United States General Accounting Office

GAO Report to Congressional Committees

March 1997 SOCIAL SECURITY

Disability Programs

Lag in Promoting

Return to Work

GAO/HEHS-97-46

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-275774 

March 17, 1997

The Honorable William V. Roth, Jr.

Chairman

The Honorable Daniel Patrick Moynihan

Ranking Minority Member

Committee on Finance

United States Senate

The Honorable Bill Archer

Chairman

The Honorable Charles B. Rangel

Ranking Minority Member

Committee on Ways and Means

House of Representatives

Each week the Social Security Administration (SSA) pays over $1 billion in

cash benefits to people with disabilities who are beneficiaries of Disability

Insurance (DI) and Supplemental Security Income (SSI). The size of the

working-age beneficiary population has grown rapidly over the past

decade, increasing by 65 percent. However, not more than 1 in 500 DI

beneficiaries, and few SSI beneficiaries, have left the rolls to return to

work. Therefore, although they may provide a measure of income security,

DI and SSI do little to enhance work capacities and promote economic

independence.

Yet societal attitudes, as reflected in the Americans With Disabilities Act

(ADA), have shifted toward goals of economic self-sufficiency and the right

of people with disabilities to full participation in society. Moreover,

medical advances and new technologies provide more opportunities than

ever for people with disabilities to work. Although at one time the

common business practice was to encourage someone with a disability to

leave the workforce, today a growing number of private companies have

been focusing on enabling people with disabilities to return to work.

In testimony before the Senate Special Committee on Aging on June 5,

1996, and in two reports to the committee issued in April and July 1996,1

we discussed why so few DI and SSI adult beneficiaries with disabilities

1

Social Security: Disability Programs Lag in Promoting Return to Work (GAO/T-HEHS-96-147, June 5,

1996); SSA Disability: Program Redesign Necessary to Encourage Return to Work (GAO/HEHS-96-62,

Apr. 24, 1996); and SSA Disability: Return-to-Work Strategies From Other Systems May Improve

Federal Programs (GAO/HEHS-96-133, July 11, 1996).

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return to work2 and how strategies from other disability systems could

help restructure DI and SSI to improve return-to-work outcomes. This

report updates the information in those previous reports that was based

on surveys of private sector leaders in developing return-to-work

programs; interviews with federal and state agency officials, experts, and

advocates and officials in Germany and Sweden; analysis of SSA’s

administrative data; and focus groups with beneficiaries.3

 Although we did

not independently verify the data used in the analysis of this report, the

data cited came from either U.S. government data systems or issue area

experts. Except for this, our work was performed in accordance with

generally accepted government auditing standards in November and

December 1996.

Results in Brief Design and implementation weaknesses in the DI and SSI programs hinder

maximizing beneficiary work potential. The application process places a

heavy emphasis on work incapacity and presumes that many medical

impairments preclude employment. And SSA does little to provide the

support and assistance that many people with disabilities need to work.

Not surprisingly, these and other program weaknesses yield poor

return-to-work outcomes and mean that DI and SSI have not kept pace with

societal trends toward the economic self-sufficiency of people with

disabilities.

Lessons learned from return-to-work strategies and practices now used in

the U.S. private sector and in other countries may hold potential for

improving federal disability programs by helping people with disabilities

return to productive activity and at the same time reduce cash benefits. SSA

serves a population with a wide range of disabilities that often may be

more severe than the disabilities of the average person served by U.S.

private sector programs. Therefore, SSA may face greater difficulty in

returning some of its clients to the workplace. The experiences of the

social insurance programs of Germany and Sweden, however, show that

return-to-work strategies are applicable to government-scale programs

serving a broad and diverse population with a wide range of work

histories, job skills, and impairment types.

Our analysis of practices advocated and implemented by the private sector

in the United States and by social insurance programs in Germany and

2

By return to work, we refer to both the reentry into the labor force of people with work experience

and the initial entry of people with no work history.

3

See GAO/HEHS-96-62 and GAO/HEHS-96-133 for a more detailed discussion of the scope and

methodology of these analyses.

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Sweden revealed three common strategies in the design of their

return-to-work programs:

• Intervene as soon as possible after an actual or potentially disabling event

to promote and facilitate return to work.

• Identify and provide necessary return-to-work assistance and manage

cases to achieve return-to-work goals.

• Structure cash and health benefits to encourage people with disabilities to

return to work.

Disability managers emphasize that these return-to-work strategies are

interrelated and work most effectively when integrated into a

comprehensive return-to-work program. They spend money on

return-to-work efforts because they believe these efforts are sound

investments that reduce disability-related costs.

Although SSA faces constraints in applying these strategies, opportunities

for better identifying and providing assistance to enable more of SSA’s

clients to engage in work could be created. The portion of DI and SSI

beneficiaries that could return to work if given the appropriate supports

and services is unknown. But if an additional 1 percent of the 6.6 million

working-age SSI and DI beneficiaries were to leave SSA’s disability rolls by

returning to work, lifetime cash benefits would be reduced by an

estimated $3 billion.4

 These reductions, however, would be offset, at least

in part, by rehabilitation and other costs that may be necessary to return a

person with disabilities to work.

Background Working-age adults with disabilities can obtain benefits in the form of

services and cash assistance from a number of public and private

programs. After the onset of a disabling condition, a worker with a

temporary work incapacity may receive short-term cash benefits from an

employer, a private insurer, one of the few states providing temporary

disability insurance, or a workers’ compensation program. Those who do

not return to the workplace may seek long-term cash benefits to replace

lost wages.

A worker covered under Social Security and unable to work because of a

severe long-term disability could be eligible for cash benefits from DI—the

country’s long-term public disability insurance program. Workers can

4

Our estimate is based on fiscal year 1995 data provided by SSA’s actuarial staff and represents the

discounted present value of the cash benefits that would have been paid over a lifetime if the

individual had not left the disability rolls by returning to work.

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supplement DI coverage with cash benefits from private long-term

disability insurance or pensions if their employers provide such plans or if

the workers have purchased supplemental insurance on their own.

Moreover, workers injured on the job can receive cash benefits through

their states’ employer-financed workers’ compensation programs. An

individual can receive workers’ compensation benefits and DI

simultaneously, although the DI cash benefit generally is reduced by

workers’ compensation. But a worker who is ineligible for cash benefits

from either private insurance or workers’ compensation5

 and who is

unable to be accommodated in the workplace may discover that DI offers

the only potential for wage replacement.

Long-term cash benefits may also be sought by people with disabilities

who have low income and limited resources, regardless of their work

histories. SSI provides income support at the national level regardless of

work connection for low-income people with disabilities. Similarly, a

veteran with wartime service who has low income and a disability

unrelated to active military duty can be eligible for a veteran’s pension.

DI and SSI are the two largest federal programs providing cash assistance to

people with disabilities. DI, established in 1956, is an insurance program

funded by payroll taxes paid by workers and their employers into a Social

Security trust fund. The program is designed to insure covered workers

against loss of income due to a disabling condition. Workers who have

worked long enough and recently enough become insured for DI coverage.

In addition to cash assistance, Medicare coverage is provided to DI

beneficiaries after they have received cash benefits for 24 months. In 1995,

about 4.2 million working-age people (aged 18 to 64) received DI cash

benefits.6 DI cash benefits in that year totaled about $36.6 billion, with

average monthly cash benefits amounting to $680 per person.7

 In 1994, the

Congress reallocated payroll tax receipts, estimated to total almost

$500 billion by the end of 2016, from the Social Security Old Age and

Survivors Insurance Trust Fund to the DI Trust Fund to prevent impending

insolvency.

In contrast, SSI is a means-tested income assistance program for disabled,

blind, or aged individuals regardless of their prior participation in the

5

Individuals can also receive compensation for injuries sustained during active duty with the armed

services or for non-job-related injuries in which another party is at fault.

6

Included among the 4.2 million DI beneficiaries are about 694,000 beneficiaries who were dually

eligible for SSI disability benefits because of the low level of their income and resources.

7

The $36.6 billion includes benefits paid to all DI disabled workers, regardless of age.

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labor force. Established in 1972 for individuals with low income and

limited resources, SSI is financed from general revenues.8

 In most states, SSI

entitlement ensures an individual’s eligibility for Medicaid benefits.9 In

1995, about 2.4 million working-age people with disabilities and 917,000

children under 18 received SSI benefits. In the same year, federal SSI cash

benefits paid to SSI beneficiaries with disabilities equaled $20.6 billion, and

average monthly SSI cash benefits amounted to about $365 per

beneficiary.10

The DI and SSI programs use the same statutory definition of disability. To

meet this definition, an adult must be determined to be unable to engage in

any substantial gainful activity because of any medically determinable

physical or mental impairment that can be expected to result in death or

that has lasted or can be expected to last at least 1 year.11 Moreover, the

statutory definition further specifies that, for a person to be determined to

be disabled, the impairment must be of such severity that the person not

only is unable to do his or her previous work, but, considering his or her

age, education, and work experience, is unable to do any other kind of

substantial work that exists in the national economy. (See app. I for a

more complete description of the five-step process used to determine DI

and SSI eligibility.)

Once a person is on the disability rolls, disability benefits continue until

one of three things happens: the beneficiary dies; SSA determines that the

beneficiary is no longer eligible for benefits; or, for DI beneficiaries,

benefits convert to Social Security retirement benefits at age 65. Generally,

a beneficiary loses eligibility for benefits for one of two reasons: the

beneficiary earns more income than allowed or SSA decides that the

beneficiary’s medical condition has improved to the point that he or she is

8

References to the SSI program throughout this letter refer to blind or disabled, not aged, recipients.

General revenues include taxes, customs duties, and miscellaneous receipts collected by the federal

government but not earmarked by law for a specific purpose.

9

States can opt to use the financial standards and definitions for disability they had in effect in

January 1972 to determine Medicaid eligibility for their aged, blind, and disabled residents, rather than

making all SSI recipients automatically eligible for Medicaid. Often the Medicaid financial standards

used by states are more restrictive than SSI’s.

10The 2.4 million SSI beneficiaries do not include individuals who were dually eligible for SSI and DI

benefits. The $20.6 billion consists of payments to all SSI blind and disabled beneficiaries regardless of

age.

11SSA uses a different definition of disability for children than for adults. Generally, the Social Security

Act defines a disabled child as a person under age 18 who suffers from a medically determinable

physical or mental impairment that results in marked and severe functional limitations.

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no longer considered disabled. To make this latter determination, SSA

periodically performs continuing disability reviews.12

Multiple Factors

Contribute to Rapid

Program Growth

DI and SSI grew rapidly between 1985 and 1995. During this period, cash

benefits to adults and children with disabilities increased from about $23.1

billion to $57.2 billion, with the inflation-adjusted cost of cash benefits

growing by 75 percent.13 (See fig. 1.) At the same time, while the number of

working-age beneficiaries who received disability benefits increased from

4.0 million to 6.6 million, DI and SSI experienced an increase in the

proportion of adult beneficiaries with the types of impairments that lead to

the longest entitlement periods, signifying lengthy stays on the rolls for

some. Individuals with mental impairments accounted for most of this

growth. (See app. II for an overview of the reasons for program growth.)

12SSA is to conduct a continuing disability review (CDR) at least once every 3 years on DI beneficiaries

whose medical improvement is possible or expected. When medical improvement is not expected, SSA

is to schedule CDRs at least once every 7 years. SSA is to conduct CDRs on one-third of SSI

beneficiaries reaching age 18 and a minimum of 100,000 additional SSI beneficiaries annually in fiscal

years 1996 through 1998. SSA is to conduct CDRs (1) at least every 3 years for children under age 18

who are likely to improve or, at the option of the Commissioner, unlikely to improve and (2) on

low-birth-weight babies within their first year of life. Disability eligibility redeterminations, instead of

CDRs, are required for all 18-year-olds beginning on their 18th birthdays, using adult criteria for

disability. See Social Security Disability: Improvements Needed to Continuing Disability Review

Process (GAO/HEHS-97-1, Oct. 16, 1996) and Social Security Disability: Alternatives Would Boost

Cost-Effectiveness of Continuing Disability Reviews (GAO/HEHS-97-2, Oct. 16, 1996).

13SSA issued its Report on Rising Cost of Social Security Disability Insurance Benefits to the Congress

on Feb. 14, 1996.

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Figure 1: Growth in DI and SSI Cash Benefits, 1985-95

Billions of Dollars

0

5

10

15

20

25

30

35

40

45

50

55

60

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Calendar Year

23.1 24.7 25.9 27.6

29.6

32.5

36.8

43.2

48.5

52.6

57.2

Note: Includes DI benefits to disabled workers and federal-only SSI benefits to all SSI blind and

disabled beneficiaries regardless of age.

Source: Annual Statistical Supplement to the Social Security Bulletin (Sept. 1996).

The number of children receiving SSI has more than tripled since 1990,

from about 300,000 to more than 900,000 in 1995.14 A number of factors

have contributed to the growth in children’s awards, including outreach

efforts by SSA and child advocates, rising numbers of children in poverty,

and major changes in the criteria for determining whether children are

disabled. Growth has been especially rapid in awards to children with

mental impairments. SSA researchers estimate that SSI awardees ages 1 to

14We have issued several products recently on children with disabilities, including Children Receiving

SSI by State (GAO/HEHS-96-144R, May 15, 1996); SSA Initiatives to Identify Coaching

(GAO/HEHS-96-96R, Mar. 5, 1996); Social Security: New Functional Assessments for Children Raise

Eligibility Questions (GAO/HEHS-95-66, Mar. 10, 1995); and Social Security: Rapid Rise in Children on

SSI Disability Rolls Follows New Regulations (GAO/HEHS-94-225, Sept. 9, 1994).

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17 with mental impairments will stay on the rolls nearly 27 years on

average.15

Statute Provides for

Returning Beneficiaries to

Work

The Social Security Act states that people applying for disability benefits

should be promptly referred to state vocational rehabilitation (VR)

agencies for services so that as many applicants as possible can return to

productive activity. State Disability Determination Service (DDS) offices,

which act for SSA in making disability evaluations, decide whether to refer

applicants to the state VR agencies.

Furthermore, to reduce the risk a beneficiary faces in trading guaranteed

monthly income and subsidized health coverage for the uncertainties of

competitive employment, the Congress has established various work

incentives intended to safeguard cash and health benefits while a

beneficiary tries to return to work. Nevertheless, few beneficiaries leave

the rolls to return to work.

Beneficiaries Face

Return-to-Work

Challenges, Yet Some Have

Characteristics Associated

With Work

Many DI and SSI beneficiaries will be unable to return to work, while others

present challenges to developing effective return-to-work strategies.

Almost half of the people receiving benefits are not likely to become

employed because of their age or because they are expected to die within

several years. For other beneficiaries, the ability to find and maintain

employment may be challenging because they need to learn basic skills

and work habits and build self-esteem to function in the workplace. Some

may lack access to the assistive technologies that could enhance their

work potential. Still others might face tight labor market conditions,

particularly for low-wage positions, that could constrain employment

opportunities. Moreover, the nature of some disabilities may limit full-time

work, while others may result in logistical obstacles such as transportation

difficulties. And despite antidiscrimination laws, some disabilities may

stigmatize individuals, making them appear less attractive to employers

and less likely to be hired.

While beneficiaries may face many challenges in attempting to return to

work, research suggests that successful transitions to work may be more

likely for younger people with disabilities and for those who have greater

15K. Rupp and C.G. Scott, “Determinants of Duration on the Disability Rolls and Program Trends,” a

paper presented at SSA’s conference on Disability Programs: Explanations of Recent Growth and

Implications for Disability Policy (Washington, D.C.: July 20, 1995). In an effort to stem the increase in

the number of children receiving SSI, the Personal Responsibility and Work Opportunity

Reconciliation Act of 1996 (P.L. 104-193) changed initial and continuing eligibility requirements for

children with disabilities. The effect of these changes on the size of the rolls is as yet unknown.

Page 8 GAO/HEHS-97-46 Promoting Return to Work
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motivation to work and more education.16 Studies have shown that a

significant number of DI and SSI beneficiaries possess these characteristics.

The DI and SSI disability rolls increasingly are composed of a significant

number of younger individuals. Among working-age DI and SSI

beneficiaries, one out of three is under the age of 40.17 In addition, in 1993,

35 percent of the 84,000 DI beneficiaries who responded to an SSA

questionnaire in May 1993 expressed an interest in receiving rehabilitation

or other services that could help them return to work, an indication of

motivation. Moreover, a substantial portion—almost one in two—of a

cohort of DI beneficiaries had a high school degree or some years of

education beyond high school.18

Changes Create

Return-to-Work

Opportunities

The percentage of beneficiaries that could return to work if given the

appropriate supports and services is unknown, in part, because

employment depends upon a multitude of complex, interrelated factors.

The data suggest, however, that a meaningful proportion of beneficiaries

could potentially benefit from return-to-work assistance. In addition, many

technological and medical advances have created more opportunities for

some individuals with disabilities to work. Electronic communications and

assistive technologies—such as scanners, synthetic voice systems,

standing wheelchairs, and modified automobiles and vans—have given

greater independence to people with some disabilities. Advances in the

management of disability—like medication to control mental illness or

computer-aided prosthetic devices—have helped reduce the functional

limitations associated with some disabilities. These advances may have

opened new employment opportunities for people with disabilities in the

growing service sector of the economy.

Social change has also promoted the goals of greater inclusion of and

participation by people with disabilities in the mainstream of society,

including children in school and adults at work. For instance, over the past

2 decades, people with disabilities have sought to remove environmental

barriers that impede them from fully participating in their communities.

16For example, J.C. Hennessey and L.S. Muller, “The Effect of Vocational Rehabilitation and Work

Incentives on Helping the Disabled-Worker Beneficiary Back to Work,” Social Security Bulletin, Vol.

58, No. 1 (Spring 1995), pp. 15-28; R.J. Butler, W.G. Johnson, and M.L. Baldwin, “Managing Work

Disability: Why First Return to Work Is Not a Measure of Success,” Industrial and Labor Relations

Review, Vol. 48, No. 3 (Apr. 1995), pp. 452-67; and R.V. Burkhauser and M.C. Daly, “Employment and

Economic Well-Being Following the Onset of a Disability: The Role for Public Policy,” in Jerry L.

Mashow, Virginia Reno, Richard V. Burkhauser, and Monroe Berkowitz, eds., Disability, Work, and

Cash Benefits (Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, 1996), pp. 59-101.

17Annual Statistical Supplement to the Social Security Bulletin (Sept. 1996).

18J.C. Hennessey and L.S. Muller, “Work Efforts of Disabled-Worker Beneficiaries: Preliminary

Findings From the New Beneficiary Followup Survey,” Social Security Bulletin, Vol. 57, No. 3 (Fall

1994), pp. 42-51.

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Moreover, the ADA supports the full participation of people with disabilities

in society and fosters the expectation that people with disabilities can

work and have the right to work. The ADA prohibits employers from

discriminating against qualified individuals with disabilities and requires

employers to make reasonable workplace accommodations unless it

would impose an undue hardship on the business.

Current Program

Structure Impedes

Return to Work

Despite advances in technology and medicine that have increased the

potential for some beneficiaries to work, the DI and SSI disability programs

have remained essentially frozen in time. Weaknesses in the design and

implementation of the DI and SSI programs, summarized in table 1, have

impeded identifying and encouraging the productive capacities of those

who might benefit from reasonable and appropriate rehabilitation and

employment assistance. The cumulative effect of these weaknesses is to

understate beneficiaries’ work capacity and hinder efforts to improve

return-to-work outcomes.

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Table 1: Summary of Program Design and Implementation Weaknesses

Program weakness Description of program weakness

Work capacity of DI and SSI beneficiaries may be

understated.

Medical conditions alone are generally a poor predictor of work incapacity. 

While impairment has some influence over capacity to work, other

factors—vocational, psychological, economic, environmental, motivational—are

often considered to be more important determinants of work capacity.

Disability determination process may encourage

work incapacity.

“All-or-nothing” decision gives incentive to promote inabilities and minimize abilities.

Lengthy application process to prove one’s disability can erode motivation and

ability to return to work.

Benefit structure can provide disincentive to

low-wage work.

The prospect of losing cash and health benefits themselves can reduce motivation

to work and receptivity to VR and work incentives, especially when low-wage jobs

are the likely outcome.

People with disabilities may be more likely to have less time available for work,

further influencing a decision to opt for benefits over work.

Work incentives are ineffective in motivating

people to work.

Work incentives are complex, difficult to understand, and poorly implemented. 

Few beneficiaries are aware that work incentives exist.

Work incentives do not overcome the prospect of a drop in income for those who

accept low-wage employment.

Risk of losing health coverage is a major barrier to returning to work.

VR plays limited role in disability programs. Access to VR services through DDS referrals is limited: restrictive state VR policies

limit categories of people referred by DDSs; the referral process is not monitored

(reflecting its low priority and removing incentive to spend time on referrals); and

the success-based VR reimbursement system is ineffective in motivating VR

agencies to accept beneficiaries as clients.

Applicants and beneficiaries are generally uninformed about VR and are not

encouraged to seek VR, affording little opportunity to opt for rehabilitation and

employment.

Studies have questioned the effectiveness of state VR agency services.

Work Capacity of DI and

SSI Beneficiaries May Be

Understated

The current disability determination process may understate the work

capacity of DI and SSI beneficiaries, thereby lowering expectations for

return-to-work outcomes. The Social Security Act requires that the

assessment of an applicant’s work incapacity be based on the presence of

medically determinable physical and mental impairments. SSA maintains a

Listing of Impairments (usually referred to as “the listings”) for medical

conditions that are presumed to be, according to SSA, ordinarily severe

enough in themselves to prevent an individual from engaging in any gainful

activity. About 70 percent of new awardees are eligible for disability

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benefits because their impairments meet or equal the listings.19 But

findings of studies we reviewed generally agree that medical conditions

are a poor predictor of work incapacity.20

Relevant studies indicate that the scientific link between work incapacity

and medical condition is a weak one. While it is reasonable to expect that

some medical impairments prevent individuals from engaging in work (for

example, people who are quadriplegic with profound mental retardation),

it is less clear that some other impairments that qualify individuals for

disability benefits prevent individuals from engaging in any substantial

gainful activity (for example, people who are missing both feet). Moreover,

while most medical impairments influence the extent to which an

individual is capable of engaging in gainful activity, other

factors—vocational, psychological, economic, environmental, and

motivational—are often considered to be more important determinants of

work capacity.

Concerns about the relationship between medical status and work

incapacity were raised before the DI program was implemented. In

deliberations leading to the establishment of the DI program, the 1948

Advisory Council on Social Security recommended that compensable

disabilities be restricted to those that can be “objectively determined by

medical examination or tests.” Physicians, however, testified before the

Congress that disability determination is inherently subjective and they

could not provide the kind of objective determination that policymakers

desired. According to this view, physicians can attest to the existence of

medical impairments, but they can neither quantify inability to work nor

certify that the impairments render a person unable to work.

Since then, some experts have contended that the scientific community is

unable to reliably predict the work capacity of people with disabilities.

The 1988 Disability Advisory Council to the Department of Health and

Human Services (HHS), citing testimony by medical experts, researchers,

rehabilitation providers, advocacy groups, and beneficiaries, concluded

that

19An impairment or combination of impairments is said to “equal the listings” if the medical findings for

the impairment are at least equivalent in severity and duration to the listed impairment. Applicants

whose impairments do not meet or equal the medical listings are further evaluated on the basis of

nonmedical factors, including residual functional capacity, age, education, and vocational skills.

20For example, S.O. Okpaku and others, “Disability Determinations for Adults With Mental Disorders:

Social Security Administration vs. Independent Judgments,” American Journal of Public Health, Vol.

84, No. 11 (Nov. 1994), pp. 1791-95; and H.P. Brehm and T.V. Rush, “Disability Analysis of Longitudinal

Health Data: Policy Implications for Social Security Disability Insurance,” Journal of Aging Studies,

Vol. 2, No. 4 (1988), pp. 379-99.

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“information about a claimant’s medical condition and vocational background cannot

conclusively demonstrate that he or she cannot work. Except in the case of very severe

disabilities and relatively minor disabilities, the current state of knowledge and technology

does not enable the quantification of disabilities or the definition of categories of disability

which reliably correlate an impairment with a particular individual’s capacity to work.”21

Disability Determination

Process May Encourage

Work Incapacity

The “all-or-nothing” nature of the disability determination process creates

an incentive for applicants to overstate their disabilities and understate

their work capacities. Because the result of the decision is either full

award or denial of benefits, applicants have a strong incentive to promote

their limitations to establish their inability to work and thus qualify for

benefits. Conversely, applicants have a disincentive to demonstrate any

capacity to work because doing so may disqualify them for benefits.

Furthermore, the documentation involved in establishing one’s disability

can, many believe, create a “disability mind-set,” which weakens

motivation to work. The effects of this process are compounded by the

length of time required to determine eligibility—from a minimum of

several months to 18 months or longer for individuals who appeal—during

which skills, abilities, and habits necessary to work can erode.

Benefit Structure Can

Provide a Disincentive to

Low-Wage Work

The prospect of losing cash and health benefits themselves is another

factor that can reduce beneficiaries’ motivation to work and their

receptivity to work incentives and VR. The average monthly cash and

health benefit value in 1994 for DI and SSI beneficiaries was about $1,050

and $930, respectively.22 As part of their consideration of whether to

undergo rehabilitation, attempt work, or both, beneficiaries may weigh the

financial gains of working against the value of their monthly cash and

health benefits. On the one hand, rehabilitation and work require

significant time commitment and the chance of success is unknown; on

the other hand, program benefits are secure and free individuals from

having to devote time to obtaining economic stability. Some people may

opt to live at a lower income level rather than at a marginally higher

income level if the latter requires a major commitment of time and energy.

Some people with disabilities commit significant amounts of time to

performing daily activities (bathing, dressing, and eating), self-managing

their impairments, receiving medical treatment, or meeting their

21HHS, Report of the Disability Advisory Council (Washington, D.C.: HHS, SSA, Mar. 11, 1988).

22Average monthly health benefit values are based on estimates from the Health Care Financing

Administration, Office of the Actuary.

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transportation needs. The time required to perform these and other

activities can reduce the time available for work and influence an

individual’s decision to opt for benefits over work.23 People who have less

time available for full-time work may see some value in part-time work. If

part-time work pays less than the value of lost benefits, however, then a

person would actually be financially better off receiving benefits rather

than working.

Work Incentives

Ineffective in Motivating

People to Work

Work incentive provisions that are complex, difficult to understand, and

poorly implemented further impede return-to-work efforts. Because SSA

does not promote them extensively, few beneficiaries are aware that work

incentives exist. Despite providing some financial protection for those

who want to work, work incentives do not appear to be sufficient to

overcome the prospect of a drop in income for those who accept low-wage

employment.

For example, DI work incentives provide for a trial work period in which a

beneficiary may earn any amount for 9 months (which need not be

consecutive) within a 60-month period and still receive full cash and

health benefits. At the end of the trial work period, if a beneficiary’s

countable earnings are more than $500 a month, cash benefits continue for

an additional 3-month grace period and then stop, causing a precipitous

drop in monthly income from full benefits to no cash benefits.24 SSA

researchers have noted that such a drop in income is a considerable

disincentive to finishing the trial work period as well as to beginning work.

Especially for beneficiaries with low earnings, it may be more financially

advantageous to continue to receive disability payments by not working or

by limiting earnings than to earn more than $500 a month in countable

income.

Beneficiaries Fear Losing

Health Coverage

The work incentive provisions also do not allay the fear of losing health

coverage that beneficiaries who return to work may face. Studies have

identified the risk of losing health coverage as a major barrier to

23W.Y. Oi, “Disability and a Workfare-Welfare Dilemma,” in C.L. Weaver, ed., Disability and Work:

Incentives, Rights, and Opportunities (Washington, D.C.: American Enterprise Institute for Public

Policy Research, 1991), pp. 31-45.

24For 36 months after the trial work period ends, cash benefits will be reinstated for any month in

which the person does not earn more than $500 a month in countable income; this is referred to as the

extended period of eligibility.

Page 14 GAO/HEHS-97-46 Promoting Return to Work
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beneficiaries’ returning to work.25 Beneficiaries who work and continue to

earn countable income above certain amounts will eventually lose health

coverage even though they have not necessarily improved medically or

obtained affordable coverage elsewhere.

DI work incentive provisions provide up to 4 years of Medicare coverage

when a person who continues to be medically disabled goes to work and

earns more than $500 a month in countable income. When this coverage

ends, these individuals may purchase Medicare coverage at the same

monthly premium paid by uninsured retired beneficiaries. But the monthly

premium—exceeding $300 in 1996—may be a hardship for beneficiaries,

especially individuals with low earnings. In a study of DI beneficiaries’

work attempts, SSA researchers noted that “the eventual loss of Medicare

coverage which, for some beneficiaries, is worth as much as cash benefits,

adds to a feeling of future financial insecurity and discourages work.”26

Moreover, SSI beneficiaries who lose health coverage because they exceed

the earnings limit do not have the option of purchasing Medicaid. Work

incentives allow beneficiaries to keep Medicaid coverage until earnings

increase to a point—referred to as the threshold amount—that SSA

considers high enough to replace SSI cash and Medicaid benefits.27

Beneficiaries who lose Medicaid could be uninsurable or face prohibitively

high premiums. It may matter little how much a beneficiary can earn by

returning to work if he or she cannot buy health insurance because of a

disabling condition. Even if a beneficiary is able to obtain health

insurance, he or she may still be subject to a waiting period and coverage

exclusions for preexisting conditions.

VR Plays Limited Role in

Disability Programs

Access to VR services through the DDS referral process is limited, because

DDSs refer few beneficiaries for VR services and state VR agencies accept

25For example, see the President’s Committee on Employment of People With Disabilities 1993

teleconference project report, Operation People First: Toward a National Disability Policy

(Washington, D.C.: President’s Committee on Employment of People With Disabilities, Mar. 28, 1994).

26Hennessey and Muller, “The Effect of Vocational Rehabilitation and Work Incentives on Helping the

Disabled-Worker Beneficiary Back to Work.” These findings should be interpreted with caution,

because SSA gathered retrospective data on event histories over a 10-year period.

27The threshold amount is based on the amount of earnings that would cause cash payments to stop in

the person’s state of residence and the annual per capita Medicaid expenditure for that state.

Page 15 GAO/HEHS-97-46 Promoting Return to Work
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fewer still as clients.28 DDSs refer for VR services, on average, only about

8 percent of DI and SSI applicants awarded benefits. And, although less is

known about how many DDS referrals are accepted by state VR agencies,

previously we estimated that less than 10 percent of beneficiaries referred

by DDSs were accepted as clients.29 Several factors contribute to limited

access, including restrictive state VR policies that limit categories of people

referred by DDSs, a referral process that is not monitored (reflecting its low

priority and removing the incentive to spend time on referrals), and a

success-based VR reimbursement system that is ineffective in motivating VR

agencies to accept beneficiaries as clients. In addition, applicants and

beneficiaries are generally uninformed about the availability of VR services

and are given little encouragement to seek them.

Even if a beneficiary is referred for VR services and accepted by a VR

agency, the effectiveness of state VR services in securing long-term

financial gains for rehabilitants has been mixed at best. In 1993, we

evaluated the long-term results of state VR services by examining the

employment status of clients (including SSA beneficiaries) over an 8-year

period following receipt of services.30 We found that gains in employment

and earnings of clients who had been successfully rehabilitated—that is,

placed in suitable paid or unpaid employment for at least 60 days—faded

after about 2 years, with earnings for many returning to near or below the

pre-VR program level after 8 years. Clients who had been successfully

rehabilitated had better work and earnings histories than clients who had

dropped out of the VR program. Clients who had not been rehabilitated,

however, but who had received many of the services that rehabilitated

clients had received, did no better in later employment and earnings than

VR dropouts who had received no services after an initial VR evaluation.

28Public and private entities, such as educational institutions, welfare agencies, hospitals, and other

health organizations, as well as DDSs, refer beneficiaries to state VR agencies. In discussing access to

VR services, we have limited our analysis to access through the DDS referral system. Our findings,

therefore, cannot be generalized to referrals from other sources.

29Social Security: Little Success Achieved in Rehabilitating Disabled Beneficiaries (GAO/HRD-88-11,

Dec. 7, 1987). We reviewed the referral outcomes of DI beneficiaries in 10 states. Approximately

90 percent of the referrals were not considered feasible prospects by the agencies, did not respond to

the agency contact, were uninterested in VR, or were already known to the agencies. These data

should be interpreted with caution because they were collected in 1986, and changes over time in DDS

and VR agency procedures, priorities, and resource levels, and in beneficiary characteristics, could

have altered acceptance patterns.

30Vocational Rehabilitation: Evidence for Federal Program’s Effectiveness Is Mixed (GAO/PEMD-93-19,

Aug. 27, 1993). We examined the program’s long-term results by computer-matching a database on

nearly 900,000 VR applicants whose cases were closed in 1980 with SSA wage records on these

individuals from 1972 through 1988—both before and after their VR program experience.

Page 16 GAO/HEHS-97-46 Promoting Return to Work
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SSA Efforts to

Improve

Return-to-Work

Outcomes Likely to

Have Only Marginal

Effect

SSA’s efforts to improve return-to-work outcomes are focused in the right

direction but are likely to have limited impact. SSA began an analysis of

barriers and disincentives to employment in its disability programs in 1994

and has undertaken several related return-to-work efforts. These include

publishing regulations permitting SSA to refer beneficiaries to an alternate

provider when the state VR agency is unable to provide VR services and

publishing a brochure to inform the public about how SSA can help with VR

services. Additionally, SSA has signed an agreement with the Department of

Education’s Rehabilitation Services Administration to provide training on

SSA’s work incentives to state VR professionals and contracted for an

evaluation of Project NetWork, an SSA research effort testing different

methods to deliver employment and rehabilitation services.

Although important, these efforts do not constitute a comprehensive

strategy that fundamentally redirects the disability programs’ current

focus on an individual’s limitations to a focus on identifying and

encouraging the productive capacities of those who might benefit from

employment assistance. For example, expanding VR opportunities may not

facilitate long-term employment among beneficiaries if people continue to

fear that working their way off the rolls will lead to loss of health

insurance. Also, educating beneficiaries about work incentives and VR

services may have little effect if beneficiaries are better off financially not

working than attempting to work.

Return-to-Work

Strategies From Other

Systems Contrast

Sharply With Federal

Disability Programs

In contrast with SSA’s disability programs, which have retained their core

design over the years, some firms in the private sector are developing new

approaches to manage their disability caseloads. Collectively known as

disability management, these approaches embody a proactive strategy for

controlling disability costs by helping employees with disabilities return to

work as soon as possible. Social insurance disability programs in Germany

and Sweden also invest in return-to-work efforts, and their experiences

show that return-to-work strategies can be applied to government-scale

programs that serve people with a wide range of work histories, job skills,

and disabilities.31

Disability managers in the U.S. private sector spend money on

return-to-work efforts because they believe such efforts are sound

31Although rigorous studies demonstrating the cost-effectiveness of German and Swedish programs

generally do not exist, we included these countries in our analysis because their disability programs

apply principles—such as early intervention and rehabilitation—that have been identified by the U.S.

private sector and other experts as being key to disability management. Application of these principles

to DI and SSI would need to be tailored to the U.S. political system and budget realities.

Page 17 GAO/HEHS-97-46 Promoting Return to Work
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investments that reduce disability-related costs. Studies have estimated

that the full cost of disability to employers ranges from about 6 to

12 percent of payroll. Such costs include insurance premiums, cash

benefits, rehabilitation benefits, and health benefits paid through workers’

compensation and employer-sponsored disability insurance programs.

Companies may also incur additional expenses for training and using

temporary workers and retraining employees with disabilities when they

return to work. When businesses help workers with disabilities return to

the workplace, they are able to reduce some of these costs.

Our analysis of practices advocated and implemented by the U.S. private

sector and other countries reveals three common strategies in the design

of their return-to-work programs. These strategies, and their underlying

practices, are summarized in table 2.

Table 2: Strategies and Practices in the Design of Return-to-Work Programs of the U.S. Private Sector and Other Countries

Strategy Practices

Intervene as early as possible after an actual or

potentially disabling event.

Address return-to-work goals from the beginning of an emerging disability.

Provide return-to-work services at the earliest appropriate time.

Maintain communication with workers who are hospitalized or recovering at home.

Identify and provide necessary return-to-work

assistance effectively.

Assess each individual’s return-to-work potential and needs.

Use case management techniques when appropriate to help workers with

disabilities return to work.

Offer transitional work opportunities that enable workers with disabilities to ease

back into the workplace.

Ensure that medical service providers understand the essential job functions of

workers with disabilities.

Structure cash and health benefits to encourage

return to work.

Structure cash benefits to encourage workers with disabilities to rejoin the

workforce.

Maintain health benefits for workers with disabilities who return to work.

Include a contractual provision that can require the worker with disabilities to

cooperate with return-to-work efforts.

Disability managers emphasized that these return-to-work strategies are

not independent of each other and are most effective when merged into a

comprehensive return-to-work program. Return-to-work strategies and

practices may potentially enhance federal disability programs by enabling

beneficiaries to work and by helping to reduce program costs.

Page 18 GAO/HEHS-97-46 Promoting Return to Work
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Intervene Early to

Facilitate Return-to-Work

Disability managers we surveyed in the private sector stressed the

importance of early intervention in returning workers with disabilities to

the workplace. Advocates of early intervention believe that the longer an

individual stays away from work, the less likely return to work will be.

Studies show that only half the workers with recently acquired disabilities

who are out of work 5 months or more will ever return to work. Disability

managers believe that long absences from the workplace can reduce

motivation to attempt work.

In Germany and Sweden, laws and policies require that an individual’s

potential for returning to work be assessed soon after the onset of a

disabling condition. Consequently, people with disabilities are generally

considered for rehabilitation and return to work at relatively early stages

in their contacts with social insurance offices. For example, everyone

applying for a disability pension in Germany is considered for

rehabilitation and return to work before being determined eligible for

permanent benefits.32

Setting return-to-work goals soon after the onset of disability and

providing timely rehabilitation services are believed to be critical in

encouraging workers with disabilities to return to the workplace as soon

as possible. Moreover, maintaining communication with a disabled worker

is also important. For example, disability managers believe that contacting

a hospitalized worker soon after an injury or illness, and then continuing

to communicate with the worker recovering at home, helps reassure the

worker that there is a job to return to and that the employer is concerned

about his or her recovery.

Provide Necessary

Return-to-Work Services,

Manage Cases

In an effort to provide appropriate services, many disability managers

strive to identify the individuals who are likely to be able to return to work

and then identify the specific services they need. This approach involves

investing in services tailored to individual circumstances that help achieve

return-to-work goals for workers with disabilities while avoiding

unnecessary expenditures. As part of this approach, individuals are

functionally evaluated to assess their potential for returning to work.

When appropriate, the private sector uses case management techniques to

coordinate the identification, evaluation, and delivery of disability-related

services for individuals deemed to need such services to return to work.

32Disability pensions in Germany are not awarded until it has been determined that the person’s

earning capacity cannot be restored through rehabilitation.

Page 19 GAO/HEHS-97-46 Promoting Return to Work
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Transitional work allows employees to ease back into the workplace in

jobs that better accommodate their disabilities than their regular jobs.

In Germany and Sweden, return-to-work services and assistance are fairly

extensive and tailored to meet individual needs. An individual may receive

a combination of different benefits and services—such as medical or

vocational rehabilitation, employment or social assistance—as well as

cash assistance while applying for or participating in rehabilitation. In

addition, both countries offer transitional work opportunities to people

with disabilities.

The private sector also stresses the need to ensure that physicians and

other medical service providers understand the essential job functions of

workers with disabilities. Without this understanding, an individual’s

return to work could be delayed unnecessarily. Also, if an employer is

willing to provide transitional work opportunities or other job

accommodations, the treating physician must be aware of and understand

these accommodations.

Provide Incentives to

Engage in Return-to-Work

Efforts

Finally, disability managers responding to our survey generally offered

incentives through their programs’ cash and health benefit structure to

encourage individuals with disabilities to return to work. These managers

believe that a program’s incentive structure can affect return-to-work

decisions. As a result, their companies structure cash benefits to make

returning to work more financially attractive than remaining away from

work. Disability managers also believe retention of health insurance can

be an important work incentive.

Although the structure of benefits plays a role in return-to-work decisions,

disability managers emphasized that well-structured incentives are not

sufficient in themselves for a successful return-to-work program. Rather,

incentives must be integrated with other return-to-work practices.

Conclusions Return-to-work strategies used in the U.S. private sector and other

countries reflect the expectation that people with disabilities can and do

return to work. But the DI and SSI programs are not placing enough priority

on tapping the work potential of beneficiaries. We believe SSA could do this

more effectively without jeopardizing the availability of benefits for people

who cannot work.

Page 20 GAO/HEHS-97-46 Promoting Return to Work
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Compelling reasons exist to try new approaches. In 1994, the Congress

reallocated payroll tax receipts, estimated to total almost $500 billion by

the end of 2016, from the Social Security Old Age and Survivors Insurance

Trust Fund to the DI Trust Fund to prevent impending insolvency. This

financial strain, along with advances in technology and medicine that

could reduce functional limitations posed by certain impairments,

provides ample reason for examining how strategies from other systems

could be applied to improve return-to-work outcomes. If even an

additional 1 percent of the 6.6 million working-age beneficiaries were to

leave SSA’s disability rolls by returning to work, lifetime cash benefits

would be reduced by an estimated $3 billion. These reductions, however,

would be offset at least in part by rehabilitation and other costs that may

be necessary to return a person with disabilities to work.

Developing an integrated, comprehensive return-to-work strategy is likely

to extend beyond SSA to include programs in other federal agencies, such

as the Department of Labor and the Department of Education, the states,

and the private sector. But, as the primary manager of multibillion-dollar

programs and as the entity with fiduciary responsibility for the trust funds,

SSA has a critical role to play as the catalyst in forging the partnerships and

cooperation that will be needed to redesign federal disability programs.

Although SSA faces constraints and challenges in applying the

return-to-work strategies of other programs, opportunities exist for

providing the return-to-work assistance that could enable more of SSA’s

beneficiaries to reduce or eliminate their dependence on cash benefits.

In earlier reports, we recommended that SSA place greater priority on

helping DI and SSI beneficiaries go back to work. We further recommended

that SSA develop a comprehensive return-to-work strategy integrating, as

appropriate, earlier intervention and provision of return-to-work

assistance as well as changes in the structure of cash and health benefits.

Recognizing that new legislation may be required to implement such a

strategy, we also recommended that SSA identify needed legislative

changes to make such a return-to-work focus a reality. SSA agreed that

beneficiaries face a number of barriers and disincentives that impede entry

into the labor force and that many current beneficiaries have the potential

to return to work. SSA expressed an interest in determining whether the

return-to-work practices of other systems could be useful in improving

beneficiary return-to-work rates and emphasized that making program

improvements would involve input from a myriad of relevant federal, state,

and private sector stakeholders.

Page 21 GAO/HEHS-97-46 Promoting Return to Work
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Agency Comments In commenting on a draft of this report, the Commissioner of Social

Security shared our concern that beneficiaries face a number of barriers to

entering or reentering the workforce and agreed that compelling reasons

exist to try new return-to-work approaches. (See app. III for the full text of

SSA’s comments.) SSA is seeking statutory authority to create a

voucher-type system that beneficiaries could voluntarily use to obtain

rehabilitation and employment services from a participating public or

private provider of their choice. Additionally, provision of extended

medical coverage for beneficiaries who return to work is also being

sought. These initiatives, reflected in the President’s 1998 budget, attempt

to place greater emphasis on return to work and to providing alternatives

to the state VR agency structure. Although not specifically mentioned by

SSA in its comments, given this increased priority we would expect to see

SSA set explicit performance measures under its Government Performance

and Results Act strategic plan regarding its return-to-work efforts.33

In its proposed initiatives, SSA recognizes that extending medical coverage

can be an important factor in reducing the perceived risks a beneficiary

faces in returning to work. But other weaknesses in the DI and SSI

programs—including a determination process that concentrates on

applicants’ incapacities and work incentives that act as

disincentives—remain unchanged, suggesting that the impact of SSA’s

initiatives may have a more limited effect than desired. A new VR service

delivery system would be likely to have the greatest effect if it were

integrated into a comprehensive return-to-work strategy that incorporates

earlier intervention, a focus on developing productive capacity, and

changes to the structure of benefits. Such a strategy would encourage

beneficiaries to take advantage of rehabilitation services and provide

incentives for beneficiaries to return to work.

In addition, while we firmly advocate the critical importance of evaluation,

the proposed 7-year pilot period for the new VR service delivery system

apparently focuses on one system to the exclusion of other alternatives. If

SSA tests only one type of service delivery system, the agency will forego

the opportunity to compare the results of the proposed outcome-based

payment system with those of alternative systems, such as combining

33The Government Performance and Results Act of 1993 created requirements for agencies to generate

the information congressional and executive branch decisionmakers need in considering ways to

improve government performance and reduce costs. It requires that agencies consult with the

Congress and other stakeholders to clearly define their missions, establish long-term strategic goals

and annual goals, measure performance against the goals they have set, and report publicly on how

well they are doing.

Page 22 GAO/HEHS-97-46 Promoting Return to Work
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outcome-based payments with reimbursements to providers based on

milestones reached prior to the beneficiary leaving the rolls.

SSA also made some technical comments, which we incorporated where

appropriate.

We are sending copies of this report to the Commissioner of the Social

Security Administration and other interested parties. Copies also will be

available to others on request. If you or your staff have any questions

concerning this report, please call me at (202) 512-7215 or Cynthia A.

Bascetta, Assistant Director, at (202) 512-7207. Other major contributors

include Barbara H. Bordelon, Brett S. Fallavollita, Michele Grgich, Susan

Y. Higgins, and Ira B. Spears, Senior Evaluators; Kenneth F. Daniell,

Evaluator; and Carol Dawn Petersen, Senior Economist.

Jane L. Ross

Director, Income Security Issues

Page 23 GAO/HEHS-97-46 Promoting Return to Work
Contents

Letter 1

Appendix I 

Five-Step Sequential

Evaluation Process

for Determining DI

and SSI Eligibility

26

Appendix II 

Reasons for Program

Growth

28

Eligibility Expansion 28

Program Outreach 28

Economic Factors 28

State Cost-Shifting 29

Lack of Affordable Health Insurance 29

Demographics 29

DI Termination Rate Decreased; SSI Rate Remained Stable 30

Appendix III 

Comments From the

Social Security

Administration

31

Related GAO Products 36

Tables Table 1: Summary of Program Design and Implementation

Weaknesses

11

Table 2: Strategies and Practices in the Design of Return-to-Work

Programs of the U.S. Private Sector and Other Countries

18

Figure Figure 1: Growth in DI and SSI Cash Benefits, 1985-95 7

Page 24 GAO/HEHS-97-46 Promoting Return to Work
Contents

Abbreviations

ADA Americans With Disabilities Act

CDR continuing disability review

DDS Disability Determination Service

DI Disability Insurance

HHS Department of Health and Human Services

SSA Social Security Administration

SSI Supplemental Security Income

VR vocational rehabilitation

Page 25 GAO/HEHS-97-46 Promoting Return to Work
Appendix I 

Five-Step Sequential Evaluation Process for

Determining DI and SSI Eligibility

To determine whether an applicant qualifies for DI or SSI disability benefits,

SSA uses a five-step sequential evaluation process. In the first step, an SSA

field office determines if an applicant is working at the level of substantial

gainful activity and whether he or she meets the applicable nonmedical

eligibility requirements (for example, residency, citizenship, Social

Security insured status for DI, and income and resources for SSI). An

applicant who is found to be not working or working but earning less than

the substantial gainful activity level (minus allowable exclusions), and

who meets the nonmedical eligibility requirements, has his or her case

forwarded to a state Disability Determination Service (DDS) office.

Applicants who do not meet these requirements, regardless of medical

condition, are denied benefits.

DDS offices gather medical, vocational, and other necessary evidence to

determine if applicants are disabled under the Social Security law. In step

two, the DDS office determines if the applicant has an impairment or

combination of impairments that is severe and could be expected to last at

least 12 months. According to SSA standards, a severe impairment is one

that significantly limits an applicant’s ability to do “basic work activities,”

such as standing, walking, speaking, understanding and carrying out

simple instructions, using judgment, responding appropriately to

supervision, and dealing with change. The DDS office collects all necessary

medical evidence, either from those who have treated the applicant or, if

that information is insufficient, from an examination conducted by an

independent source. Applicants with severe impairments that are expected

to last at least 12 months proceed to the third step in the disability

determination process; applicants without such impairments are denied

benefits.

At step three, the DDS office compares the applicant’s condition with the

Listing of Impairments (the “listings”) developed by SSA. The listings

contain over 150 categories of medical conditions (examples of conditions

include the loss of both feet or an IQ score below 60) that, according to

SSA, are severe enough ordinarily to prevent an individual from engaging in

substantial gainful activity. An applicant whose impairment is cited in the

listings or whose impairment is equally as severe or more severe than

those impairments in the listings, and who is not engaging in substantial

gainful activity, is found to be disabled and awarded benefits. An applicant

whose impairment is not cited in the listings or whose impairment is less

severe than those cited in the listings is evaluated further to determine

whether he or she has vocational limitations that, when combined with the

medical impairment(s), prevent work.

Page 26 GAO/HEHS-97-46 Promoting Return to Work
Appendix I 

Five-Step Sequential Evaluation Process for

Determining DI and SSI Eligibility

In step four, the DDS office uses its physician’s assessment of the

applicant’s residual functional capacity to determine whether the

applicant can still perform work he or she has done in the past. For

physical impairments, residual functional capacity is expressed in certain

demands of work activity (for example, ability to walk, lift, carry, push,

pull, and so forth); for mental impairments, residual functional capacity is

expressed in psychological terms (for example, whether a person can

follow instructions and handle stress). If the DDS office finds that a

claimant can perform work done in the past, benefits are denied.

In the fifth and last step, the DDS office determines if an applicant who

cannot perform work done in the past can do other work that exists in the

national economy.34 Using SSA guidelines, the DDS considers the applicant’s

age, education, vocational skills, and residual functional capacity to

determine what other work, if any, the applicant can perform. Unless the

DDS office concludes that the applicant can perform work that exists in the

national economy, benefits are allowed.

At any point in the sequential evaluation process, an examiner can deny

benefits for reasons relating to insufficient documentation or lack of

cooperation by the applicant. Such reasons can include an applicant’s

failure to (1) provide medical or vocational evidence deemed necessary

for a determination by the examiner, (2) submit to a consultive

examination that the examiner believes is necessary to provide evidence,

or (3) follow a prescribed treatment for an impairment. Benefits are also

denied if the applicant asks the DDS to discontinue processing the case.

34By definition, work in the national economy must be available in a significant amount in the region

where the applicant lives or in several regions of the country. It is inconsequential whether (1) such

work exists in the applicant’s immediate area, (2) job vacancies exist, or (3) the applicant would

actually be hired.

Page 27 GAO/HEHS-97-46 Promoting Return to Work
Appendix II 

Reasons for Program Growth

Although the reasons for growth and their relative effects are not fully

understood, multiple factors contributed to the increase in SSA’s disability

program growth. The following factors affected program growth by

bringing more people into the programs and lowering the rate at which

some beneficiaries left the programs.

Eligibility Expansion The eligibility standards, especially for mental impairments (which include

mental retardation and mental illness), were expanded in the mid- to late

1980s largely as a result of the effects of legislative, regulatory, and judicial

action. For example, additions were made to the listing of medical criteria

used by SSA to determine program eligibility, which gave greater weight to

evidence gathered from an applicant’s own physician, and more

consideration was granted to pain and functional deficits in social

relations and in concentration.

Program Outreach The purpose of SSA’s outreach efforts has been to reduce the barriers that

prevented or discouraged potentially eligible individuals from applying for

SSI benefits. SSA has conducted several outreach efforts since program

authorization in 1972. In the late 1980s, congressional and agency actions

were taken to ensure that all segments of the potential SSI population were

made aware of their potential eligibility. For instance, a permanent

outreach program for disabled and blind children was established by the

Omnibus Budget Reconciliation Act of 1989; SSA made SSI outreach an

ongoing agency priority in 1989; and, in 1990, the Congress mandated that

SSA expand the scope of its SSI outreach efforts.

Economic Factors Economic factors play an important role in the decisions of people with

disabilities to seek disability benefits, particularly DI benefits, according to

an SSA-sponsored study on the demographic and economic determinants of

growth in SSA disability programs.35 Factors that reduce the rewards of

participating in the labor force for people with disabilities, such as

downturns in the business cycle, make leaving the labor force and

applying for benefits more attractive. But, while economic downturns

contribute to program growth, no evidence exists that there has been a

concomitant exit from the DI rolls when the economy has improved.

35D.C. Stapleton and others, “Demographic and Economic Determinants of Recent Application and

Award Growth for SSA’s Disability Programs,” a paper presented at SSA’s conference on Disability

Programs: Explanations of Recent Growth and Implications for Disability Policy (Washington, D.C.:

July 20-21, 1995).

Page 28 GAO/HEHS-97-46 Promoting Return to Work
Appendix II 

Reasons for Program Growth

State Cost-Shifting Many state and local governments actively encouraged and assisted

disabled recipients of state-funded general assistance to apply for SSI

benefits when general assistance was cut in these jurisdictions. These

state and local efforts to shift public assistance recipients with disabilities

onto the SSI rolls appeared to increase the number of SSI (and, to a lesser

extent, DI) applications and awards, according to the SSA-sponsored study

on growth in the disability programs.

Lack of Affordable

Health Insurance

An increase in the number of people without affordable health insurance

may have affected the size of the DI and SSI program growth. The uninsured

population under age 65 in the United States grew by 5 million between

1988 and 1992.36 In addition, limitations in employment-based health care

coverage for chronic conditions may have prompted some individuals to

apply for DI or SSI for health care protection.

Demographics Demographic changes have played a role in program growth. For example,

the aging baby boom cohort born between 1946 and 1964 (which increased

the number of people in middle age during the late 1980s and early 1990s),

greater labor force participation among women (which increased the

number of women insured for disability benefits), and declines in marriage

rates (which may have limited the income support provided by spouses of

people with disabilities) have been associated with increases in program

applications and awards.

Also, the growing number of immigrants admitted annually for legal

residence in the United States may have contributed to SSI growth. In 1993,

880,000 immigrants were admitted to the United States, compared with

570,000 in 1985. In addition, nearly 3 million formerly illegal immigrants

attained legal residence status under the Immigration Reform and Control

Act of 1986. This increased immigrant population is likely to have

contributed to the rising portion of disabled immigrants on SSI, which

increased from less than 2 percent of the SSI disabled population in 1982 to

about 6 percent in 1993.37

36The Environment of Disability Income Policy: Programs, People, History and Context, National

Academy of Social Insurance, Disability Policy Panel Interim Report (Washington, D.C.: 1996), p. 93.

37Supplemental Security Income: Recent Growth in the Rolls Raises Fundamental Program Concerns

(GAO/T-HEHS-95-67, Jan. 27, 1995). Under the Personal Responsibility and Work Opportunity

Reconciliation Act of 1996, the income and resources of an immigrant’s sponsor and an immigrant’s

spouse are counted in determining eligibility for SSI benefits. The effect on future growth in the rolls

of SSI by provision is unknown.

Page 29 GAO/HEHS-97-46 Promoting Return to Work
Appendix II 

Reasons for Program Growth

DI Termination Rate

Decreased; SSI Rate

Remained Stable

As more people were enrolled, the DI termination rate decreased and the

SSI termination rate remained stable, thereby resulting in a net increase in

DI and SSI program size. The DI termination rate decreased from 13 percent

in 1985 to 10 percent in 1993 (between 1970 and 1984, the DI termination

rate fluctuated between 14 and 19 percent). The termination rate for each

of the major reasons for exiting DI—conversion to retirement benefits at

age 65, death, failure to meet medical criteria, and return to

work—decreased during this period (reaching age 65 and dying accounted

for the vast majority of instances of termination from 1985 to 1992).

Between 1988 and 1993, the SSI termination rate for adults with disabilities

remained around 16 percent.

A factor contributing to the decrease in DI terminations due to medical

recovery—which, at below 0.5 percent, were at an all time low from 1991

to 1993—may have been the reduction in the number of continuing

disability reviews (CDR) performed by SSA.

38 In the early 1990s, because of

SSA resource constraints and increasing initial claims workloads, the

number of DI CDRs declined dramatically. In fiscal year 1996, about

4.3 million DI and SSI beneficiaries were due or overdue for CDRs.39

38The Environment of Disability Income Policy: Programs, People, History and Context, p. 65.

39Social Security Disability: Improvements Needed to Continuing Disability Review Process

(GAO/HEHS-97-1, Oct. 16, 1996).

Page 30 GAO/HEHS-97-46 Promoting Return to Work
Appendix III 

Comments From the Social Security

Administration

Page 31 GAO/HEHS-97-46 Promoting Return to Work
Appendix III 

Comments From the Social Security

Administration

Page 32 GAO/HEHS-97-46 Promoting Return to Work
Appendix III 

Comments From the Social Security

Administration

Page 33 GAO/HEHS-97-46 Promoting Return to Work
Appendix III 

Comments From the Social Security

Administration

Page 34 GAO/HEHS-97-46 Promoting Return to Work
Appendix III 

Comments From the Social Security

Administration

Page 35 GAO/HEHS-97-46 Promoting Return to Work
Related GAO Products

Social Security Disability: Improvements Needed to Continuing Disability

Review Process (GAO/HEHS-97-1, Oct. 16, 1996).

SSA Disability: Return-to-Work Strategies From Other Systems May

Improve Federal Programs (GAO/HEHS-96-133, July 11, 1996).

Social Security: Disability Programs Lag in Promoting Return-to-Work

(GAO/T-HEHS-96-147, June 5, 1996).

SSA Disability: Program Redesign Necessary to Encourage Return to Work

(GAO/HEHS-96-62, Apr. 24, 1996).

PASS Program: SSA Work Incentive for Disabled Beneficiaries Poorly

Managed (GAO/HEHS-96-51, Feb. 28, 1996).

Social Security Disability: Management Action and Program Redesign

Needed to Address Long-Standing Problems (GAO/T-HEHS-95-233, Aug. 3,

1995).

Disability Insurance: Broader Management Focus Needed to Better

Control Caseload (GAO/T-HEHS-95-164, May 23, 1995).

Supplemental Security Income: Recipient Population Has Changed as

Caseloads Have Burgeoned (GAO/T-HEHS-95-120, Mar. 27, 1995).

Social Security: New Functional Assessments for Children Raise Eligibility

Questions (GAO/HEHS-95-66, Mar. 10, 1995).

Social Security: Federal Disability Programs Face Major Issues

(GAO/T-HEHS-95-97, Mar. 2, 1995).

Supplemental Security Income: Recent Growth in the Rolls Raises

Fundamental Program Concerns (GAO/T-HEHS-95-67, Jan. 27, 1995).

Social Security: Rapid Rise in Children on SSI Disability Rolls Follows New

Regulations (GAO/HEHS-94-225, Sept. 9, 1994).

Social Security: Disability Rolls Keep Growing, While Explanations

Remain Elusive (GAO/HEHS-94-34, Feb. 8, 1994).

Vocational Rehabilitation: Evidence for Federal Program’s Effectiveness Is

Mixed (GAO/PEMD-93-19, Aug. 27, 1993).

(106520) Page 36 GAO/HEHS-97-46 Promoting Return to Work
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