to be thinking about policies that are critical for workers with 

disabilities such as paid leave, and paid sick days, and ensuring access to long-term supports and services. 

These are the kinds of policies that will make it possible for people to stay at work longer and not need to access DI benefits. And 

I would hope that they will be part of the mix as we continue to 

look at this important program and issue. 

Representative Maloney. Okay. I want to thank you for all of 

your perspectives, and particularly Chairman Coats for calling today’s hearing. The Social Security Disability Insurance Program is 

a critical part of our safety net that protects each of us in the event 

of a life-changing injury or illness prevents us from working to 

earn a living. 

We all have an interest in making this program as strong and 

successful as possible. And the recent Budget Agreement extended 

solvency of the Disability Insurance Trust Fund through 2022, and 

took important steps to bolster anti-fraud programs and to 

strengthen program integrity. 

But today we did hear concerns about the SSDI. We did hear 

that SSDI is plagued by fraud and abuse; that the program is 

growing at out-of-control rates, that it is easy to get on SSDI and 

that it discourages work. 

These assertions are largely not supported by the facts. SSDI is 

an insurance program. Workers earn benefits by paying a small 

tax, less than one percent of their taxable income, over years of 

work. The typical disabled worker worked for 22 years before becoming disabled, and none of us knows if he or she will need disability benefits at some time in our lives. 

But a young person starting her career or his career today has 

a one in four chance of needing SSDI before reaching retirement. 

Today there are nearly 11 million SSDI beneficiaries, including 

nearly 9 million disabled workers, and almost 2 million spouses 

and children of disabled workers. Those who receive benefits face 

severe and long-lasting impairments, including Alzheimer’s, cancer, 

blindness, lupus, multiple sclerosis, and many other diseases. 

SSDI benefits are modest, but critical. The average monthly benefit, as Ms. Vallas has said, is $1,165, slightly over the poverty line. 

SSDI is the only source of income for one in three beneficiaries, 

and it is the main source of income for more than four in five. 

There are several misconceptions about SSDI. I hope that today’s 

hearing has cleared up some of these misconceptions. I would say 

the number one is that it is rift and filled with fraud, and we have 

seen vivid cases of fraud in the media, for example, a man doing 

yard work while collecting disability. 

And let’s be clear that any fraud or misuse of the system is a 

waste of taxpayer money. It is unacceptable and really needs to 

stop. However, SSDI fraud is rare, according to the Social Security 

Administration, the improper payments rate was less than one percent in fiscal year 2013. 
31 

The IG of the Social Security Administration is here today to tell 

us about successful fraud fighting initiatives like the Cooperative 

Disability Investigations, and Continuing Disability Reviews. 

Every dollar spent on CDI efforts to investigate initial claims, for example, saves as much as $17. So these are powerful programs, 

and I am pleased that the Budget Agreement doubles CDI capacity 

to track down people who are trying to claim disability unfairly. 

And it is a credit to Mr. O’Carroll and to the IG’s office that this 

work is tracked carefully so as policymakers we are not forced to 

make decisions on the basis of anecdotal evidence. 

So let us use hard data to make sure that SSDI serves the people 

who really need it. 

The number two misconception, I believe, is SSDI is growing at 

out-of-control rates, driven by people who did not really need the 

benefits. The overwhelming body of evidence shows that the growth 

in SSDI beneficiaries and program costs is largely due to demographic changes like the aging of the Baby Boomers and the huge 

increases in the number of working women. 

As the Baby Boomers have aged, they have moved into age 

brackets that are more prone to disability. A worker is twice as 

likely to be disabled at 50 as 40, and twice as likely at 60 as 50. 

This alone drives a large part of the increase in the number of people who receive disability benefits. 

Likewise, as women have entered the work force in greater numbers, they became eligible for SSDI. While women accounted for 

less than 40 percent of those insured for SSDI in 1980, they make 

up close to half of those insured for benefits today. 

The Center on Budget and Policy Priorities finds that nearly 70 

percent of growth in SSDI beneficiaries since 1980 is explained by 

demographic factors. New peer-reviewed research from Harvard 

Economist Jeffrey Liebman confirms the key role demographic factors have played. But these trends have generally played themselves out. As Baby Boomers continue to age and move from disability to retirement, the increase in beneficiaries has reached its 

lowest level in more than 30 years. 

The third misconception is that SSDI is easy to get. Not so, as 

Ms. Vallas pointed out. The United States has among the most 

stringent eligibility criteria. Applicants must provide extensive 

medical documentation of the disability, and show that they are 

unable to do their prior job, and any job in the national economy. 

And that is a high bar. 

In fact, about two-thirds of disability insurance applications are 

denied. And as Dr. Duggan notes in his testimony, in 2014 the 

share of applicants approved for SSDI was at the lowest level in 

history. 

Another large misconception, number four, once on disability 

beneficiaries have no incentive to return to work. In fact, SSDI allows beneficiaries to earn $1,090 a month with no impact on benefits. In other words, beneficiaries who receive disability have a very 

high incentive to work. 

The Budget Deal calls for more initiatives to test whether 

smoothing out the so-called ‘‘cash cliff’’ and replacing it with a 

gradual offset would help more people to increase their work and 

earnings. And the Obama Administration has advocated for early 
32 

intervention strategies to help keep disabled workers employed and 

off the DI rolls in the first place. 

And both ideas are worth exploring. But we must recognize that 

most SSDI recipients simply cannot work. They struggle with injuries and illnesses. They have earned those benefits, and any one of 

us could be in that situation. And that is why we need and must 

protect Social Security Disability Insurance. 

And I thank the Chairman for allowing me to put my comments 

in the record. And I see the Senator has returned. 

Chairman Coats. We welcome Senator Lee, because we would 

have closed out thinking that perhaps you weren’t going to come, 

but we are glad you did. And the timing is perfect. 

Senator Lee. Thank you very much, Mr. Chairman. And thank 

you, Representative Maloney, for accommodating my schedule. 

Chairman Coats. Let me just state this, also, for the benefit of 

the Ranking Member. The hearing record will as usual remain 

open for five business days for questions to be put in the record. 

Senator Lee. 

Senator Lee. Thank you very much. Thanks to all of you for 

being here. 

Dr. Duggan, I would like to talk to you for a minute. You, along 

with David Autor, talked about the role that private disability insurance might be able to play in alleviating some of the pressure 

that is currently brought to bear on the SSDI program. 

While I personally don’t think that mandatory private disability 

insurance is an appropriate, feasible path forward, I have been 

working on a proposal that would provide an incentive by a payroll 

tax reduction for employers and self-employed individuals to purchase private disability insurance, creating something of an incentive for them to buy it. 

Relative to your proposal of universal private disability insurance, I would like to get your perspective on an incentivized employer option to provide private disability insurance for two years 

of insurance coverage at 50 percent, at a rate of 50 percent of a 

covered individual’s income. 

The incentive would be a reduction in payroll tax liability by 0.25 

percentage points of the employer’s side payroll taxes, would last 

no longer than two years, and may require medical treatments for 

plan participants if such treatments may provide the—may improve the individual’s ability to work. 

Can I just get your thoughts on that, whether you think that 

would help? 

Dr. Duggan. So I think—so, yes, David Autor, Professor Autor 

and I put together a proposal that involved private disability insurers, partly because private disability insurers are able to move 

away from a sort of one-size-fits-all approach, and instead tailor 

somewhat whatever interventions they make with individuals to 

the specifics of the person. 

So to give you a sense of what we had in mind, just to give you 

a quick recap and then to connect to yours, was the idea that private disability insurer would have a vast amount of experience 

with getting people back to work, covering people let’s say for disabilities that they incur, but helping them get back to work and 

working with the employer because both then the private disability 
33 

insurer and the employer have skin in the game to some extent to 

get this person, to help this person’s health improve and to keep 

them engaged in the work force. 

And the Netherlands has had some experience with this, and 

Richard Burkhauser at Cornell has written some on this, and the 

evidence from the Netherlands indicates that this has led to reduction in enrollment, ultimately, in their public disability programs 

because the private disability insurers can sort of help individuals 

address whatever disabilities they have, improve their health 

somewhat, and stay engaged in the work force 

So there are lots of examples of things that an insurer can do. 

But to some extent that kind of rapid early intervention that insurers are good at, that the private insurers can be good at, can be 

a way to keep people from going into public disability insurance for 

a long time. 

Senator Lee. Okay, so you think there is a possibility that this 

kind of thing could work, if you provide some incentive for the employer, or for self-employed individuals that might help? 

Dr. Duggan. Yes. You know, with something like this the devil 

is in the details, but I think part of the reason that Autor and I 

looked into that was based on our own research and reading of the 

research out there, was that this would be a good way to stem 

flows to the program by moving away from somewhat of a one-sizefits-all approach. 

Senator Lee. Right, right. And incentivizing the kind of behavior that will lead to fewer risks for the system. 

Dr. Duggan. Yes, exactly. I mean I think that’s part of the reason that Worker’s Comp, for example—Worker’s Comp isn’t always 

working perfectly, but it is the way that it’s designed. And I know 

it’s mandatory and this wouldn’t be mandatory, but basically the 

insurers and the employers are on the same page with respect to 

wanting to keep people off the program in the first place. And if 

they get on it, get them back to work as quickly as possible. 

Senator Lee. Right, right. I thank you for your response to that 

and for your input. And I would love to continue to get your input 

as this idea is developed. 

Dr. Duggan. Yeah, if I can help in any way, it is an area—disability is an area I have been working on for a long time, and if 

I can help with my own research on anything I am happy to help 

anyone on improving the program. 

Senator Lee. That is very helpful. I think it is important to talk 

about other reforms to SSDI, but I do want to highlight the fact 

that the private group long-term disability insurance, according to 

one study, already saves federal programs $2 billion a year. 

And so I think this is an area that is very much ripe for exploration and am glad to have had this discussion with you. And I 

thank you for your input. 

Dr. Duggan. And just one last thing on that. One-third of workers do have private disability insurers through their employers. So 

right off the bat there is a set of people who already have a private 

disability coverage. So it’s just worth nothing. 

Senator Lee. Great. Thank you very much. 

Thank you, Mr. Chairman. 
34 

Chairman Coats. Thank you, Senator. I want to thank my colleagues. As the witnesses and those who are here have seen, there 

is a significant interest in this subject. I particularly want to thank 

our witnesses. I thought it was a very constructive discussion. All 

three of you participated and gave us a lot of information I think 

that will be helpful in dealing with reforming a program that is a 

necessary program for obviously those who qualify, and something 

we want to show that we have taken the efficiencies and the effectiveness to make this a program we can all be proud of. 

So thank you very much for this. And with that, this hearing is 

closed. 

(Whereupon, at 4:12 p.m., Wednesday, November 4, 2015, the 

hearing was adjourned.) 
(35) 

SUBMISSIONS FOR THE RECORD 
36 

PREPARED STATEMENT OF HON. DAN COATS, CHAIRMAN, JOINT ECONOMIC

COMMITTEE

The committee will come to order. 

First, I want to thank Senator Cotton for asking the Committee to examine how 

we can improve the Social Security Disability Insurance program. 

The SSDI program was originally created as a safety net for primarily older workers whose disabilities prevented them from working. In the subsequent decades we 

have witnessed an expansion of program eligibility, accompanied by a sharp increase in the number of claimants. 

As of today, nearly nine million Americans receive Social Security Disability Insurance benefits, including almost five percent of working age adults. In total, SSDI 

accounts for about 15 percent of benefits paid through the Social Security Administration. 

While the SSDI program was originally crafted to maintain the principles of rehabilitation and return to work, statistics show that this rarely happens today and the 

program’s underlying structure disincentivizes many from working. 

The Bipartisan Budget Act, passed by Congress last week, did take some steps 

toward improved SSDI program operation. For instance, the SSDI program will 

begin to test an alternative to the current ‘‘cash cliff’’ in an effort to address disincentives for claimants to return to work. The bill also includes important program 

integrity reforms, such as enhancing fraud enforcement and deterrence measures as 

well as requiring regular case reviews to confirm claimant eligibility. 

While these actions are useful, they do not address the long-term solvency questions facing the SSDI program. As a result, last week’s budget agreement temporarily shored up the program by transferring funds from the Old Age and Survivors 

Trust Fund. 

Today, we want to examine how we can ensure success for the Social Security Disability Insurance Program and its beneficiaries over the long term. This includes 

measures to assist the successful transition of individuals to the workplace, which 

impacts their personal well-being as well as the fiscal sustainability of the program. 

We must also ask how current administrative processes can be reformed. The current SSDI program review and appeal system is burdened by a backlog that increases risk of fraud and slows awards of benefits to individuals who need them. 

The SSDI program is also plagued with improper payments. Just last week, the 

Government Accountability Office outlined billions of dollars in overpayments. The 

Social Security Administration Inspector General, here with us today, has also studied this issue, finding overpayments to 44.5 percent of sampled claimants. 

There is clearly much work to be done to improve the administration of the SSDI 

program. 

I would like to welcome our witnesses and thank them for being here today to 

discuss how we can address all these issues and leave with a better understanding 

of steps we should consider to improve the SSDI program for both current and future claimants. 

I now recognize Ranking Member Maloney for her opening statement. 

PREPARED STATEMENT OF HON. CAROLYN B. MALONEY, RANKING DEMOCRAT, JOINT

ECONOMIC COMMITTEE

Chairman Coats, thank you for calling today’s hearing. The Social Security Disability Insurance (SSDI) program is a critical part of our safety net that protects 

each of us in the event of a life-changing injury or illness that prevents us from 

working and earning a living. We all have an interest in making this program as 

strong and successful as possible. 

The recent budget agreement extended the solvency of the Disability Insurance 

Trust Fund through 2022 and took important steps to bolster anti-fraud programs, 

strengthening program integrity. 

Nevertheless, it’s likely that some concerns about SSDI will be raised this afternoon. We may hear that SSDI is plagued by fraud and abuse; the program is growing at an out-of-control rate; it’s easy to get SSDI; and the program discourages 

work. 

These assertions are largely not supported by the facts. 

SSDI is an insurance program. Workers earn benefits by paying a small tax—less 

than 1 percent of their taxable income—over years of work. The average beneficiary 

worked for 22 years before becoming disabled. 

None of us knows if we will need disability benefits sometime in our lives. But 

a young person starting her career today has a one in four chance of needing SSDI 

before reaching retirement. 
37 

WHO RECEIVES DISABILITY BENEFITS

Today, there are nearly 11 million SSDI beneficiaries, including nearly 9 million 

disabled workers and almost 2 million spouses and dependent children of disabled 

workers. 

Those who receive benefits face severe and long-lasting impairments including 

Alzheimer’s, amputations, cancer, congestive heart failure, blindness, lupus, gastrointestinal hemorrhaging, cerebral palsy, multiple sclerosis, traumatic brain injury, 

intellectual disability, schizophrenia and severe depression. 

SSDI benefits are modest, but critical. The average monthly benefit is $1,165— 

slightly over the poverty line. SSDI is the only source of income for one in three 

beneficiaries. It is the main source of income for more than four in five. 

There are several misconceptions about SSDI. I hope that today’s hearing can 

help to clear up some of the more common ones. 

MISCONCEPTION #1: SSDI IS RIFE WITH FRAUD

We have seen vivid cases of fraud in the media—for example, a man doing yard 

work while collecting disability payments. Let’s be clear—any fraud or misuse of the 

system is a waste of taxpayer money and is unacceptable. 

However, SSDI fraud is rare. According to the Social Security Administration, the 

improper payment rate was less than one percent in FY 2013. 

The Inspector General of the Social Security Administration is here today to tell 

us about successful fraud-fighting initiatives like Cooperative Disability Investigations (CDI) and Continuing Disability Reviews. 

Every dollar spent on CDI efforts to investigate initial claims, for example, saves 

as much as $17. These are powerful programs and I’m pleased that the budget 

agreement doubles CDI capacity to track down people who are trying to claim disability benefits unfairly. 

It is a credit to the Inspector General that this work is tracked carefully, so as 

policy makers we aren’t forced to make decisions on the basis of anecdotal evidence. 

Let’s use hard data to make sure that SSDI serves the people who really need it. 

MISCONCEPTION #2: SSDI IS GROWING AT AN OUT-OF-CONTROL RATE DRIVEN BY PEOPLE

WHO DON’T REALLY NEED DISABILITY BENEFITS

The overwhelming body of evidence shows that the growth in SSDI beneficiaries 

and program costs is largely due to demographic changes like the aging of the baby 

boomers and the huge increases in the number of working women. 

As the baby boomers have aged, they have moved into age brackets that are more 

prone to disability. A worker is twice as likely to be disabled at age 50 as at 40, 

and twice as likely at age 60 as at 50. This alone drives a large part of the increase 

in the number of people who receive disability benefits. 

Similarly, as women have entered the workforce in greater numbers, they became 

eligible for SSDI. While women accounted for less than 40 percent of those insured 

for SSDI in 1980, they make up close to nearly half of those insured for benefits 

today. 

The Center on Budget and Policy Priorities finds that nearly 70 percent of growth 

in SSDI beneficiaries since 1980 is explained by demographic factors. New peer-reviewed research from Harvard economist Jeffrey Liebman confirms the key role demographic factors have played. 

But these trends have generally played themselves out. As baby boomers continue 

to age and move from disability to retirement, the increase in beneficiaries has 

reached its lowest level in more than 30 years. 

MISCONCEPTION #3: IT’S EASY TO GET SSDI

This is not so. The United States has among the most stringent eligibility criteria 

in the OECD. 

Applicants must provide extensive medical documentation of their disability and 

show that they are unable to do their prior job and any job in the national economy. 

That’s a high bar. 

In fact, about two-thirds of disability insurance applications are denied. And as 

Dr. Duggan notes in his testimony, in 2014 the share of applicants approved for 

SSDI was at its lowest level in history. 
38 

MISCONCEPTION #4: ONCE ON DISABILITY, BENEFICIARIES HAVE NO INCENTIVE TO

RETURN TO WORK

In fact, SSDI allows beneficiaries to earn $1,090 a month with no impact on benefits. In other words, beneficiaries receiving disability have a very high incentive to 

work. 

The budget deal calls for more initiatives to test whether smoothing out the socalled ‘‘cash cliff’’ and replacing it with a gradual offset would help more people to 

increase their work and earnings. 

And the Obama Administration has advocated for early intervention strategies to 

help keep disabled workers employed and off the SSDI rolls in the first place. 

Both ideas are worth exploring. 

But we must recognize that most SSDI recipients simply cannot work—they 

struggle with debilitating injuries and illnesses. They have earned these benefits. 

Any one of us could be in that situation. And that is why we need and must protect 

Social Security Disability Insurance. 
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QUESTIONS FOR THE RECORD FOR DR. MARK DUGGAN SUBMITTED BY SENATOR AMY

KLOBUCHAR AND RESPONSES

DISABILITY DEMONSTRATION PROGRAMS AND LESSONS FROM NORWAY

Dr. Duggan, in your testimony you noted that the recently passed Bipartisan Budget Act of 2015 would establish demonstration projects to look at 

improving work incentives in the Social Security Disability Insurance 

(SSDI) Program. Yet, past work programs have not had strong results. You 

also discussed the evidence from other countries, specifically Norway, 

which may be helpful in designing the demonstration projects called for 

under the Bipartisan Budget Act of 2015. 

As we design these work incentive demonstration projects, what recommendations do you have for project design? What are the lessons 

learned from past efforts? 

It would be important to work with an organization that has a demonstrated 

track record of successfully implementing large-scale interventions. Additionally 

academic researchers with relevant expertise should be involved, as they can bring 

additional insights from other disciplines and are focused on producing research 

that is of sufficiently high quality for eventual publication in peer-reviewed outlets 

(with this peer review serving as a useful discipline device to improve the ultimate 

product). It also would be important to have a large sample size in the study and 

to randomize individuals to a control group and to one or more treatment groups. 

Multiple treatment groups could be used to test the effects of alternative changes. 

For example, to investigate the effect of changes in work incentives for current SSDI 

recipients, there could be multiple treatment groups with different benefit offset 

rates. 

As documented in a recent report by the Congressional Research Service, there 

has been limited success to date in implementing SSDI demonstration projects: 

http://greenbook.waysandmeans.house.gov/sites/ 

greenbook.waysandmeans.house.gov/files/RL33585.pdf 

For example, the Benefit Offset National Demonstration (BOND) had several implementation problems, with the Social Security Advisory Board even calling for the 

termination of this demonstration. 

What are the lessons learned from other countries, specifically Norway? 

Recent evidence from Norway demonstrates that improving work incentives for individuals receiving disability benefits can increase employment and the exit rate 

from the program (Kostol and Mogstad, 2014). While the effects are substantial, the 

fraction that exits the program remains relatively small. This suggests there is limited scope for work incentives for SSDI recipients alone to improve labor market 

outcomes for individuals with disabilities. My 2010 paper with David Autor proposed additional efforts on the ‘‘front end’’ of the program to reduce the flow of individuals onto SSDI in the first place. 

Thank you for these questions and I hope that my responses are helpful to you. 

Please feel free to contact me in the future if I can ever be of assistance. 

Æ