United States General Accounting Office

GAO Report to the Chairman, Special

Committee on Aging, U.S. Senate

April 1996 SSA DISABILITY

Program Redesign

Necessary to

Encourage Return to

Work

G O A

years

1921 - 1996

GAO/HEHS-96-62

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-256285 

April 24, 1996

The Honorable William S. Cohen

Chairman

Special Committee on Aging

United States Senate

Dear Mr. Chairman:

This report responds to your request for information on why few Social Security Disability

Insurance (DI) and Supplemental Security Income (SSI) adult beneficiaries with disabilities are

returned to gainful employment. The report discusses weaknesses in the design and

implementation of the DI and SSI programs that impede the Social Security Administration from

identifying and expanding the productive capacities of beneficiaries. The report also presents

information on key program trends.

As agreed with your office, unless you publicly announce its contents earlier, we plan no further

distribution of this report until 30 days from the date of this letter. At that time, we will send

copies to the Commissioner of Social Security, the Secretary of Education, the Secretary of

Health and Human Services, and other interested parties. We will also make copies available to

others upon request.

Please contact me on (202) 512-7215 if you or your staff have any questions concerning this

report. Other GAO contacts and contributors to this report are listed in appendix VII.

Sincerely yours,

Jane L. Ross

Director, Income Security Issues
Executive Summary

Purpose The Disability Insurance (DI) and the Supplemental Security Income (SSI)

programs are the two largest federal programs providing assistance to

people with disabilities. The two programs served 7.2 million people in

1994 and provided $53 billion in cash benefits. The Social Security

Administration (SSA) administers DI and SSI and makes benefits

determinations using a common definition of disability for both programs.

SSA is also responsible for encouraging DI and SSI beneficiaries to return to

work whenever possible. To this end, DI and SSI applicants are to be

referred to state vocational rehabilitation agencies. The Congress has

enacted various work incentive provisions that are designed to safeguard

beneficiaries’ cash and medical benefits to encourage them to test their

ability to engage in work.

Despite these statutory provisions, as well as medical and technological

changes that have afforded greater potential for some beneficiaries to

work, not more than 1 of every 500 DI beneficiaries has left the rolls by

returning to work. For this reason, the Chairman of the Senate Special

Committee on Aging asked GAO to

• describe changes in the number and characteristics of DI and SSI program

beneficiaries over time and the implications of these changes for returning

beneficiaries to work;

• analyze the disability determination process to assess whether it can

accurately distinguish between applicants who can work and those who

cannot; and

• evaluate the effect of the disability determination process, work

incentives, and vocational rehabilitation on returning DI and SSI

beneficiaries 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, or a workers’ compensation program. The last

resort for many people who cannot return to the workplace is long-term

cash benefits provided by workers’ compensation, private disability

insurance, and DI. Long-term cash benefits, available through SSI, are the

last resort for people with disabilities who have low income and limited

assets.

Page 2 GAO/HEHS-96-62 Social Security Disability Redesign
Executive Summary

DI provides cash benefits for people with disabilities covered under Social

Security who have been found to be unable to work at gainful levels. After

receiving DI benefits for 24 months, DI beneficiaries also become eligible

for Medicare. In 1994, there were 3.3 million DI beneficiaries. SSI provides

cash benefits for the aged, blind, and disabled whose income and

resources are below a specified amount. In most cases, SSI beneficiaries

are also eligible for Medicaid coverage. In 1994, there were 2.4 million

blind and disabled SSI beneficiaries of working age. Additionally, in 1994

671,000 adult beneficiaries received both DI and SSI benefits because they

met requirements for both programs, and 841,000 children with disabilities

received SSI benefits.

To be considered disabled by either program, an adult must be unable to

engage in any substantial gainful activity (SGA) 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 12 months or longer.

Once a person is on the rolls, benefits continue until death; until SSA

determines that the beneficiary no longer meets the eligibility

requirements; or, in the case of DI beneficiaries, until their benefits are

converted to Social Security retirement benefits at age 65.

Results in Brief Over the last decade, the number of DI and SSI beneficiaries increased

70 percent because of program changes and economic and demographic

factors. By 1994, 31 percent of DI beneficiaries and 57 percent of the adult

SSI beneficiaries had mental impairments—conditions that have one of the

longest anticipated entitlement periods (about 16 years for DI). During the

past decade, the proportion of adult beneficiaries who were middle aged

steadily increased as the proportion who were older than middle aged

declined, although data on recent years suggest that this trend may

reverse.

Almost one of every two beneficiaries may not be realistic candidates for

return to work because of their age or because they are expected to die

within several years. The ability to find and maintain employment may be

challenging for others because some beneficiaries have a very limited

work history, even low-wage positions may be limited, and people with

certain impairments may appear less attractive to employers. On the other

hand, advances in technology—like standing wheelchairs and synthetic

voice systems—and the medical management of some physical and mental

impairments have created potential for some people with disabilities to

engage in work. Furthermore, there has been a trend toward greater

Page 3 GAO/HEHS-96-62 Social Security Disability Redesign
Executive Summary

inclusion of and participation by people with disabilities in the mainstream

of society.

SSA is required to assess an applicant’s work incapacity on the basis of the

presence of medically determinable physical and mental impairments.

However, evidence indicates that, except in cases of very severe

disabilities, making an “either/or” disability determination based on

medical condition is very difficult. Other factors—psychosocial,

environmental, and economic—also influence work incapacity.

Weaknesses in the design and implementation of DI and SSI program

components have limited SSA’s capacity to identify and assist in expanding

beneficiaries’ productive capacities. Eligibility requirements and the

application process encourage people to focus on their inabilities, not

their abilities; work incentives offered by the programs do not overcome

the risk of returning to work for many beneficiaries, and the complexities

of work incentives can make them difficult to understand and challenging

to implement; and beneficiaries receive little encouragement to use

rehabilitation services, which are relatively inaccessible to beneficiaries

seeking them.

SSA identified key return-to-work issues in mid-1994 and has developed a

draft internal document laying out four initiatives that could be used to

increase return-to-work outcomes. SSA will need to develop an integrated

approach to help more beneficiaries join the workforce.

Principal Findings

Current Caseload Poses

Challenges Yet

Advancements Increase

Potential for Return to

Work

Between 1985 and 1994, the number of people with disabilities who

received DI and SSI benefits increased from 4.2 million to 7.2 million.

Program growth has been attributed to factors that increased the number

of people who came onto the rolls—for example, eligibility expansion,

program outreach, and national economic factors—and decreased the rate

at which people left the rolls through death and retirement.

During this period, the programs experienced an increase in the portion of

beneficiaries with longer-lasting impairments, particularly mental

impairments. By 1994, mental impairments, which are associated with the

Page 4 GAO/HEHS-96-62 Social Security Disability Redesign
Executive Summary

longest entitlement periods, accounted for 57 percent of the SSI beneficiary

population aged 18 to 64, and 31 percent of the DI beneficiary population.

The DI and SSI adult beneficiary populations became somewhat younger

during this period. The proportion of DI beneficiaries who were middle

aged (aged 30 to 49) increased from 30 percent in 1986 to 40 percent in

1994; the proportion of SSI beneficiaries who were middle aged increased

from 36 percent in 1986 to 46 percent in 1994.

The current caseload presents challenges to developing effective

return-to-work strategies. Almost half of a cohort of beneficiaries who

entered DI in 1988 had died or reached age 65 within almost 6 years; and

about the same proportion of adult DI and SSI beneficiaries were aged 50 or

older in 1994. Assisting those individuals who can return to work will

require varying approaches and levels of support. Beneficiaries with little

work history, and perhaps some people with mental impairments, may

have additional challenges in finding and maintaining employment. Also,

economic trends, labor market competition, and welfare reform may limit

the availability of full-time employment in the future for beneficiaries who

are low-wage earners.

However, advances in medicine and assistive technologies and a trend

toward greater inclusion of and participation by people with disabilities in

the mainstream of society have created more work potential for people

with disabilities than in the past. Further, the 1990 Americans With

Disabilities Act (ADA) supports the full participation of people with

disabilities in society and fosters the expectation that people with

disabilities can work.

Determining Who Can and

Who Cannot Work Is

Difficult

SSA is required to assess an applicant’s work incapacity on the basis of the

presence of medically determinable physical and mental impairments.

However, while decisions may be more clear cut in the cases of people

whose impairments inherently and permanently prevent work, disability

determinations may be much more difficult in the cases of people with

disabilities who may have a reasonable chance to work if they receive

appropriate assistance and support. Research studies suggest that making

accurate decisions about who can and cannot work is difficult.

Program Components

Undermine Return to Work

The “either/or” nature of the disability determination process encourages

applicants to focus on their inabilities. The documentation involved in

Page 5 GAO/HEHS-96-62 Social Security Disability Redesign
Executive Summary

establishing one’s disability can, many believe, create a “disability

mindset” that erodes motivation to work, and the length of time required

to determine eligibility can weaken skills, abilities, and habits necessary to

work.

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; neither do

they allay the fear of losing medical coverage and other federal and state

assistance that beneficiaries who return to work must face. Work

incentive provisions are complex and difficult to understand, making

implementation a challenge. Few beneficiaries are aware that work

incentives exist, and SSA does not promote them extensively.

Vocational rehabilitation (VR) has also played a limited role in the DI and SSI

programs, in part, because of restrictive state VR policies and limited

alternatives to the state VR system. As with work incentives, beneficiaries

are generally uninformed about the availability of VR services and are given

little encouragement to seek them.

Program Redesign Is

Necessary to Better

Identify and Expand

Beneficiary

Return-to-Work Potential

Although a sizable portion of the disability rolls may not be realistic

candidates for returning to work, there is a meaningful and growing

portion who can be expected to survive for many years and who may be

able to return to work. Although no solid evidence is available, some

information from SSA indicates that up to one-third of the beneficiary

population may have rehabilitation potential. Weaknesses in the design

and implementation of the DI and SSI programs, however, have done little

to identify and encourage the productive capacities of beneficiaries who

might be able to benefit from rehabilitation and employment assistance. In

this context, SSA needs to take major action, which may require proposing

new legislation, to create and implement effective, integrated, and

consistent return-to-work strategies.

Recommendation GAO recommends that the Commissioner of SSA take immediate action to

place greater priority on return to work, including designing more

effective means to more accurately identify and expand beneficiaries’

work capacities and better implementing existing return-to-work

mechanisms. As part of this effort, the Commissioner of SSA should

develop a legislative package for those areas in which SSA does not

Page 6 GAO/HEHS-96-62 Social Security Disability Redesign
Executive Summary

currently have legislative authority to enact change in order to position the

agency to expeditiously redirect its emphasis on return to work.

Agency Comments In commenting on a draft of this report, the Commissioner of SSA

concurred with GAO’s findings and conclusions (see app. VI), but did not

indicate whether or not action would be taken to implement GAO’s

recommendation. The Commissioner also made a number of technical

comments, which GAO incorporated where appropriate.

Page 7 GAO/HEHS-96-62 Social Security Disability Redesign
Contents

Executive Summary 2

Chapter 1 

Introduction

12

The Number of People With Disabilities Depends on the

Definition of Disability

12

Services Range From Return-to-Work Assistance to Long-Term

Cash Benefits

13

DI and SSI Program Design 14

Objectives, Scope, and Methodology 18

Chapter 2 

Current Caseload

Poses Challenges Yet

Advancements

Increase Potential for

Return to Work

20

Caseloads Have Grown Rapidly and Changed Since the Mid-1980s 20

Beneficiary Population Presents Return-to-Work Challenges 30

Advances Increase Return-to-Work Potential 32

Chapter 3 

Current DI and SSI

Program Structure

Impedes Return to

Work

33

Determining Who Can and Who Cannot Work on the Basis of

Medical Condition Is Imprecise

35

Disability Determination Process Encourages Work Incapacity 38

Benefit Structure Provides Disincentive to Low-Wage Work 39

Work Incentives Ineffective in Motivating People to Work 39

VR Plays Limited Role in Disability Programs 48

Chapter 4 

Conclusions,

Recommendation, and

Agency Comments

57

Conclusions 57

Recommendation 59

Agency Comments 59

Appendixes Appendix I: Range of Public and Private Disability Benefit Types

for Working-Aged People With Disabilities

60

Appendix II: Five-Step Sequential Evaluation Process for

Determining DI and SSI Eligibility

62

Appendix III: List of Expert Reviewers 64

Page 8 GAO/HEHS-96-62 Social Security Disability Redesign
Contents

Appendix IV: Size of Disability Rolls and Amount of Cash

Benefits, 1985-94

66

Appendix V: Summary of Studies on Accuracy of Disability

Determinations

68

Appendix VI: Comments From the Social Security Administration 72

Appendix VII: Major Contributors to This Report 74

Bibliography 75

Related GAO Products 84

Tables Table 2.1: Increase in Number of Beneficiaries and Cash Benefits,

1985-94

22

Table 2.2: Percentage Distribution of DI Beneficiaries With

Diagnosis Available by Selected Impairment Categories, 1986-94

27

Table 2.3: Percentage Distribution of SSI Adult Disabled

Beneficiaries by Selected Impairment Categories, 1986-94

28

Table 2.4: Percentage Distribution of Adult DI and SSI

Beneficiaries by Age Group, 1986-94

29

Table 2.5: Percentage Distribution of Adult DI and SSI Awardees

by Age Group, 1986-94

30

Table 3.1: Summary of DI and SSI Program Design and

Implementation Weaknesses

34

Table 3.2: Highlights of DI and SSI Work Incentive Provisions 41

Table 3.3: The Impact of Benefit Cessation for Some DI

Beneficiaries

43

Table IV.1: DI Beneficiary Population and Cash Benefits, 1985-94 66

Table IV.2: SSI Beneficiary Population and Cash Benefits, 1985-94 66

Table IV.3: Concurrent DI and SSI Beneficiaries, 1985-94 67

Table IV.4: DI and SSI Beneficiaries and Cash Benefits, 1985-94 67

Table V.1: Summary of Studies on Validity of SSA Disability

Determinations

69

Figure Figure 2.1: Growth in the DI and SSI Programs, 1985-94 23

Page 9 GAO/HEHS-96-62 Social Security Disability Redesign
Contents

Abbreviations

ADA Americans With Disabilities Act

CDR continuing disability review

CRS Congressional Research Service

DDS Disability Determination Service

DI Disability Insurance

FICA Federal Insurance Contributions Act

GA general assistance

HCFA Health Care Financing Administration

HHS Department of Health and Human Services

IRWE Impairment-Related Work Expenses

OIG Office of Inspector General

PASS Plan for Achieving Self-Support

RFC residual functional capacity

SGA substantial gainful activity

SSA Social Security Administration

SSI Supplemental Security Income

VR vocational rehabilitation

Page 10 GAO/HEHS-96-62 Social Security Disability Redesign
Page 11 GAO/HEHS-96-62 Social Security Disability Redesign
Chapter 1 

Introduction

Advances in technology and medicine and economic changes have created

more potential for people with disabilities to engage in employment.

Moreover, there has been a trend toward greater inclusion of and

participation by people with disabilities in the mainstream of society.

These changes have sparked an increased interest in public policy on the

employment of people with disabilities.

In this report, we focus on Disability Insurance (DI) and Supplemental

Security Income (SSI)—the two largest federal programs providing

assistance to people with disabilities. Provisions contained in the

legislation that created DI and SSI focus on returning people with

disabilities to self-supporting employment whenever possible. Yet, very

few people have left the disability rolls to return to work.1

DI is the nation’s primary source of income replacement for workers with

disabilities who have paid Social Security taxes and are entitled to

benefits. SSI provides federal and state assistance to people who are aged,

blind, or disabled, regardless of Social Security coverage, whose income

and resources are below a specified amount.2 DI and SSI are administered

by the Social Security Administration (SSA) with the assistance of state

agencies.

The Number of People

With Disabilities

Depends on the

Definition of

Disability

Estimates of the number of people with disabilities in the United States

depend on the definition of disability. The Survey of Income and Program

Participation—an ongoing study by the U.S. Census Bureau of the

economic well-being of the civilian noninstitutionalized

population—reports about 51.5 million people with some type of work or

functional limitation.3

 Approximately 43 million people are reported as

having disabilities when using the definition of disability in the Americans

With Disabilities Act of 1990 (ADA). According to ADA, having a physical or

mental impairment substantially limiting one or more major life activity,

having a record of such an impairment, or being regarded as having such

an impairment constitutes disability.

When disability is defined by inability to work or perform other major

activities, the size of the population with disabilities is much smaller. For

1

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

entry of people with little or no work history.

2

Reference to the SSI program throughout the remainder of the report addresses blind or disabled, not

aged, recipients.

3

U.S. Census Bureau, unpublished data collected at the end of 1993 and the beginning of 1994.

Page 12 GAO/HEHS-96-62 Social Security Disability Redesign
Chapter 1 

Introduction

instance, about 16 million persons are work disabled according to the U.S.

Census Bureau’s 1993 Current Population Survey, which defines work

disability as a self-reported limitation in the type or amount of work a

person is able to perform because of chronic illness or impairment.

Services Range From

Return-to-Work

Assistance to

Long-Term Cash

Benefits

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

services and short- and long-term cash assistance from a number of public

and private programs (see app. I). After the onset of a disabling condition,

workers may be eligible for return-to-work services, such as rehabilitation.

The aim of such return-to-work services is to maintain workers in their

current work setting. These services are provided through various means,

including employers, private disability insurers, state or private nonprofit

vocational rehabilitation programs, and workers’ compensation programs.

If, however, a worker is temporarily unable to work while recovering from

an illness or injury but is expected to recover, the worker may turn to

short-term cash benefits to replace lost wages. To illustrate, in the case of

a temporary inability to work caused by an illness or an off-the-job injury,

a person might be eligible for short-term cash disability benefits from state

temporary disability insurance. Five states provide this type of benefit.4

Or, a worker might be eligible for paid sick leave or sickness or accident

insurance benefits if a policy is provided by the employer or purchased by

the worker. If the worker is injured on the job but is expected to recover,

he or she may be eligible for temporary workers’ compensation benefits.

Once the worker recovers and returns to the workplace, temporary cash

benefits end.

Those who do not return to work may seek long-term cash benefits to

replace lost wages. They may be eligible for private disability insurance

benefits—either employer-provided or from a personal policy—or, if

injured on the job, for workers’ compensation. In some cases, workers can

supplement DI coverage—the country’s long-term public disability

insurance program for workers—with cash benefits from private long-term

disability insurance. But a worker who is not eligible for cash benefits

from either private insurance or workers’ compensation and is unable to

be accommodated in the workplace may discover that DI offers the only

potential for wage replacement.

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

have low income and limited assets, regardless of their work histories.

4

States that provide this benefit are California, Hawaii, New Jersey, New York, and Rhode Island.

Page 13 GAO/HEHS-96-62 Social Security Disability Redesign
Chapter 1 

Introduction

Individuals with little or no work history are unlikely to be covered by

employer-provided disability insurance. Moreover, it is unlikely that such

individuals could afford to purchase a private disability policy. These

individuals may apply for SSI benefits. SSI provides income support at the

national level regardless of work connection for low-income people with

disabilities.

DI and SSI Program

Design

DI and SSI are the two major public programs serving people with

disabilities. In 1994, 3.3 million disabled workers were enrolled in DI and

received, on average, about $660 a month; 2.4 million adults aged 18 to 64

were enrolled in SSI and received, on average, about $360 a month

(beneficiaries in the 48 states plus the District of Columbia that provided a

monthly SSI supplement in 1994 received, on average, an additional $103).

In addition, 671,000 more people were concurrently enrolled in both

programs,5

 and 841,000 children with disabilities received SSI benefits.6

DI is designed to insure covered workers against loss of income due to a

disabling condition. The program was established in 1956 under title II of

the Social Security Act. At that time, its primary purpose was to prevent

“loss or reduction of benefit rights” for wage earners who became disabled

and were considered unable to continue paying Social Security taxes. The

program provided payment of cash benefits to disabled workers aged 50 or

older. Benefits for dependents of disabled workers were provided by the

1958 Social Security Amendments, and benefits to disabled workers under

age 50 were provided by the 1960 amendments. The Congress authorized

Medicare coverage for DI beneficiaries in 1972, making it available to

beneficiaries after they have received cash benefits for 24 months.

Those who have worked long enough and recently enough become insured

for DI coverage,7

 but there is no requirement that a disabling impairment

happen on or because of the job. The DI program is funded through

5

Individuals insured under Social Security who meet SSI’s income and resource requirements qualify

for both DI and SSI benefits.

6

SSA, Annual Statistical Supplement to the Social Security Bulletin (Washington, D.C.: SSA, Aug. 1995);

HHS, State Assistance Programs for SSI Recipients, SSA Pub. No. 17-002 (Washington, D.C.: Office of

Program Benefits Policy, SSA, Jan. 1995).

7

Workers earn up to four credits per year, and the amount of earnings required for a credit increases

each year as general wage levels rise. In 1995, one credit was received for every $630 of earnings. The

number of work credits needed for DI benefits depends on the worker’s age when he or she becomes

disabled. For instance, a person who becomes disabled before age 24 needs six credits in the 3-year

period ending when the disability starts; a 50-year-old person needs 28 credits, 20 of which must have

been earned in the 10 years immediately before becoming disabled.

Page 14 GAO/HEHS-96-62 Social Security Disability Redesign
Chapter 1 

Introduction

Federal Insurance Contributions Act (FICA) taxes paid into a trust fund by

employers and workers.8

The SSI program was authorized in 1972 under title XVI of the Social

Security Act as a means-tested income assistance program for the aged,

blind, or disabled. In most cases, SSI beneficiaries are eligible for Medicaid

coverage. SSI raised to the federal level preexisting federal/state welfare

programs authorized under various provisions of the Social Security Act.

Unlike DI beneficiaries, SSI disabled recipients do not need to have a work

history to qualify for benefits, but they must have low income and limited

assets. The SSI program is funded through general revenues.9

Disability Determination

Process Decides Eligibility

The Social Security Act defines disability as the inability to engage in any

substantial gainful activity (SGA)10 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 12 months or longer.11 Moreover,

the act states that the impairment must be of such severity that a 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 engage in any other

kind of substantial work that exists in the national economy.

To apply for DI or SSI benefits, a person must file an application at any one

of 1,300 SSA field offices or other authorized locations. For SSA to

determine whether an applicant qualifies for disability benefits, the

application proceeds through a five-step evaluation process (see app. II).

In step one, an SSA field office determines if an applicant is currently

engaged in SGA. If an applicant is found not to be engaged in SGA, the field

office forwards the application to a state Disability Determination Service

(DDS) office for processing through the remaining four steps until a

8

FICA payroll taxes are allocated among the Disability Insurance Trust Fund, Old Age and Survivors

Trust Fund, and the Medicare Trust Fund.

9

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

government that are not earmarked by law for a specific purpose.

10Regulations currently define SGA as employment that produces countable earnings of more than

$500 a month for disabled individuals and $960 a month for individuals who are blind. SSA deducts

from gross earnings the cost of items a person needs in order to work and the value of support a

person needs on the job because of the impairment before deciding if work is SGA.

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 any medically determinable

physical or mental impairment of comparable severity to one that disables an adult. For a complete

description of the specific criteria, see Social Security: Rapid Rise in Children on SSI Disability Rolls

Follows New Regulations (GAO/HEHS-94-225, Sept. 9, 1994). When we refer to SSA’s definition of

disability in this report, we are referring to the definition applicable to adults.

Page 15 GAO/HEHS-96-62 Social Security Disability Redesign
Chapter 1 

Introduction

determination of disability or no disability is reached. A DDS office

develops medical, functional, vocational, and other necessary evidence;

evaluates it; and determines whether the applicant meets the disability

criteria set forth in SSA regulations. Once the DDS has determined that the

applicant meets the criteria, SSA calculates the benefits payable and makes

the award.

SSA pays the costs incurred by DDSs in evaluating applications, including

the expense of collecting medical evidence they request from hospitals,

clinics, or other institutions. There are 54 DDSs throughout the country

employing about 12,000 full-time and 2,000 part-time employees. SSA

reported that in fiscal year 1994 the DDSs processed about 2.6 million initial

claims, and the total DDS budget was about $1.1 billion.

Applicants denied benefits after the initial DDS review may request a

reconsideration by the DDS office. If still not satisfied, they can appeal to

an administrative law judge. If denied again, they may appeal to the SSA

Appeals Council and, later, to the federal district courts.

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 under one of two conditions:

(1) a beneficiary earns more income than allowed by program rules (the

monthly ceiling is $500 for disabled DI beneficiaries and $960 for blind DI

beneficiaries; for SSI, the ceiling varies from state to state—for example,

$1,464 in Pennsylvania and $1,855 in California) or (2) SSA decides that a

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

no longer considered disabled and can now perform work at the SGA level.

In order to make this latter determination, SSA periodically performs

continuing disability reviews.12 The law requires SSA to conduct such a

review at least once every 3 years on DI beneficiaries whose medical

improvement is possible or expected. When medical improvement is not

expected, SSA is required to schedule a continuing disability review at least

once every 7 years.

12For a more complete discussion of SSA’s performance in conducting continuing disability reviews,

see Disability Insurance: Broader Management Focus Needed to Better Control Caseload

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

Page 16 GAO/HEHS-96-62 Social Security Disability Redesign
Chapter 1 

Introduction

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 in order to maximize the number of such individuals

who can return to productive activity. However, the act does not require

that all applicants be referred to VR agencies because doing so would not

be useful in many circumstances (for example, a 62-year-old person who

experienced an accident resulting in total paralysis would be unlikely to

benefit sufficiently from VR to return to work). DDS offices decide whether

or not to refer applicants to state VR agencies. DDS offices make referral

decisions using SSA’s recommended criteria and additional criteria

developed in consultation with state VR agencies to screen out applicants

who are not considered to be reasonable candidates for rehabilitation.

Once a referral has been made, a state VR agency weighs the candidate’s

potential for rehabilitation against that of other VR applicants. If the VR

agency decides to offer services to the applicant, it contacts the applicant

directly. State VR agencies also provide rehabilitation services to people

not involved with the DI and SSI programs. VR services include, for example,

guidance, counseling, and job placement, as well as therapy and training.

State VR agencies are reimbursed by the federal government for the

rehabilitation cost of each DI/SSI client who is returned to employment at

the SGA level for 9 continuous months. The Social Security Act provides for

withholding benefits from beneficiaries for refusal, without good cause, to

accept rehabilitation services offered to them.

A beneficiary who engages in work encounters additional challenges,

however. By returning to work, a beneficiary trades guaranteed monthly

income and premium-free medical coverage for the uncertainties of

competitive employment. To reduce this risk, the Congress has established

program provisions, referred to as work incentives, to safeguard cash and

medical benefits while a beneficiary tries to return to work. For example,

DI provisions allow beneficiaries to engage in a trial work period during

which they can earn any amount without affecting their benefits.13

Beneficiaries who complete a trial work period but who do not medically

recover can retain Medicare coverage for at least an additional 39 months.

In addition, cash benefits can be reinstated for any month within a

36-month period following the end of a trial work period if a beneficiary’s

earnings drop below the SGA level. Under SSI provisions, beneficiaries

whose impairments continue are allowed to earn above the SGA level and

13The trial work period allows beneficiaries to work for 9 months (not necessarily consecutively)

within a 60-month rolling period and earn any amount without affecting benefits. After the trial work

period, cash benefits continue for 3 months and then stop if countable earnings are greater than $500 a

month.

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to continue to receive reduced cash benefits indefinitely. Also, SSI

beneficiaries whose earnings eliminate eligibility for cash benefits can

continue to receive Medicaid coverage if their incomes remain within

certain limits.

Despite congressional interest in helping return DI and SSI beneficiaries to

employment, few beneficiaries engage in work while on the rolls and

fewer still leave the rolls to return to work. In a recent month, for

example, about 8 percent of SSI recipients aged 18 to 64 reported any

earnings, and about 1 percent of DI beneficiaries reported earning $500 or

more. Moreover, during each of the past several years, about 6,000 of the

more than 3 million DI beneficiaries have been terminated from the rolls

because they returned to work. Although SSA does not count the number of

SSI beneficiaries terminated because of return to work, it has estimated

that few are terminated for this reason.

The proportion of beneficiaries who return to work (1 in 500 for DI) would

be higher if candidates unlikely to obtain gainful employment were

excluded from the equation. Such candidates include, for example,

beneficiaries who are expected to die or to reach retirement age within a

few years following benefit award. SSA research findings provide some

estimate of the size of these groups. Among a cohort of beneficiaries who

entered DI in 1988, 28 percent died and 17 percent reached 65 within 5-1/2

years. Also, among cohorts of recipients who entered SSI between 1974 and

1982, 28 percent died or reached 65 within 10 years. Moreover, 46 percent

of all working-aged DI and SSI beneficiaries are 50 or older.14 While age

alone may be neither an accurate nor appropriate predictor of

return-to-work potential, older workers who become disabled generally

are less likely to recover functioning and return to work than younger

workers.

Objectives, Scope,

and Methodology

The Chairman of the Senate Special Committee on Aging asked us to

examine trends in the DI and SSI programs and determine why few

beneficiaries are returned to substantial gainful employment. On the basis

of subsequent discussions with his office, we designed our study to do the

following:

• describe changes in the number and characteristics of DI and SSI program

beneficiaries over time and the implications of these changes for returning

beneficiaries to work;

14Annual Statistical Supplement to the Social Security Bulletin, multiple years.

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• analyze the disability determination process to assess whether it can

accurately distinguish between applicants who can work and those who

cannot; and

• evaluate the effect of the disability determination process, work

incentives, and vocational rehabilitation on returning DI and SSI

beneficiaries to work.

To do this work, we reviewed the extant literature and synthesized our

prior work and reports published by SSA, the Congressional Research

Service (CRS), and others; analyzed information from SSA; interviewed

federal and state agency officials, experts, and advocates; observed DDS

operations; and conducted six focus groups around the country with

people receiving federal disability benefits. We also convened a panel of

disability experts (see app. III) to review our findings and comment on the

report’s accuracy, completeness, objectivity, and soundness. A

bibliography of the literature we used in our analysis and a list of related

GAO products are presented at the end of this report.

We did not independently verify the accuracy of the data used in the

analysis of this report. Our work was performed between February 1994

and December 1995 in accordance with generally accepted government

auditing standards.

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The number of beneficiaries and the cost of program benefits have grown

rapidly since the mid-1980s. Program growth is attributed to factors that

increased the number of people coming onto the rolls and decreased the

number leaving. As the beneficiary population has grown, a greater

portion of beneficiaries now have impairments—especially mental

impairments—that are likely to keep them on the rolls for longer periods

than in the past. Also, the beneficiary population has proportionately more

middle-aged adults and fewer older beneficiaries, although trends in

recent years suggest that the relative numbers of older beneficiaries may

increase in the years ahead.

For the current beneficiary population, there are challenges to develop

effective return-to-work strategies that will recognize and flexibly respond

to individual differences. However, while economic changes may have had

a mixed impact on work opportunities for people with disabilities,

technological and medical advances—along with a trend toward inclusion

of and participation by people with disabilities in mainstream

society—have created more potential for some people with disabilities to

engage in gainful work.

Caseloads Have

Grown Rapidly and

Changed Since the

Mid-1980s

Between 1985 and 1994, the combined DI and SSI beneficiary population

increased 70 percent and the inflation-adjusted cost of cash benefits grew

66 percent. Although the reasons for growth are not fully understood, a

number of factors are believed to have increased the number of people

who entered the programs and decreased the number who were

terminated. These factors include eligibility expansion; program outreach;

fewer continuing disability reviews; and occurrences external to the

programs, for example, a downturn in the business cycle and demographic

changes.

At the same time, the portion of the adult beneficiary population with

longer-lasting impairments has increased since the mid-1980s. This trend

has been driven especially by increases in the proportion of beneficiaries

with mental impairments. In 1994, more people qualified for disability

benefits because of mental retardation and mental illness than any other

impairment category. Compared with beneficiaries with shorter-term

impairments, a lower proportion of beneficiaries with longer-term

impairments are terminated from the rolls each year because of death. The

growing proportion of beneficiaries with longer-lasting impairments

means that the beneficiary population, on average, is likely to spend more

time on the rolls before reaching age 65.

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In addition, the beneficiary population has become, on average, modestly

but steadily younger since the mid-1980s. The proportion of adult

beneficiaries who are middle-aged has steadily increased as the proportion

who are older has declined. However, this trend reversed slightly between

1992 and 1994. Coupled with the aging of the “baby boom” cohort, this

suggests that the age of the beneficiary population may increase in the

years ahead.

Size and Costs of

Caseloads Are Rising

DI and SSI caseloads and expenditures increased dramatically between

1985 and 1994, and the pace of this growth accelerated in the early 1990s.

As a result of this rapid growth, concern arose regarding the adequacy of

the DI Trust Fund. Responding to estimates that the DI Trust Fund would

be depleted in 1995, the Congress reallocated payroll tax receipts in 1994

from the Social Security Old Age and Survivors Trust Fund into the DI

Trust Fund. SSA has estimated that by the end of 2016 this measure will

have transferred $499 billion from the Old Age and Survivors Insurance

Trust Fund into the DI Trust Fund.

In 1985, 4.2 million blind and disabled persons under age 65 received DI or

SSI benefits: 2.3 million received DI benefits, 1.6 million blind and disabled

adults and children received SSI, and about 324,000 people received both DI

and SSI benefits. By 1994, the number of blind and disabled people under

age 65 receiving DI or SSI benefits reached 7.2 million. The DI beneficiary

population increased 41 percent, the SSI beneficiary population increased

105 percent, and the number of people receiving both DI and SSI increased

107 percent. (See table 2.1.) Moreover, 37 percent of the growth between

1985 and 1994 in the overall size of the disability rolls occurred between

1992 and 1994 (see fig. 2.1). Appendix IV presents information on the

entire 1985 to 1994 period.

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Table 2.1: Increase in Number of

Beneficiaries and Cash Benefits,

1985-94

Beneficiary categories 1985 1994 Percent increase

Number of beneficiaries (in thousands)

DIa 2,332 3,292 41

SSI adultsb (aged 18 to 64) 1,333 2,362 77

SSI childrenb (under age

18) 227 841 270

DI/SSI (dual eligibility) 324 671 107

Total 4,216 7,166 70

Cash benefits (in billions, percent increase adjusted for inflation)

DIa $16.5 $33.7 49

SSIc 6.6 18.9 109

Total $23.1 $52.6 66

aIncludes only disabled workers aged 18 to 64.

bIncludes people with a federal SSI payment and/or federally administered state supplementation.

cIncludes federal-only (not state supplementation) SSI payments to SSI adults aged 18 to 64; SSI

children under age 18; and people dually eligible for SSI and DI payments who are disabled

workers. Also includes federal-only SSI payments to SSI beneficiaries aged 65 or older and

people dually eligible for SSI and DI who are not disabled workers.

Source: Annual Statistical Supplement to the Social Security Bulletin, multiple years.

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Figure 2.1: Growth in the DI and SSI

Programs, 1985-94 Millions of Beneficiaries

0

1

2

3

4

5

6

7

8

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Year

SSI Beneficiaries

Beneficiaries Receiving Both DI and SSI

DI Beneficiaries

Note: SSI beneficiaries include all people with a federal SSI payment or a federally administered

state supplementation. DI beneficiaries include disabled workers aged 18 to 64.

Source: Annual Statistical Supplement to the Social Security Bulletin, multiple years.

As the number of DI and SSI beneficiaries increased, so did the amount paid

in cash benefits. In 1985, SSA paid $17 billion in DI cash benefits and $7

billion in SSI cash benefits. By 1994, cash benefits reached $34 billion for DI

and $19 billion for SSI. Overall, the combined DI and SSI cash benefits

increased from $23 billion to $53 billion in 10 years (adjusted for inflation,

the increase in the value of cash benefits was 66 percent). Moreover, the

cost of DI and SSI benefits nearly doubles when including the cost of health

care coverage. In 1994, the cost of providing Medicare and Medicaid to

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beneficiaries was about $48 billion,15 bringing the federal cost of cash

benefits and health care coverage for disabled beneficiaries in that year to

about $101 billion.

More People Entered the

Programs and Fewer Left

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

understood, multiple factors contributed to the increase in 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. Standards expanded largely because 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. Around 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. Since 1990,

the Congress has appropriated $33 million for SSA to complete a series of

outreach demonstration projects.

15The $48 billion includes $19.7 billion in Medicare disbursements for 4.3 million disabled Medicare

enrollees during 1994, according to Health Care Financing Administration (HCFA) Office of the

Actuary estimates. Disabled enrollees include disabled workers who are DI beneficiaries; disabled

railroad retirement system annuitants; people suffering from end-stage renal disease; and federal,

state, and local employees receiving Medicare benefits who are not DI beneficiaries. Although HCFA

told us they could not identify the specific amount of this disbursement made on behalf of DI

beneficiaries, according to SSA, there were about 4 million DI beneficiaries (including 671,000 disabled

workers dually eligible for DI and SSI benefits) in 1994, or about 93 percent of disabled Medicare

enrollees during that year. The $48 billion figure also includes $28.4 billion in Medicaid vendor

payments, premiums, and other capitation payments made on behalf of SSI blind and disabled

beneficiaries in 1994, as estimated by the HCFA Office of the Actuary.

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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.16 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 to people with disabilities. However,

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.

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

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

benefits when GA 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 DI and SSI. The uninsured population under

age 65 in the United States grew by 5 million persons between 1988 and

1992. Coupled with this growth, limitations in employer-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,

880,00 immigrants were admitted to the United States, compared with

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

16D.C. Stapleton and others, “Demographic and Economic Determinants of Recent Application and

Award Growth for SSA’s Disability Programs,” a paper presented at the Social Security

Administration’s conference on Disability Programs: Explanations of Recent Growth and Implications

for Disability Policy (Washington, D.C.: July 20-21, 1995).

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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.

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

13.1 percent in 1985 to 10.8 percent in 1992 (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 was relatively low from 1985 to 1992) may have been the

reduction in the number of continuing disability reviews (CDR) performed

by SSA.

17 In the early 1990s, because of SSA resource constraints and

increasing initial claims workloads, the number of DI CDRs declined

dramatically. In 1995, the backlog of CDRs for DI beneficiaries was about

1.5 million cases, with about 500,000 additional cases coming due each

year.18

17The purpose of a CDR is to verify that an individual on the rolls still has a disability that prevents that

person from working. The Social Security Independence Act (1994) directed SSA to perform a

minimum number of CDRs for SSI beneficiaries. As now required, SSA plans to conduct 100,000 CDRs

on SSI adults and on one-third of SSI children turning age 18 for each of the 3 fiscal years beginning in

1996. Conducting the appropriate number of CDRs has significant implications for expenditures. For

example, in 1994, SSA determined that 17,000 DI beneficiaries were no longer eligible for benefits on

the basis of information gathered from CDRs. These results are subject to appeal; SSA estimates that

65 percent of the ineligibilities will be upheld and that terminations will save an average of $90,000 in

lifetime DI and Medicare benefits costs per person. As a result, total savings from these CDRs could be

almost $1 billion.

18Social Security Disability: Management Action and Program Redesign Needed to Address

Long-Standing Problems (GAO/HEHS-95-233, Aug. 3, 1995).

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Proportion of Beneficiaries

With Longer-Lasting

Impairments Grew

SSA researchers have found that the types of impairments that qualify

people for benefits are associated with different lengths of entitlement.19

The researchers calculated average length of stay on the disability rolls for

DI and SSI cohorts who were awarded benefits (“awardees”) from 1975

through 1993. For DI awardees, on average, mental impairments (16 years);

diseases of the nervous system (13 years); and musculoskeletal

impairments (10 years) lead to the longest entitlement periods. Between

1986 and 1994, the proportion of DI beneficiaries with any one of these

three impairment types increased from 54 percent to 62 percent (see table

2.2). Most of this growth occurred within the category of mental

impairment, which increased from 24 percent of the DI beneficiary

population in 1986 to 31 percent in 1994. The trend toward a greater

portion of beneficiaries with longer-lasting impairments signifies lengthy

stays on the rolls for some.

Table 2.2: Percentage Distribution of

DI Beneficiaries With Diagnosis

Available by Selected Impairment

Categories, 1986-94

Percentage of total DI beneficiary population with selected impairments

Year

Mental

impairmenta

Disease of

nervous

systemb

Musculoskeletal

condition Total

1986 24.4 11.0 18.2 53.6

1987 26.1 11.0 18.2 55.3

1988 26.7 11.0 18.5 56.2

1989 27.7 10.9 18.9 57.5

1990 28.5 10.7 19.1 58.3

1991 29.2 10.6 19.4 59.2

1992 29.8 10.4 20.0 60.2

1993 30.6 10.2 20.5 61.3

1994 30.9 10.0 20.9 61.8

aIncludes mental illness and mental retardation.

bIncludes diseases of the nervous system and sense organs.

Source: Annual Statistical Supplement to the Social Security Bulletin, multiple years.

19K. Rupp and C.G. Scott, “Determinants of Duration on the Disability Rolls and Program Trends,” a

paper presented at the Social Security Administration’s conference on Disability Programs:

Explanations of Recent Growth and Implications for Disability Policy (Washington, D.C.: July 20-21,

1995). We exclude congenital disease (14 years’ average length of entitlement) because of this

category’s low prevalence among the DI population (0.4 percent).

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For SSI adult awardees, on average, mental impairments and diseases of

the nervous system also lead to the longest entitlement periods.20,21 The

proportion of adult SSI beneficiaries with either of these impairment types

increased from 60 percent in 1986 to 65 percent in 1994. In 1994, about

57 percent of adult SSI beneficiaries had a mental impairment, up from

50 percent in 1986. (See table 2.3.)

Table 2.3: Percentage Distribution of

SSI Adult Disabled Beneficiaries by

Selected Impairment Categories,

1986-94

Percentage of beneficiary population aged 18 to 64 with

selected impairmentsa

Year

Mental

impairmentb

Disease of nervous

systemc Total

1986 49.7 10.4 60.1

1987 51.4 10.2 61.6

1988 52.2 10.0 62.3

1989 53.1 9.9 63.0

1990 53.7 9.5 63.2

1991 54.2 9.2 63.4

1992 54.7 8.7 63.5

1993 55.9 8.7 64.6

1994 56.7 8.5 65.2

aIncludes people receiving federally administered payments; excludes people transferred from

prior state programs.

bIncludes psychiatric impairments and mental retardation.

cIncludes diseases of the nervous system and sense organs.

Source: Annual Statistical Supplement to the Social Security Bulletin, multiple years.

Proportion of Middle-Aged

Beneficiaries Grew While

Proportion of Older

Beneficiaries Declined

Between 1986 and 1994, the proportion of adult beneficiaries who were

middle aged steadily increased as the proportion who were older than

middle aged declined. Although this trend signified that the beneficiary

population had become younger, it did not signify that the population was

20Although musculoskeletal conditions lead to one of the longest entitlement periods for DI, these

conditions are associated, on average, with moderate lengths of entitlement for the SSI population.

While congenital diseases lead, on average, to the longest entitlement periods for SSI, we excluded this

condition from our analysis because of its low prevalence (2 percent) among the SSI population under

age 65.

21According to SSA researchers, the mean duration on the rolls for SSI awardees with a psychiatric

impairment is 20 years for adults aged 18 to 34, 14 years for adults aged 35 to 49, and 6 years for adults

aged 50 to 61 years. The mean duration on the SSI rolls for beneficiaries with mental retardation is 23

years for adults aged 18 to 34, 15 years for adults aged 35 to 49, and 7 years for adults aged 50 to 61

years.

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young, as only 10 percent of the adult DI/SSI disability rolls consisted of

persons aged 18 to 29 in 1994. Moreover, the proportion of older new

awardees increased slightly in recent years, suggesting that the beneficiary

population will become older in the years ahead if this trend persists.

Among the DI population, the proportion of beneficiaries aged 30 to 49

steadily increased from 30 percent in 1986 to 40 percent in 1994. While the

proportion of DI beneficiaries who were younger remained around

4 percent during this time, the proportion of older DI beneficiaries steadily

decreased from 66 percent in 1986 to 56 percent in 1994. Likewise, within

SSI, the proportion of beneficiaries who were middle aged increased as the

proportions of beneficiaries who were older or younger decreased. The

proportion of SSI beneficiaries aged 30 to 49 increased from 36 percent in

1986 to 46 percent in 1994. During this time, the proportion of

beneficiaries who were older decreased from 40 percent to 35 percent, and

the proportion of beneficiaries who were younger decreased from

23 percent to 19 percent. (See table 2.4.)

Table 2.4: Percentage Distribution of

Adult DI and SSI Beneficiaries by Age

Group, 1986-94 18-29 30-49 50-64

Percentage of beneficiary population aged 18 to 64

Year DI SSIa,b DI SSIb DI SSIb

1986 4.4 23.4 29.5 36.3 66.0 40.3

1987 4.3 23.1 31.4 37.7 64.3 39.2

1988 4.2 22.6 32.7 38.9 63.1 38.5

1989 4.1 21.9 34.2 40.2 61.6 37.9

1990 4.3 21.2 35.8 41.6 60.0 37.2

1991 4.4 20.2 37.2 43.1 58.4 36.8

1992 4.6 19.3 38.6 44.5 56.8 36.2

1993 4.6 19.8 39.2 45.0 56.2 35.3

1994 4.2 19.2 39.8 45.9 56.0 34.9

aExcludes blind and disabled children aged 18 to 21 as defined by the program.

bIncludes all people receiving federally administered payments.

Source: Annual Statistical Supplement to the Social Security Bulletin, multiple years.

The trend toward serving a greater proportion of beneficiaries who were

middle aged was also generally evident among new awardees. While the

proportion of DI awardees who were under 35 fluctuated somewhere

around 17 percent between 1986 and 1994, the proportion of DI awardees

who were middle aged steadily increased from 25 percent to 31 percent;

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the proportion of DI awardees who were older than middle aged steadily

decreased, except in 1994, from 55 percent to 51 percent. Between 1993

and 1994, however, the proportion of DI awardees who were between 50

and 64 increased nearly 3 percentage points (an increasing proportion of DI

awardees who are older may continue into the future as the baby boom

cohort turns 50 and older). Likewise, the proportion of SSI middle-aged

awardees increased modestly between 1986 and 1992; between 1992 and

1993, the proportion of middle-aged awardees decreased as the proportion

of older awardees and, to a lesser extent, younger awardees increased.

Overall, the proportions of younger, middle-aged, and older SSI awardees

in 1993 were roughly equal. (See table 2.5.)

Table 2.5: Percentage Distribution of

Adult DI and SSI Awardees by Age

Group, 1986-94 Under 35 35-49 50-64

Percentage of awardee population

Year DI SSI DI SSI DI SSI

1986 19.8 33.5 25.4 26.9 54.8 39.7

1987 17.9 31.4 26.5 28.0 55.6 40.6

1988 17.6 30.3 27.1 31.0 55.3 38.7

1989 16.6 30.3 28.0 30.7 55.4 39.0

1990 17.3 29.0 28.7 31.8 54.0 39.2

1991 17.4 29.1 30.2 33.2 52.4 37.7

1992 18.5 30.9 30.7 34.3 50.8 34.8

1993 17.5 31.9 31.7 32.1 50.8 36.0

1994 15.8 a 30.5 a 53.7 a

a1994 data not reported in source document.

Source: DI figures from SSA, Annual Statistical Supplement to the Social Security Bulletin, multiple

years; SSI figures from Rupp and Scott, “Determinants of Duration on the Disability Rolls and

Program Trends.”

Beneficiary

Population Presents

Return-to-Work

Challenges

Developing effective return-to-work strategies for people with disabilities

presents challenges to policymakers. For example, strategies need to

recognize individual differences and abilities and should have the

flexibility and capacity to provide varying levels and types of assistance.

Some people may require a one-time medical intervention, while others

may need ongoing and changing levels of medical support; some

individuals may require remedial retraining, and others may need

education and job coaching.

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Moreover, beneficiaries with limited work histories present particular

challenges in finding and maintaining employment.22 In addition to needing

to learn basic skills and work habits, some beneficiaries, for example, may

need to overcome social isolation and low self-esteem in order to function

at the workplace. Also, even jobs that pay low wages may not be widely

available for some beneficiaries and may become more scarce in the

future. Real wages for the least skilled workers have declined since the

late 1970s. Current welfare reform proposals call for sending low-skilled

people into the labor market, so competition for low-wage jobs may

increase.23 Also, the U.S. economy may be moving toward more temporary

or part-time work (which generally offers little if any health care coverage

and other benefits). While this trend would match the needs of some

beneficiaries who cannot or do not want to work full-time, it would also

make the road to economic self-sufficiency more difficult and less

attractive than public support for others, particularly for those who earn

low wages.

In addition, employment may be more easily disrupted for some people

with disabilities, thereby creating additional challenges to developing

successful return-to-work mechanisms. For instance, people with visual

impairments who work in office settings may undergo more adjustment

than other workers if an office converts from a text- to a graphics-mode of

communication. At a more basic level, some people with disabilities may

experience difficulty in getting to work in the event of inclement weather

or changes in public transportation schedules. Moreover, the nature of

some disabilities may make it difficult for some workers to engage in

full-time work while other disabilities may stigmatize individuals and

perhaps make them appear less attractive to employers. Finally, a shift in

the U.S. economy from labor/manufacturing to skill/service-based jobs

may have had a negative impact on the job opportunities for some people

with mental impairments.

22SSI beneficiaries do not need to have any work history to qualify for benefits. Social Security field

offices surveyed applicants for disability benefits on 2 days during 1994. Field office staff administered

the survey after completion of the initial claims interview. SSA found that 42 percent of applicants for

SSI benefits reportedly left their last job more than 12 months before applying for benefits; 27 percent

said they did not know when they left their last job. See Associate Commissioner for Research and

Statistics, SSA, memo to Associate Commissioner for Disability regarding results of the 1994 2-day

field office survey of disability applicants (Mar. 22, 1994).

23Some similarities exist between the return to work of people on disability rolls and employment of

people on welfare rolls. For a discussion of GAO’s work on the latter, see JOBS and JTPA: Tracking

Spending, Outcomes, and Program Performance (GAO/HEHS-94-177, July 15, 1994) and

Self-Sufficiency: Opportunities and Disincentives on the Road to Economic Independence

(GAO/HRD-93-23, Aug. 6, 1993).

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Advancements Increase Potential for Return

to Work

Advances Increase

Return-to-Work

Potential

Although efforts to maximize the work potential of people currently on the

disability rolls face many challenges, numerous technological and medical

advances and economic changes have created more potential for some

people with disabilities to engage in work. Electronic communications and

assistive technologies—such as synthetic voice systems, standing

wheelchairs, and modified automobiles and vans—have given greater

independence and more work potential to some people with disabilities.

Advances in the management of disability—like medication to control

mental illness or computer-aided prosthetic devices that return some

functioning to the impaired—have helped reduce the severity of some

disabilities. Also, the shift in the U.S. economy toward the service industry

may have opened new opportunities for some people with physical

impairments.

Moreover, over the last several decades, there has been a trend toward

greater inclusion of and participation by people with disabilities in the

mainstream of society. 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. Additionally, the ADA

supports the full participation of people with disabilities in society and

fosters the expectation that people with disabilities can work. The ADA

prohibits employers from discriminating against qualified individuals with

disabilities and requires employers—without undue hardship—to make

reasonable workplace accommodations.

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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. The findings of the studies we reviewed

generally agree that difficult measurement and conceptual issues

complicate the use of medical conditions as the basis for decisions on

work incapacity. Indeed, making valid decisions about who can work and

who cannot is very difficult. While decisions may be more clear cut in the

case of people whose impairments inherently and permanently prevent

work, disability determinations may be much more difficult concerning

people who may have a reasonable chance of work if they receive

appropriate assistance and support. Nonmedical factors may play a crucial

role in determining the extent to which people in this latter group can

engage in substantial gainful activity.

Compounding decision-making difficulties are program features that,

taken together, can undermine the incentive to attempt work. First, the

“either/or” focus of the disability determination process encourages

applicants to concentrate on their inabilities. Moreover, people who have

successfully established their disability to SSA staff may have little reason

or desire to attempt rehabilitation and competitive work. Second, the

benefit structure can provide disincentives to low-wage workers. Third,

work incentives, which few beneficiaries take advantage of, are generally

ineffective in encouraging return to work. Finally, VR plays a limited role in

the disability programs because beneficiaries have poor and untimely

access to services, and the long-term gains for people who receive VR

services are generally lacking. As a result, the design and implementation

of DI and SSI undermine the ability of SSA to identify and expand work

capacities of beneficiaries and return them to substantial gainful

employment. Table 3.1 summarizes these program weaknesses.

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Table 3.1: Summary of DI and SSI Program Design and Implementation Weaknesses

Program area Weakness

Disability determination “Either/or” 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 Cash and medical 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 “All-or-nothing” nature of DI cash benefits can make work at low wages financially

unattractive.

Risk of losing medical coverage when returning to work is high for many beneficiaries.

Loss of other federal and state assistance is a risk for some beneficiaries who return to

work.

Few beneficiaries are aware that work incentives exist.

Work incentives are not well understood by beneficiaries and program staff alike.

VR Access to VR services through DDS referrals is limited: restrictive state policies severely

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; VR

counselors perceive beneficiaries as less attractive VR candidates than other people with

disabilities, making them less willing to accept beneficiaries as clients; and the

success-based reimbursement system is ineffective in motivating VR agencies to accept

beneficiaries as clients.

Applicants are generally uninformed about VR and beneficiaries 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, since long-term,

gainful work is not necessarily the focus of VR agency services.

Delayed VR intervention can cause a decline in receptiveness to participate in

rehabilitation and job placement activities, as well as a decline in skills and abilities. 

The monopolistic state VR structure can contribute to lower quality service at higher

prices, and recent regulations allowing alternative VR providers may not be effective in

expanding private sector VR participation.

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Determining Who Can

and Who Cannot Work

on the Basis of

Medical Condition Is

Imprecise

The Social Security Act defines disability as the inability to engage in any

SGA 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 12 months or longer. A physical or mental impairment is

one that results from anatomical, physiological, or psychological

abnormalities that are demonstrable by medically acceptable clinical and

laboratory diagnostic techniques. The statutory requirement for disability

presumes that some medical conditions are sufficient, in themselves, to

prevent individuals from engaging in substantial gainful employment. The

presumed link between inability to work and presence of a medical

condition establishes the basis for SSA’s award of disability benefits.

SSA maintains a Listing of Impairments containing medical conditions that

are, according to SSA, ordinarily severe enough in themselves to prevent an

individual from engaging in any SGA. About 70 percent of new awardees are

eligible for disability because their impairments meet or equal the listings.24

 Applicants whose impairments do not meet or equal the medical listings

are further evaluated on the basis of nonmedical factors, including

residual functional capacity (RFC), age, education, and vocational skills.25

Weak Scientific Basis

Makes Disability

Determinations Inherently

Difficult

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 can completely prevent individuals from

engaging in any minimal work activity (for example, people who are

quadriplegic with profound mental retardation), it is less clear that some

other impairments that qualify individuals for disability benefits

completely prevent individuals from engaging in any SGA (for example,

people who are missing both feet). Moreover, while most medical

impairments may have some influence over the extent to which an

individual is capable of engaging in gainful activity, other

factors—vocational, psychological, economic, environmental, and

24An 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 findings of a listed

impairment.

25SSA reports that “some, but not all, of the Listings consider functional consequences of an

impairment; however, functional considerations vary significantly among the Listings. Additionally, in

assessing an individual’s functional abilities at the later steps in the sequential evaluation, adjudicators

collect and analyze evidence from a multitude of different, and often conflicting, sources including:

objective clinical and laboratory findings; treating source opinions and other third-party statements

considered to be consistent with the objective evidence; and the individual’s descriptions of his or her

limitations.” See HHS, Plan for a New Disability Claim Process (Washington, D.C.: HHS, SSA, Sept.

1994, p. 11).

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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 up 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.” However, physicians 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 cannot quantify inability to work, and they

cannot certify that the impairments render a person unable to work.

Since then, experts have contended that the scientific community lacks

the empirical data and quantitative models 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

“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.”26

Studies Show Difficulties

in Accurately Determining

Who Can and Who Cannot

Work

Studies we reviewed show that sorting people into two mutually exclusive

categories—either not having the ability to engage in SGA or having the

capacity to do so—can lead to questionable decisions. Many people with

disabilities may have some capacity to work, especially if given

appropriate treatment and support, and these cases are likely to be the

ones that result in different decisions by different decisionmakers. Using

medical criteria as the basis for these decisions attempts to impose

precision on an imprecise process. Decision-making as implemented under

current law involves significant judgment, which may result in some

applicants’ receiving benefits while others with similar limitations in their

capacities are denied benefits. Such a disparity illustrates the inherent

subjectivity of making disability determinations; it does not imply that

26HHS, Report of the Disability Advisory Council (Washington, D.C.: HHS, SSA, Mar. 11, 1988).

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DDSs could make more accurate decisions under current decision-making

procedures.

Two of the studies we reviewed compared disability decisions made by

DDS/SSA with nonbinding decisions on the same cases made by independent

decisionmakers. In one study, a team of vocational and health care

professionals reached decisions opposite from those reached by DDS/SSA in

30 percent of cases: DDS/SSA approved 37 percent of the cases denied by the

teams and denied 27 percent of the cases approved by the teams.27 The

other study found that a team of mental health workers could not agree on

a disability decision in 47 percent of DI/SSI cases involving people with

mental impairments. Among the cases allowed by the team, 88 percent

were also allowed by the DDS; but of the cases denied by the team,

55 percent were allowed by the DDS (overall, the team reached conclusions

opposite from those of the DDS in about one out of every four cases).28

The findings of one other study and a survey we conducted suggest that

disability decisions are not accurate predictors of work capacity. The

study found that, among a sample of people who had physical impairments

that met or equaled the listings but who were not enrolled in DI or SSI,

about 61 percent of men and 32 percent of women were employed 2 years

after being diagnosed with their physical impairment.29 The survey we

conducted showed that about 58 percent of DI applicants who were denied

benefits in 1984 and who were not receiving DI benefits as of 1987 reported

that they were not working (over two-thirds of these nonworking

applicants had been out of the workforce for at least 3 years).30 Moreover,

the self-reported functional and health status of the nonworking denied

group was nearly indistinguishable from the status of a sample of DI

beneficiaries accepted into the program in 1984. Appendix V contains

more details on the studies cited.

27S.Z. Nagi, Disability and Rehabilitation: Legal, Clinical, and Self-Concepts and Measurement

(Columbus: Ohio State University Press, 1969).

28S.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.

29H.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.

Employment figures exclude the 27 percent of adults who died during the 2-year period.

30Social Security Disability: Denied Applicants’ Health and Financial Status Compared With

Beneficiaries’ (GAO/HRD-90-2, Nov. 6, 1989).

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Disability

Determination

Process Encourages

Work Incapacity

Two aspects of the disability determination process—the disability

decision itself and the application process—may promote inability to

work. Eligibility for disability benefits is an “either/or” decision. The Social

Security Act characterizes individuals as either unable to engage in any

substantial gainful employment or having the capacity to work. Because

the decision is a dichotomy—the result is either full award of benefits or

denial of benefits—applicants have a strong incentive to promote their

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

benefits. Conversely, applicants have a disincentive to demonstrate any

capacity to work at all.

Moreover, the process of applying for disability benefits has been

characterized in the literature we reviewed as long, cumbersome, and

possibly debilitating in itself because of the certification and labeling of

the individual as disabled. The length of the determination process ranges

from a minimum of several months to 18 months or longer for individuals

who are initially denied benefits and appeal. During this time, an applicant

meets with his or her physician, SSA staff, and others in an attempt to

establish disability. Some individuals completing the process may become

entrenched in their perceived inability to work, which can possibly lead to

a gradual decrease in actual work ability.

SSA survey results indicate that nearly one-half of DI and SSI applicants with

a work history reported being out of the workforce for more than 6

months in the period immediately preceding application for benefits.31

Consequently, their skills and work habits may have declined prior to

application. And, since these individuals are unlikely to participate in any

substantial gainful employment during the application process, the erosion

of skills may be exacerbated, further contributing to a decline in their

motivation or ability to work.

Applicants who successfully meet the programs’ definition of disabled may

be poor candidates for attempting a return to work. They have been

through a lengthy process that required them to prove an inability to work.

They have provided information about their disabilities before program

officials and the health care community, and family and friends may have

helped to demonstrate their work incapacity. Moreover, being out of the

workforce may have degraded their marketability. The literature suggests

that these factors can reduce receptivity to VR and work incentives as well

as the motivation to develop or regain the ability to engage in gainful

31Memo from SSA’s Associate Commissioner for Research and Statistics to the Associate

Commissioner for Disability, March 22, 1994.

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employment. The degree to which this may occur, however, will vary

among beneficiaries. A small portion of people do, in fact, leave the rolls

by returning to work.

Benefit Structure

Provides Disincentive

to Low-Wage Work

Cash and medical benefits themselves are another factor that can reduce

beneficiaries’ motivation to work and receptivity to work incentives and

VR. The average monthly benefit value in 1994 for DI and SSI beneficiaries

was about $1,050 and $930, respectively.32 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 medical 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 secure 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 or receiving medical treatment, or meeting their

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.33 People who have less

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

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

person would actually be financially better off to receive benefits rather

than to work.

Work Incentives

Ineffective in

Motivating People to

Work

From our fieldwork and analysis of several studies, we identified

weaknesses in the design and implementation of work incentive

provisions. While some provisions effectively reduce the risk of returning

to work, others do little to remove work disincentives. Studies conducted

by SSA researchers and others have questioned the effectiveness of the

work incentive provisions and have cited many of the same design and

32Average monthly medical benefit values are based on estimates from HCFA, Office of the Actuary.

33W.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.

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implementation problems raised during our discussions with disability

advocates and program and rehabilitation officials.

DI and SSI Work Incentives

Provide Different Benefit

Protections

The DI and SSI programs offer a number of work incentives to encourage

beneficiaries to return to work. For both populations, work incentive

provisions safeguard cash and medical benefits and retain beneficiaries’

program eligibility during work attempts. However, work incentive

provisions differ significantly between the two programs, providing

differing levels of benefit protection for DI and SSI beneficiaries. One

significant difference between the two programs is that a DI beneficiary’s

cash benefit stops completely after the trial work period (if it is

determined that work is at the SGA level), while an SSI recipient’s cash

benefit is gradually reduced to ease the transition back to work. Another

difference is that a DI beneficiary can purchase Medicare coverage as an

ex-beneficiary, although it is expensive for lower-wage earners to do so,

but an SSI recipient may lose Medicaid coverage once he or she exceeds a

certain income level.34

A number of work incentive provisions exist within each program, and,

depending upon an individual’s particular situation, certain provisions may

be more useful than others. If, for example, a DI beneficiary engages in

work and earns more than $500 a month but needs a wheelchair and

special transportation in order to work, the beneficiary may use the

Impairment-Related Work Expenses (IRWE) provision to maintain eligibility

while working. This provision allows a DI or SSI beneficiary to deduct work

expenses that are related to the impairment from gross earnings, which

are used to determine continuing eligibility. Without this provision,

someone with high disability-related work expenses could be financially

harmed by returning to work. On the other hand, a beneficiary such as a

construction worker who became eligible due to blindness may need to

acquire new skills in order to return to work. The Plan for Achieving

Self-Support (PASS) provision allows DI beneficiaries to become eligible for

SSI, or SSI beneficiaries to increase the amount of their monthly cash

benefits, by excluding from the SSI eligibility and benefit calculations

34The earned income threshold is the first item considered in determining whether eligibility for

Medicaid should continue. If an individual’s earnings exceed the threshold level, SSA performs an

individualized calculation to determine if the earnings are sufficient to replace SSI, Medicaid, and

publicly funded attendant care that would otherwise be lost due to earnings. Also, the individual must

continue to meet all other SSI disability and nondisability requirements to continue Medicaid coverage.

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income or resources set aside to pursue a work goal.35 Table 3.2 highlights

each program’s work incentive provisions.

Table 3.2: Highlights of DI and SSI Work Incentive Provisions

Program Provision

Income safeguards

DI Trial work period: Allows beneficiaries to work for 9 months (not necessarily

consecutively) within a 60-month rolling period during which they may earn any amount

without affecting benefits. After the trial work period, cash benefits continue for 3 months,

then stop if countable earnings are greater than $500 a month.

Extended period of eligibility: Allows for a consecutive 36-month period after the trial

work period in which cash benefits are reinstated for any month countable earnings are

$500 or less. This period begins the month following the end of the trial work period.

SSI Earned income exclusion: Allows recipients to exclude more than half of earned income

when determining the SSI payment amount.

Section 1619 (a): Allows recipients to continue to receive SSI cash payments even when

earnings exceed $500 a month. However, as earnings increase the payment decreases.

Plan for Achieving Self-Support (PASS): Allows recipients to exclude from their SSI

eligibility and benefit calculation any income or resources used to achieve a work goal.

DI and SSI Impairment-related work expenses: Allows the costs of certain impairment-related items

and services needed to work to be deducted from gross earnings in figuring SGA and

cash payment amount. For example, attendant care services received in the work setting

are deductible while nonwork-related attendant care services performed at home are not.

Subsidies: Allows the value of the support a person receives on the job to be deducted

from earnings to determine SGA. An example of such support is the value of supervision

provided to a worker with a disability that is in addition to that provided to other workers

receiving the same pay.

Medical coverage safeguards

DI Continued Medicare coverage: Allows for continued Medicare coverage for at least 39

months following a trial work period as long as one continues to be medically disabled.

Medicare buy-in: Allows beneficiaries to purchase Medicare coverage after the 39-month

premium-free coverage ends. Beneficiaries pay the same monthly cost as uninsured

retired beneficiaries pay.

SSI Section 1619 (b): Allows recipients to continue receiving Medicaid coverage when

earnings become too high to allow a cash benefit. Coverage continues until earnings

reach a threshold amount, which varies in every state. For example, the threshold amount

in 1994 was $17,480 in Pennsylvania and $22,268 in California.

(continued)

35PASS Program: SSA Work Incentive for Disabled Beneficiaries Poorly Managed (GAO/HEHS-96-51,

Feb. 28, 1996).

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Program Provision

Eligibility safeguards

DI Reentitlement to cash benefits and Medicare: After a period of disability ends, allows

beneficiaries who become disabled again within 5 years (7 years for widow(ers) and

disabled adult children) to be reentitled to cash and medical benefits without another

5-month waiting period.

SSI Property essential to self-support: Allows recipients to exclude from consideration in

determining SSI eligibility the value of property that is used in a trade or business or for

work. Examples include the value of tools or equipment.

DI and SSI Continued benefit while in an approved vocational rehabilitation program: Allows a

person actively participating in a vocational rehabilitation program to remain eligible for

cash and medical benefits even if he or she medically improves and is no longer

considered disabled by SSA.

Work Incentives’ Design

Weaknesses Diminish

Their Effectiveness

Despite the ways in which work incentive provisions can provide some

financial protection for those who want to return to work, work incentive

provisions do not appear to be appropriately designed to motivate

beneficiaries to work. In fact, from an SSA survey of DI beneficiaries, it was

found that only about 2 percent said that their decision to attempt work

was influenced by the work incentive provisions.36 Our review, as well as

other studies, identified a number of design weaknesses that diminish the

work incentives’ intended benefit safeguards.

“All-or-Nothing” Nature of Cash

Benefits for DI Beneficiaries

Makes Work Financially

Unattractive

Research conducted by SSA researchers and others suggests that DI work

incentive provisions are actually disincentives. 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 medical 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. For 36 months after the trial work period ends, referred to as the

extended period of eligibility, cash benefits will be reinstated for any

month in which the person does not earn more than $500 a month in

countable income. After the completion of the trial work period, a

beneficiary’s countable earnings in excess of $500 a month cause a

precipitous drop in monthly income—from full benefits to no cash benefit.

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

36J.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. These findings should be interpreted with caution, since SSA gathered retrospective

data on event histories over a 10-year period.

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

work.37

Cash and medical benefits continue indefinitely for a DI beneficiary as long

as the beneficiary does not earn more than $500 a month in countable

income or does not medically recover. Especially for beneficiaries with

low earnings, it may be more financially advantageous to quit work, or

work part time, and continue to receive disability payments than to earn

more than $500 a month in countable income. As illustrated in table 3.3,

some beneficiaries would be making a rational economic decision to limit

work in order to continue receiving benefits.

Table 3.3: The Impact of Benefit

Cessation for Some DI Beneficiaries

Earnings Cash benefit

Total

monthly

income

Beneficiary earning no more than $500 a

month $500 $660 $1,160

Beneficiary earning more than $500 a month 501 0 501

Table 3.3 presents a simplified scenario illustrating the financial

disincentive to work for some DI beneficiaries. If a beneficiary works and

earns $500 a month in countable income and continues to receive the

average DI cash benefit, his or her total monthly income would be $1,160.

At minimum wage ($4.25 an hour), the beneficiary would need to work 27

hours a week to earn $500. But, if that same beneficiary earned $1 more,

so that earnings were greater than $500 a month, cash benefits would stop,

and the $1 additional earnings would cost the beneficiary $659 in monthly

income. To maintain a monthly income of $1,160, the beneficiary would

have to work 63 hours each week in a minimum-wage-paying job.

A review of the effectiveness of DI work incentive provisions performed by

the Office of Inspector General (OIG) at HHS found that some beneficiaries

who had completed a trial work period subsequently reduced their

earnings so they could continue to receive the full cash benefit amount,

causing their total monthly income (wages plus cash benefit) to be higher

than it would have been from earnings alone.38 The OIG observed that these

beneficiaries were making “financially correct decisions,” a conclusion

37J.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. These findings should be interpreted with caution, since SSA gathered retrospective

data on event histories over a 10-year period.

38HHS, Audit of the Effectiveness of Title II Disability Work Incentives, A-13-92-00223 (Washington,

D.C.: HHS, OIG, Feb. 1993).

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that table 3.3 supports. Of 63 cases reviewed, 9 beneficiaries—or

14 percent—had reduced their earnings in order to continue to receive

cash benefits. Although it is uncertain whether this behavior is

widespread, data from a study of beneficiary participation in DI work

incentive provisions indicate that only 6 percent of the beneficiaries

successfully completed a trial work period, and more than half of those

never left the program.39

Beneficiaries Fear Losing

Medical Coverage

In addition to losing cash benefits, beneficiaries who work and continue to

earn countable income above certain amounts will eventually lose medical

coverage even though they have not necessarily medically improved or

obtained affordable coverage elsewhere. Disability advocates and VR

counselors that we spoke with believe that the fear of losing medical

coverage is one of the most significant barriers to the participation of SSI

and DI beneficiaries in a VR program, their return to work, or both.

DI work incentive provisions provide up to 4 years of premium-free

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 premium-free coverage ends, these individuals may purchase

Medicare coverage at the same monthly premium paid by uninsured

retired beneficiaries. However, the monthly premium—exceeding $300 for

full coverage in 1996—may be a hardship for some beneficiaries,

especially individuals with low earnings. In a study of DI beneficiary 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.”40

SSI beneficiaries who lose medical coverage because they exceed the

earnings limit do not have the option of purchasing Medicaid. In most

states, section 1619 work incentives allow beneficiaries to keep Medicaid

coverage even when earnings exceed $500 a month. SSI beneficiaries may

keep their 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.41

39L.S. Muller, “Disability Beneficiaries Who Work and Their Experience Under Program Work

Incentives,” Social Security Bulletin, Vol. 55, No. 2 (summer 1992), pp. 2-19.

40Hennessey and Muller, “The Effect of Vocational Rehabilitation and Work Incentives on Helping the

Disabled-Worker Beneficiary Back to Work.”

41The 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. As

discussed earlier, the earned income threshold is followed by an individualized assessment to

determine whether eligibility for Medicaid should continue.

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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 exclusion

for preexisting conditions.

Other studies have also identified the risk of losing medical coverage as a

major barrier to beneficiaries’ returning to work. For example, the fear of

losing Medicaid and Medicare was identified as perhaps the single greatest

barrier to employment by the President’s Committee on Employment of

People With Disabilities. Its study reportedly included the views of more

than 1,200 leaders of every major disability constituency in every state.42 In

a recent OIG/HHS survey of disability program applicants, 75 percent of the

DI applicants and 79 percent of the SSI applicants rated continued medical

coverage as very important to encouraging work.43

Beneficiaries Who Return to

Work Risk Losing Other

Federal and State Assistance

Beneficiaries with low income may be receiving benefits from other

programs—for example, food stamps, housing assistance, and energy

assistance. SSI and DI work incentives do not protect beneficiaries from

losing benefits from other programs. During our visits with disability

advocates and rehabilitation counselors, we were told of instances in

which beneficiaries had little option other than to quit work because they

could not afford to lose their housing assistance. Thus, beneficiaries faced

with losing their medical benefits and benefits from other programs if they

return to work have an incentive to forgo work in order to continue

receiving cash, medical, and other types of assistance.

Work Incentives Are

Poorly Implemented

Implementation problems further limit the effectiveness of work incentive

provisions in two ways. First, beneficiaries are generally unaware of the

work incentive provisions. Second, if beneficiaries are aware of the

provisions, they generally do not understand their complexities.

42President’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).

43HHS, Disability Applicants’ Responses to Vocational Rehabilitation Issues: A Mail Survey (draft

report) OEI-07-90-00830 (HHS, OIG, Mar. 1995). The OIG selected a random sample of 600 applicants

whose claims had been adjudicated. SSA awarded benefits to half the applicants and denied benefits to

the other half.

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Beneficiaries Are Generally

Unaware of Work Incentive

Provisions

For work incentives to influence behavior, beneficiaries need to be aware

of the work incentive provisions. Disability advocate groups and VR

counselors told us, however, that beneficiaries generally are unaware of

the work incentive provisions. SSA researchers have found that, among a

sample of DI beneficiaries, 80 percent were unaware of the work incentive

provisions at the time they returned to work.44 This lack of knowledge of

work incentives is due, in part, to SSA’s emphasizing disability

determination over encouraging or helping beneficiaries to work. SSA

claims representatives told us that they devote most of their time to

assisting beneficiaries to apply for benefits, leaving little time to inform

them of work incentive provisions. When work is discussed, it is generally

in the context of the application process and how earnings may result in

lower benefits or no benefits at all.

Although some claims representatives do spend time discussing the work

incentive provisions, they recognize that time spent on work incentives is

quite brief and that it occurs at the end of a lengthy application process in

which they have already provided beneficiaries with a large amount of

information. Further, the evidence we reviewed indicated that, at the time

of application, individuals are focused on establishing their inability to

work and not on initiating efforts to obtain employment. Other claims

representatives told us that they discuss work incentive provisions only if

the beneficiary expresses a desire to work, while still others said they

provide brochures describing work incentive provisions or rely on SSA

headquarters to provide this information.

Beneficiaries Generally Do Not

Understand Complex Work

Incentives

Claims representatives, disability advocates, and VR counselors told us that

most beneficiaries who are aware of the work incentive provisions do not

understand them. In fact, counselors and advocates who help beneficiaries

return to work are not always able to explain how work incentives apply

to a person’s particular situation, because they are not fully aware of or do

not understand all the provisions themselves. Claims representatives, who

spend most of their time processing claims, are not always familiar with

work incentive provisions, either. During group discussions with claims

representatives, we found that although some appeared to have a good

working knowledge of the work incentive provisions, some were not

aware of certain provisions while others appeared to be confused by them.

The difficulty in understanding work incentives is heightened for the

11 percent of the beneficiary population who receive both DI and SSI. For

44Hennessey and Muller, “Work Efforts of Disabled-Worker Beneficiaries: Preliminary Findings From

the New Beneficiary Followup Survey.”

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these concurrent beneficiaries, the SSI work incentive provisions apply to

the SSI portion of their cash benefit and the DI provisions apply to the DI

portion of their cash benefit. In some SSA district offices, concurrent

beneficiaries must go to two different claims representatives to handle

their cases. In addition, when reporting earnings to SSA, these beneficiaries

must report their earnings to both programs, each of which has its own

reporting requirements and processes. For example, DI requires that

reported earnings reflect when the income was earned, while SSI requires

that reported earnings reflect when the income was received.

Some beneficiaries who receive DI and SSI benefits do not understand the

different reporting requirements. If these beneficiaries report earnings

only to one program, for example, they may be overpaid by the program

that does not receive the earnings data. Beneficiaries can become even

more confused and anxious about working when they later receive a

notice of overpayment.

Studies have also found that beneficiaries generally do not understand

work incentive provisions. For example, one study concluded that DI and

SSI work incentive policies and procedures were neither well understood

nor operating smoothly administratively.45 Another study noted that DI

beneficiaries who were aware of work incentive provisions were

unfamiliar with the details and had conflicting interpretations. The study

also found that claims representatives had a large number of

responsibilities and used very little of their time advising beneficiaries

about return to work. Moreover, the claims representatives said that the

complexity of the work incentives made the provisions hard for even them

to master.46 The Disability Advisory Council also concluded that

beneficiaries did not understand the work incentive provisions. The

Council stated that better understanding of the provisions would help

beneficiaries dispel their fears and encourage them to test their work

capacity.47

45A.C. Jensen, Consumers’ Experiences with Work Incentive Policies in the Supplemental Security

Income and Social Security Disability Insurance Programs: An Exploratory Study (Elmhurst, Ill.:

National Foundation for People With Disabilities, June 1990).

46Portfolio Associates, Inc., for the Office of Disability, Division of Disability Program Information and

Studies, SSA, HHS, Work Incentive Marketing Project (final report) (Washington, D.C.: HHS,

Jan. 1989).

47Report of the Disability Advisory Council, HHS.

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VR Plays Limited Role

in Disability Programs

The application process and weak DI and SSI program work incentive

provisions can discourage a beneficiary from attempting to return to work.

Structural weaknesses in the VR system—spanning SSA, the DDSs, and the

state VR agencies—further diminish the chances that a beneficiary will

return to work.

The Social Security Act established the policy that the maximum number

of individuals applying for disability benefits should be rehabilitated into

productive activity. People applying for disability benefits are to be

promptly referred to state VR agencies for rehabilitation services.48 VR

services are intended to prepare individuals with disabilities for work

opportunities. However, VR has a limited impact on DI and SSI, as state

agencies successfully rehabilitate only about 1 out of every 1,000

beneficiaries, on average, each year.49

Access to VR Services

Through DDS Referrals Is

Limited

With few beneficiaries referred by DDSs for VR services, and fewer still

accepted by VR agencies as clients, access to VR services through the DDS

referral process is limited.50 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 by VR agencies as clients.51

Several factors contribute to limited access.

48The Rehabilitation Act of 1973, as amended, authorizes the Department of Education’s VR program,

which provides federal funds to a network of state VR agencies, to operate the country’s public VR

program. The federal share of funding for these services is about 80 percent; the states pay the

balance.

49The DI and SSI programs’ standard of successful rehabilitation is limited to cases in which the

beneficiary is returned to SGA for at least 9 continuous months (which we refer to as “SSA-defined

success”). In contrast, state VR agencies’ standard of successful rehabilitation is met if the agency

places the individual in suitable employment (paid or unpaid) for at least 60 days (which we refer to as

“VR-defined success”). In this case, we are referring to an SSA-defined success.

50Public 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, do not generalize to referrals from other sources.

51Social 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.

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Restrictive State Policies Limit

VR Referrals

SSA’s national screening guidelines are intended to ensure that all disabled

applicants with rehabilitation potential are given the opportunity to

receive services. The national guidelines counsel DDSs to refer all

applicants for VR services except those with terminal illnesses, severe or

rapidly progressive impairments not responding to treatment, or other

characteristics that make rehabilitation and sustained work unlikely.

Using SSA’s national guidelines as a basis, however, some DDSs, working in

conjunction with state VR agencies to reflect state agency priorities, have

developed additional criteria for the DDSs to apply in screening out certain

categories of beneficiaries for referral. In this way, some VR agencies have

limited the types of referrals they receive to those they consider to be the

best VR candidates.

These added criteria are more restrictive than SSA’s national guidelines.

For example, California’s state VR agency and state DDS have agreed to

limit referrals to beneficiaries who are high-school-educated (or the

equivalent), 18 to 45 years old, and have an orthopedic or visual

impairment (if a DI beneficiary) or an orthopedic, visual, or mental

retardation impairment (if an SSI beneficiary). California developed its

criteria to overcome problems encountered with large numbers of

unevaluated referrals that it considered too time consuming and

unproductive to deal with. These criteria, if strictly applied, would

preclude from referral for VR services, for instance, a DI beneficiary with a

mental impairment.

Some state policies also restrict VR services to people capable of working a

minimum number of hours per week. This restriction, according to the

President’s Committee on Employment of People With Disabilities, blocks

people with disabilities who can work fewer than a prescribed minimum

number of hours per week from VR services that could help them become

more employable.52

52Operation People First: Toward a National Disability Policy, President’s Committee on Employment

of People With Disabilities.

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SSA Does Not Routinely

Monitor the Referral Process

Although SSA monitors the volume, timeliness, and quality of the benefit

application process, little information is routinely collected on the referral

process. To illustrate,

• although SSA began early in 1996 to track the number of DDS-referred

beneficiaries accepted for VR services,53 SSA does not track the number of

DDS-referred beneficiaries successfully rehabilitated (SSA-defined

success);54

• SSA does not collect information on the reasons that some DDS referrals are

not accepted for services or successfully rehabilitated; and

• the DDSs do not review the referral process as part of the DDS quality

assurance process.

Information such as this could help evaluate and improve the referral

process, including the quality of the referrals, and also reward employees

for their accomplishments in referral activities. Nevertheless, the Joint VR

Referral Task Force, a multiagency group that sought to improve the VR

referral process, reported that no work credit or other recognition was

associated with the referral process in SSA’s field offices.55

By not routinely monitoring the performance of the referral process, SSA

and DDSs tell their employees that referring beneficiaries for VR has

relatively low priority compared with claims processing tasks. A message

of low priority greatly diminishes the incentive for SSA field office and DDS

employees to spend time informing individuals about the referral process

and assessing beneficiaries’ potential for referral, thereby negatively

affecting the number of referrals.

Beneficiaries Are Perceived as

Less Attractive VR Candidates

Not all people referred to state VR agencies are accepted for VR services.

State VR agencies use their own selection processes to identify individuals

they believe will be best served by VR services. Some state VR agency

counselors view DI and SSI beneficiaries as relatively less attractive

candidates for VR services than VR candidates who are not beneficiaries,

thereby reducing the number of DDS referrals that they accept. When

53SSA began early in 1996 to collect information on the number of DDS referrals accepted for VR

services by the state VR agencies. This was the first step in the agency’s implementation of new

regulations that allow it to use providers for VR services other than state agencies.

54SSA tracks successful rehabilitations but cannot distinguish these cases by referral source.

55HHS, Final Report and Recommendations Resulting from the Joint Vocational Rehabilitation Referral

Task Force (Washington, D.C.: Office of Disability, SSA, May 16, 1994). The task force included

representatives from state VR agencies, DDSs, the Department of Education’s Rehabilitation Services

Administration, and SSA. The task force reviewed the existing VR referral process and recommended

improvements.

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choosing between DI and SSI beneficiaries and others, for example, some

counselors are influenced by two different perceptions of beneficiaries:

they are seen either as less needy than other potential VR candidates who

are unemployed and lack disability benefits or as more difficult to

rehabilitate because they are more severely disabled and less motivated to

participate in rehabilitation than other persons referred for VR services. In

either case, some VR counselors are less willing to accept DI and SSI

beneficiaries as clients.

Moreover, no follow-up exists between the DDS examiner who refers the

beneficiary and the VR counselor who receives the referral, unlike other

sources of referrals for the VR agencies. In light of the evidence that

beneficiaries are sometimes perceived as less attractive VR candidates than

non-SSA clients, lack of a support network to advocate personally on behalf

of beneficiaries may mean that beneficiaries will be at a disadvantage in

the selection of people served by VR agencies when this type of support

exists for referrals from other sources.

However, attitudes held by some VR counselors toward beneficiaries may

not be unrealistic. For instance, the average cost of VR services for a

beneficiary who was successfully rehabilitated (VR-defined success) was

about $4,000 in fiscal year 1992; in comparison, the cost of services for a

successfully rehabilitated nonbeneficiary was about $2,500.56 Disincentives

discussed above can impede beneficiaries’ motivation to return to work

and may cause beneficiaries to be unreceptive to VR. Clients with poor

motivation to seek and gain employment can prevent VR agencies from

achieving a high rate of success.

Rehabilitation Reimbursement

System Is Ineffective in

Motivating VR Agencies

Studies have questioned whether the VR reimbursement system motivates

state VR agencies to accept DI and SSI beneficiaries. Through 1981, SSA

allocated funds to state VR agencies to finance VR services provided to

beneficiaries regardless of rehabilitation outcome. Under the current VR

reimbursement program established by the Congress in 1981, SSA

reimburses state VR agencies only for costs incurred in successfully

rehabilitating DI and SSI beneficiaries (SSA-defined success).57 The Congress

intended this “success-based” reimbursement system to provide state VR

agencies with an incentive to rehabilitate beneficiaries to SSA’s standards.

56These cost figures include only purchased VR services, such as training, not VR agency salaries and

administrative expenses.

57SSA’s reimbursement is in addition to the funding provided to state VR agencies by the federal

(80 percent) and state (20 percent) governments, which covers costs for both successful and

unsuccessful cases.

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We reported previously that VR agencies became more cautious about

accepting DI beneficiaries for services following implementation of the

current reimbursement system.58 They were more cautious because of

(1) the perceived lower likelihood of success with DI beneficiaries and

(2) the uncertainty of getting SSA reimbursement for the cost of VR services

because SSA had a considerable backlog of claims for VR reimbursement at

the time. The HHS/OIG found little evidence in 1990 that the reimbursement

system was inducing states to increase the number of SSA clients served.59

With two exceptions, the sampled states had made no special efforts to

enroll SSA beneficiaries in VR programs, and none had established any

special rehabilitation activities for them. In spite of the Congress’ intent to

motivate state agencies to rehabilitate beneficiaries, the OIG found that,

because of implementation problems, states had little incentive to

rehabilitate SSA clients. Problems included, for example, delays in

receiving reimbursements from SSA and policies in some states that

required reimbursements to be deposited into a state’s general fund rather

than into a VR agency’s operating budget. Thus, problems in

implementation have hampered testing the full potential of the

success-based reimbursement system.

Beneficiaries Are Unaware

of VR Services and Are Not

Encouraged to Use Them

SSA field office employees are required by agency regulations to inform

applicants for disability benefits that they may be contacted by a state VR

agency about an opportunity for rehabilitation. Employees also are

required to inform applicants that refusal to accept rehabilitation services

offered to them, without good cause, can result in the withholding of

benefits. Moreover, employees are expected to give written materials

about VR services to anyone who inquires about disability benefits.

In spite of these policies, a 1995 HHS/OIG survey of DI and SSI applicants

found that respondents were generally uninformed about VR.

60 More than

two-thirds of the respondents said that they had not been told or did not

recall having been told that they might be contacted about VR services.

Three out of every four respondents said that they had not been told or did

not recall having been told that benefit payments might stop if they

refused to participate in VR. Moreover, three out of every four respondents

said they had not received or did not recall having received materials

58Social Security: State Vocational Rehabilitation Agencies’ Reimbursement for the Disabled

(GAO/HRD-87-36BR, Feb. 3, 1987).

59HHS, Social Security Administration Payments for Vocational Rehabilitation, OEI-07-89-00950

(Washington, D.C.: OIG, HHS, Apr. 1990).

60Disability Applicants’ Responses to Vocational Rehabilitation Issues: A Mail Survey, HHS.

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about VR services. If not informed about VR services, the chances of

beneficiaries’ becoming rehabilitated and returning to the workforce may

be reduced.

Responding to findings by the Joint VR Referral Task Force that

beneficiaries lacked awareness about rehabilitation opportunities, SSA has

recently developed and distributed a brochure on VR for its field offices to

disseminate to beneficiaries.61 The availability of updated materials on VR,

however, does not guarantee that a beneficiary will be thoroughly familiar

with VR services, as SSA and DDS employees generally lack incentives to

educate beneficiaries about VR.

In addition to the lack of awareness and support, beneficiaries generally

lack encouragement to take part in VR services. For example, some state VR

agencies make little or no attempt to contact beneficiaries and involve

them in their VR programs or actively encourage them to become

interested in VR. Additionally, fewer than half the applicants surveyed by

the OIG in 1995 reported that someone had encouraged them to participate

in VR.

62 And only one out of every four applicants surveyed reported having

received encouragement from SSA employees to take part in VR services.

Since beneficiaries’ initial exposure to the possibility of VR occurs at the

same time that they are trying to establish inability to work, limited

encouragement can further distance them from seeking VR services.

Long-Term Gains From

State VR Services Are

Generally Lacking

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

agency, studies have questioned the effectiveness of VR services. In 1993,

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

employment status of VR clients (including SSA beneficiaries) over an

8-year period following receipt of services.63 We found that gains in

employment and earnings of clients who had been successfully

rehabilitated (VR-defined success) 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.

61Final Report and Recommendations Resulting from the Joint Vocational Rehabilitation Referral Task

Force, HHS.

62Disability Applicants’ Responses to Vocational Rehabilitation Issues. A Mail Survey, HHS.

63Vocational Rehabilitation: Evidence for Federal Program’s Effectiveness is Mixed (GAO/PEMD-93-19,

Aug. 27, 1993). GAO 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.

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However, clients who had not been rehabilitated, but 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.

Obtaining sustained, gainful work for clients is not always the focus of

state VR agencies, which may be one reason that long-term gains are

limited. Each client served works with the state VR agency to establish an

individual rehabilitation plan. The plan includes an achievable vocational

goal considered to be “suitable employment” for the client. The VR agency

considers a client to be successfully rehabilitated following 60 days of

suitable employment (VR-defined success). Suitable employment need not

involve wages or salary and may include, for example, working as an

unpaid homemaker or family worker.64 The suitable employment found for

about 10 percent of state VR agencies’ successful cases in fiscal year 1992

was as unpaid homemakers. Moreover, more than one of every four DI

beneficiaries rehabilitated in fiscal year 1992 was an unpaid homemaker.

The VR 60-day measure of success is less rigorous than SSA’s criterion of

employment at SGA for 9 continuous months. State VR agency employees,

accountable to their states for success according to the 60-day measure,

may not necessarily be geared toward providing beneficiaries with

services oriented toward achieving and maintaining long-term gainful

employment. Strong organizational incentives—pay, promotion, and

recognition—may incline VR counselors toward providing services suitable

for short-term employment or homemaker activity rather than for

longer-term competitive employment.

Moreover, studies show that few beneficiaries receive VR services that are

associated with returning beneficiaries to work. SSA researchers reported

that certain VR services—job placement, vocational training, and general

education—had a significant and positive effect on the tendency for DI

beneficiaries to return to work.65 This finding is supported by another

study of the same population, in which about one-half to two-thirds of DI

beneficiaries who received these types of VR services indicated that the

64The Department of Education defines “unpaid homemaker” as someone who is able to keep house

for oneself, if living alone, or for self and others, if living in a family setting. An unpaid family worker is

someone who works without pay on a family farm or in a family business.

65Hennessey and Muller, “The Effect of Vocational Rehabilitation and Work Incentives on Helping the

Disabled-Worker Beneficiary Back to Work.”

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services helped them return to work or continue working.66 The latter

study found, however, that these VR services were offered to a small

segment of the relatively few DI beneficiaries who received VR: only

6 percent received job placement services, 12 percent received vocational

training, and 7 percent received general education.67 A similar message

was reported by the 1988 Disability Advisory Council.68 The Council heard

testimony that some state VR agencies did not provide adequate job

placement and job retention services, and it recommended that VR

programs for beneficiaries be geared toward these services.

Timing of Referral Can

Diminish Its Effectiveness

Findings from research we reviewed generally agreed that rehabilitation,

including treatment, offered close to the onset of disabling impairments

has the greatest likelihood of success. In fact, the literature emphasizes

that “early” intervention for disabled workers is “not a question of months,

but of days or even hours.”69 However, by the time a person applies for DI

or SSI benefits, in many cases the chance for early work-site intervention

has been lost. SSA survey results indicate that nearly 40 percent of DI/SSI

applicants with a work history reported being out of the workforce for

more than 12 months in the period immediately prior to applying for

disability benefits.70

The application process further delays the provision of VR services. The

period during which applicants are being certified and labeled as disabled

is generally a lengthy one during which applicants risk becoming

entrenched in their self-perceived inability to work. According to SSA’s

Associate Commissioner for Disability, “DDSs refer some individuals...to

the state [VR agencies] at the same time we notify these individuals of [our]

disability decisions. Arguably, this is the least appropriate time to discuss

VR or employment.”71

66Hennessey and Muller, “Work Efforts of Disabled-Worker Beneficiaries: Preliminary Findings From

the New Beneficiary Followup Survey.”

67Just over one-half of DI beneficiaries who received VR services received physical therapy. Physical

therapy was found to have a positive and significant effect on the tendency to return to work.

68Report of the Disability Advisory Council, HHS.

69W.A. Hunt and others, “Disability and Work: Lessons from the Private Sector,” paper presented at the

National Academy of Social Insurance and the National Institute for Disability and Rehabilitation

Research Workshop on Disability, Work, and Cash Benefits (Santa Monica, Calif.: Dec. 8-10, 1994), p.

32.

70Memo from SSA’s Associate Commissioner for Research and Statistics to the Associate

Commissioner for Disability, HHS.

71HHS, Associate Commissioner, Office of Disability, Developing a World-Class Employment Strategy

for People with Disabilities, A Briefing for Commissioner Chater and Principal Deputy Commissioner

Thompson (Washington, D.C.: SSA, HHS, Aug. 1994).

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The timing of the referral can diminish the effectiveness of VR in

rehabilitating individuals and encouraging them to return to work.

Extended absence from the workplace reinforces a person’s self-perceived

inability to work and drains one’s motivation to work. As a consequence,

receptiveness to participate in rehabilitation and job placement activities

can decline.

Overall Service Delivery

Structure May Limit

Quality of Services

The VR service delivery structure may contribute to the limited gains in

employment and earnings derived from state VR services. DDSs refer

beneficiaries to the state VR agency network for services. Since state VR

agencies select the service providers, little competition exists in this

network to help ensure that beneficiaries receive high-quality,

cost-effective services. Beneficiaries cannot choose among public and

private service providers operating in a competitive market to find the one

that provides the services they believe are most valuable.

New authority in SSA’s regulations allows SSA to refer people to private VR

providers when the state VR agencies refuse or are unable to serve

referrals. SSA put into place the information system needed to begin

implementation of these regulations early in 1996 and expects to have

some private entities providing VR to its referrals by the summer of 1996.

Although the regulations introduce limited competition in providing VR

services to DI and SSI beneficiaries, two factors may limit participation by

private VR providers. First, state VR agencies have 4 months to accept or

reject a referral before beneficiaries can receive services from private

providers. This first right of refusal may result in state agencies’ selecting

beneficiaries who are the easiest to rehabilitate and employ, thereby

leaving the most difficult cases for the private market to serve. Second,

some private providers have criticized the practice of reimbursing for

services only after clients have been employed at SGA for 9 continuous

months. A representative of these providers calls the timing of this

payment mechanism “unworkable” for the private sector because of the

financial burden and risk it imposes on providers.

In effect, allowing private sector providers access to beneficiaries only

after the public sector rejects them means that private sector providers

will continue playing a secondary role in the market. Consequently, choice

and competition will remain curtailed, and the quality of VR services is not

likely to change.

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Conclusions, Recommendation, and Agency

Comments

Conclusions In recent years, the potential for some DI and SSI beneficiaries to engage in

substantial gainful employment has increased because of advances in

assistive technologies and the medical management of disabilities, as well

as an increasing trend toward the integration of people with disabilities

into society. The Congress has signaled an interest in taking advantage of

these changes to enhance the employment opportunities for DI and SSI

beneficiaries.

A significant portion of people receiving disability benefits may not be

likely candidates for rehabilitation and return to work, however. For

instance, almost one-half of a cohort of beneficiaries who entered DI in

1988 died or reached the age of 65 in less than 6 years. Furthermore,

almost one-half of the adult DI and SSI beneficiary population was aged 50

or older in 1994.

On the other hand, there is a meaningful portion of working-age

beneficiaries who can be expected to survive for many years, and who

may be candidates to return to work. SSA testified before the House

Committee on Ways and Means in 1990 that almost one-third of DI and SSI

beneficiaries are very good candidates for VR.

72 Furthermore, 35 percent of

the 84,000 DI beneficiaries who responded to a questionnaire in May 1993

that asked if their medical conditions had changed indicated an interest in

receiving rehabilitation or other services that could help them get back to

work.

Weaknesses in the design and implementation of the DI and SSI programs,

however, mean that little has been done to identify and encourage the

productive capacities of beneficiaries who might be able to benefit from

rehabilitation and employment assistance. The disability determination

process encourages applicants to focus on their incapacities and, coupled

with a strong financial incentive to retain benefits, may create little

interest in returning to work. Work incentives may not overcome the risk

of lost income faced by beneficiaries attempting trial work or the risk of

losing medical coverage when successfully employed. SSA does not

adequately promote work incentives, and the complexities of the work

incentives—especially in the absence of clear guidance from SSA staff—are

difficult for beneficiaries to understand. Also, state VR services do not

appear to be accessible to many beneficiaries, and their effectiveness in

securing long-term financial gains for beneficiaries has been called into

72“Proposals to Improve the Effectiveness of the Social Security Administration’s Vocational

Rehabilitation Program,” testimony given by Louis D. Enoff, Deputy Commissioner for Programs,

before the Subcommittee on Social Security, Committee on Ways and Means, U.S. House of

Representatives, serial 101-94, Apr. 19, 1990.

Page 57 GAO/HEHS-96-62 Social Security Disability Redesign
Chapter 4 

Conclusions, Recommendation, and Agency

Comments

question. The cumulative effect of these weaknesses is diminished

capacity of the DI and SSI programs to return people to work. Indeed, we

testified in May 1995 that SSA required a broader management focus to do

more to improve the productive capacity of DI and SSI beneficiaries.73

In light of these weaknesses, SSA needs to place much greater emphasis on

achieving return-to-work outcomes. Doing this will require SSA to

restructure its existing strategies for identifying and enhancing the

productive capacities of beneficiaries. SSA’s success in restructuring is

likely to be dependent upon a multifaceted approach. For instance,

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 impact if

beneficiaries are better off financially not working than attempting to

work. Examples such as these suggest that the full impact of restructuring

return-to-work efforts may be limited unless these efforts are integrated

into a unified and consistent strategy.

As an initial step in restructuring its return-to-work strategy, SSA needs to

identify the size and characteristics of the beneficiary population that has

a reasonable chance of achieving gainful employment. SSA also needs to

identify how the design and implementation of the DI/SSI application

process, benefit structure, work incentives, and VR service provider system

can be restructured to facilitate employment opportunities. Throughout

such efforts, special attention should be given to developing data on the

costs and benefits of various return-to-work strategies, as this will be

essential input for policymakers considering redesign options. Finally,

success in improving return-to-work rates will be likely to extend beyond

the control of SSA alone to other federal agencies—such as the Department

of Education and the Department of Labor, which have jurisdiction over

issues affecting the rehabilitation and employment of people with

disabilities—and to the private sector as well.

SSA may find that restructuring its return-to-work strategies requires

legislative action. For instance, the experts we interviewed, as well as

much of the literature we reviewed, underscored the influence of

treatment, supports, and services on the work capacities of people with

disabilities. However, current law does not require the evaluation of an

individual’s capacities to consider such enabling supports and services.

Thus, to the extent that decisions on work capacity and successful

73GAO/T-HEHS-95-164, May 23, 1995.

Page 58 GAO/HEHS-96-62 Social Security Disability Redesign
Chapter 4 

Conclusions, Recommendation, and Agency

Comments

return-to-work outcomes depend upon such supports and services, SSA

may wish to propose legislative reform to the disability determination

process, benefit structure, and other areas of program design.

Recommendation We recommend that the Commissioner of SSA take immediate action to

place greater priority on return to work, including designing more

effective means to more accurately identify and expand beneficiaries’

work capacities and better implementing existing return-to-work

mechanisms. As part of this effort, the Commissioner of SSA should

develop a legislative package for those areas in which SSA does not

currently have legislative authority to enact change, in order to position

the agency to expeditiously redirect its emphasis on return to work.

Agency Comments In commenting on a draft of this report, the Commissioner of Social

Security concurred with our findings and conclusions (see app. VI) but did

not indicate whether or not she would take action to implement our

recommendation. The Commissioner agreed that DI and SSI beneficiaries

face a number of barriers and disincentives that impede entry into the

workforce. She also agreed that many current beneficiaries have the

potential to return to work and that making program improvements will

involve input from a network of federal, state, and private sector players.

The Commissioner made a number of technical comments, which we have

incorporated where appropriate.

Page 59 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix I 

Range of Public and Private Disability

Benefit Types for Working-Aged People With

Disabilities

Cash Benefit

Public/Private Insurers

Long-Term Disability 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

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.

Short-Term Disability In case of illness or injury resulting in a temporary inability to work, a

person might be eligible to receive short-term cash disability benefits from

state temporary disability insurance programs.74 However, only five states

currently provide this type of benefit.75 Outside these states, workers may

be eligible for paid sick leave or sickness or accident insurance benefits if

provided by the employer or purchased on their own.

Compensation Individuals can receive compensation for injuries sustained on the job,

during active duty with the Armed Services, and in nonjob-related

accidents. 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. An injured worker can receive compensation for

temporary total disability—meaning that the worker is unable to work but

expected to fully recover—or for being permanently and totally disabled

for any employment. If, however, the permanent disability is partial, the

injured worker can receive compensation whether or not the disability

lessens work ability. Also, a member of the Armed Services who becomes

permanently disabled because of injuries or disease incurred or

aggravated by active duty is compensated based on the percentage of

normal functioning that is lost, ranging from partial to total (10 percent to

100 percent). Finally, an individual injured in an automobile accident or

suffering other nonjob-related injuries in which another party is at fault

can also receive compensation payments.

74These programs are integrated with sick leave in varied ways.

75California, Hawaii, New Jersey, New York, and Rhode Island.

Page 60 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix I 

Range of Public and Private Disability

Benefit Types for Working-Aged People

With Disabilities

Income Support A person with severe disabilities who has low income can receive

means-tested cash benefits from SSI regardless of workforce connections.

Similarly, a veteran with wartime service who has low income and a

disability unrelated to active military duty can be eligible for a veterans’

pension.

Services A myriad of federal, state, and local disability programs provide services

for working-aged people with disabilities. For instance, each state has one

or more agencies that provide VR services to eligible individuals under a

joint federal/state VR program administered by the Rehabilitation Services

Administration in the Department of Education. State workers’

compensation also pays for rehabilitation; veterans have a separate VR

program as well as other programs administered by the Department of

Veterans Affairs that supply, for example, prosthetics and housing

assistance. The Department of Transportation grants funds from

earmarked revenues to support transportation projects and programs that

benefit people with disabilities. And people with disabilities who have low

income may be eligible for food stamps, housing, and employment

assistance administered, respectively, by the Departments of Agriculture,

Housing and Urban Development, and Labor. An array of federal agencies

also funds services for people with specific impairments, including visual,

hearing, and mental impairments, as well as developmental disabilities.

Health Care Eligible working-aged individuals with disabilities benefit from publicly

provided health insurance. Medicaid provides federal funds to states to

help pay for health care for people who are eligible for SSI. The Medicare

program provides hospital and medical insurance protection for disabled

individuals who have qualified for DI benefits. Additionally, a person can

defray the costs of disability-related medical expenses by purchasing

private medical insurance or participating in an employer-provided

insurance program.

Page 61 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix II 

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 (SGA) and whether he or she meets the applicable

nonmedical eligibility requirements (Social Security insured status,

income and resources, residency, and citizenship, for example).76 An

applicant found to be not working or working but earning less than SGA

(minus allowable exclusions), and who meets the nonmedical eligibility

requirements, has his or her case forwarded to a 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

SGA. 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 SGA, is found 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

76To be eligible for DI benefits, individuals must have worked long enough and recently enough under

Social Security. To be eligible for SSI benefits, individuals must not have countable monthly income

(earned and unearned income, as defined by the SSI program, minus allowable exclusions) higher than

the federal benefit rate, nor countable real and personal property (including cash) worth more than

$2,000.

Page 62 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix II 

Five-Step Sequential Evaluation Process for

Determining DI and SSI Eligibility

evaluated further to determine whether he or she has vocational

limitations that, when combined with the medical impairment(s), prevent

work.

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

applicant’s residual functional capacity (RFC) to determine whether the

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

physical impairments, an RFC is expressed in certain demands of work

activity (for example, ability to walk, lift, carry, push, pull, and so forth);

for mental impairments, an RFC 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.77 Using SSA guidelines, the DDS considers the applicant’s

age, education, vocational skills, and RFC 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 to 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.

77By 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 63 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix III 

List of Expert Reviewers

Deborah R. Becker, M.Ed.

Research Project Director

New Hampshire-Dartmouth Psychiatric Research Center

Concord, New Hampshire

Sharon Bonney, M.A.

Assistant Director

Executive Office

World Institute on Disability

Oakland, California

Henry P. Brehm, Ph.D.

Professor

Department of Sociology

University of Maryland, Baltimore County

Catonsville, Maryland

Richard V. Burkhauser, Ph.D.

Professor

Center for Policy Research

The Maxwell School

Syracuse University

Syracuse, New York

Admiral David M. Cooney (ret.)

Karalekas & Noone

Washington, D.C.

David H. Dean, Ph.D.

Associate Professor of Economics

Robins School of Business

University of Richmond

Richmond, Virginia

Donald E. Galvin, Ph.D.

President and Chief Executive Officer

Commission on Accreditation of Rehabilitation Facilities

Tucson, Arizona

Page 64 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix III 

List of Expert Reviewers

Allen Jensen

Intergovernmental Health Policy Project

George Washington University

Washington, D.C.

Arthur T. Meyerson, M.D.

Professor and Vice Chairman of Psychiatry

Department of Psychiatry

University of Medicine and Dentistry of New Jersey

Newark, New Jersey

Virginia Reno

Project Director

National Academy of Social Insurance

Washington, D.C.

Kenneth J. Shaw

Director

Program Development and Research Division

Goodwill Industries International, Inc.

Bethesda, Maryland

William E. Shelton

Director

Disability Determination Bureau

Department of Health and Social Services

Madison, Wisconsin

Jenifer Simpson

Policy Associate

Governmental Activities Department

Community Services Division

United Cerebral Palsy Associations

Washington, D.C.

Deborah A. Stone, Ph.D.

David R. Pokros Professor of Law and Social Policy

Heller Graduate School

Brandeis University

Waltham, Massachusetts

Page 65 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix IV 

Size of Disability Rolls and Amount of Cash

Benefits, 1985-94

Table IV.1: DI Beneficiary Population

and Cash Benefits, 1985-94

Year

Beneficiariesa (in

thousands)

Annual

percentage

increase in

beneficiaries

Benefits (in

millions)

Annual

percentage

increase in

benefits

1985 2,332 $16,483

1986 2,371 1.7 17,409 5.6

1987 2,396 1.0 18,053 3.7

1988 2,419 1.0 19,165 6.2

1989 2,452 1.3 20,314 6.0

1990 2,547 3.9 22,113 8.9

1991 2,686 5.4 24,738 11.9

1992 2,900 8.0 27,856 12.6

1993 3,100 6.9 30,913 11.0

1994 3,292 6.2 33,711 9.1

aIncludes only disabled workers aged 18 to 64.

Source: Annual Statistical Supplement to the Social Security Bulletin (Aug. 1995).

Table IV.2: SSI Beneficiary Population and Cash Benefits, 1985-94

Beneficiariesa (in thousands) Benefitsb

Year

Adults (aged

18-64)

Children

(under age 18) Total

Annual

percentage

increase

Amount in

millions

Annual

percentage

increase

1985 1,333 227 1,561 $6,575

1986 1,466 241 1,707 9.4 7,308 11.2

1987 1,488 251 1,739 1.9 7,830 7.1

1988 1,544 255 1,799 3.5 8,457 8.0

1989 1,615 265 1,880 4.5 9,244 9.3

1990 1,728 309 2,036 8.3 10,372 12.2

1991 1,866 397 2,263 11.1 12,073 16.4

1992 2,064 556 2,620 15.8 15,346 27.1

1993 2,230 723 2,953 12.7 17,624 14.8

1994 2,362 841 3,204 8.5 18,910 7.3

aIncludes all people with a federal SSI payment and/or federally administered state

supplementation.

bIncludes federal-only (not state supplementation) SSI payments to SSI adults aged 18 to 64; SSI

children under age 18; and people dually eligible for SSI and DI payments who are disabled

workers. Also includes federal-only SSI payments to SSI beneficiaries aged 65 or older and

people dually eligible for SSI and DI who are not disabled workers.

Source: Annual Statistical Supplement to the Social Security Bulletin (Aug. 1995).

Page 66 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix IV 

Size of Disability Rolls and Amount of Cash

Benefits, 1985-94

Table IV.3: Concurrent DI and SSI

Beneficiaries, 1985-94

Year

Number of beneficiaries in

thousandsa

Annual percentage

increase

1985 324

1986 357 10.1

1987 390 9.2

1988 411 5.5

1989 444 7.9

1990 465 4.7

1991 509 9.7

1992 568 11.5

1993 626 10.3

1994 671 7.2

aIncludes only disabled workers under age 65 who also receive SSI.

Source: Annual Statistical Supplement to the Social Security Bulletin (multiple years).

Table IV.4: DI and SSI Beneficiaries

and Cash Benefits, 1985-94 Beneficiariesa Benefitsb

Year

Number in

thousands

Annual

percentage

increase

Amount in

millions

Annual

percentage

increase

1985 4,217 $23,058

1986 4,435 5.2 24,717 7.2

1987 4,525 2.0 25,883 4.7

1988 4,630 2.3 27,622 6.7

1989 4,776 3.2 29,558 7.0

1990 5,047 5.7 32,485 9.9

1991 5,458 8.1 36,811 13.3

1992 6,088 11.5 43,202 17.4

1993 6,679 9.7 48,537 12.3

1994 7,166 7.3 52,621 8.4

aIncludes DI disabled workers aged 18 to 64. Also includes the following groups who receive a

federal SSI payment and/or federally administered state supplementation: SSI adults aged 18 to

64, SSI children under age 18, and people dually eligible for SSI and DI who are disabled

workers.

bIncludes DI payments to disabled workers aged 18 to 64 and federal-only (not state

supplementation) SSI payments to SSI adults aged 18 to 64; SSI children under age 18; and

people dually eligible for SSI and DI payments who are disabled workers. Also includes

federal-only SSI payments to SSI beneficiaries aged 65 and older and people dually eligible for

SSI and DI who are not disabled workers.

Source: Annual Statistical Supplement to the Social Security Bulletin (Aug. 1995).

Page 67 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix V 

Summary of Studies on Accuracy of

Disability Determinations

Evidence from four empirical studies shows that accuracy is limited in a

disability determination system designed to sort people with disabilities

into categories of either not having the ability to engage in any substantial

gainful employment or having the capacity to do so (see table V.1). The

studies indicate that

• independent decisionmakers often make different disability decisions than

DDS/SSA offices on the same cases and

• meeting or equaling SSA’s listings for physical impairments may not be a

good predictor of an inability to work.

As independent decisionmakers often disagreed among each other or had

difficulty in deciding whether to accept or deny cases, the findings do not

demonstrate that DDS/SSA should be making more accurate decisions, but

that disability decisions involve a high level of judgment in many cases.

Indeed, SSA has reported some inconsistency between DDS decisionmakers

themselves. In one study, SSA found that there was about one chance in

eight that two DDS examiners selected at random in a state would reach

opposite decisions on the same case using the same decision-making

criteria; there was about one chance in six that opposite decisions would

be reached by examiners chosen from two different states.78

78HHS, Consistency of Initial Disability Decisions Among and Within States, No. 13-11869 (Washington,

D.C.: SSA, HHS, July 1980).

Page 68 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix V 

Summary of Studies on Accuracy of

Disability Determinations

Table V.1: Summary of Studies on

Validity of SSA Disability

Determinations

Study Principal findings

Nagi (1969)a Overall level of disagreement between DDS/SSA and

independent clinical teams was 30%: 37% of cases

denied by independent teams were approved by

DDS/SSA, and 27% of cases approved by the teams were

denied by DDS/SSA.

Okpaku and others (1994)b An independent team of mental health workers could not

reach a decision on 47% of cases (most of these

cases—79%—were approved by DDSs). Of cases on

which a decision was reached, there was a 24% level of

disagreement with DDSs: 88% of cases approved by the

team were approved by DDSs; 55% of cases denied by

the team were approved by DDSs.

Brehm and Rush

(1988)c

Of a sample of adults from the Framingham Heart Study,

about 60% of men and 32% of women who met or

equaled SSA medical listings—in other words, individuals

who would have been considered too disabled to work

had they applied for disability benefits—were employed

at 2-year and 4-year follow-ups (excluding the 27% of

adults who died before the first 2-year period and an

additional 12% who died before the second 2-year

period). Among adults 54 years of age or younger,

employment rates were 83% for men and 42% for women.

GAO (1989)d Nearly 60% of applicants who were denied DI benefits in

1984 were not working 3 years later (over two-thirds of

this group had been out of work throughout this period).

When the self-reported functional and health status of

nonworking, denied applicants was compared with the

status of beneficiaries who entered DI in 1984, little

difference was found. On the basis of self-reporting, GAO

classified about three-fourths of each group as having

severe functional limitation.

aNagi, Disability and Rehabilitation: Legal, Clinical, and Self-Concepts and Measurement.

bOkpaku and others, “Disability Determinations for Adults With Mental Disorders: Social Security

Administration vs. Independent Judgments.”

cBrehm and Rush, “Disability Analysis of Longitudinal Health Data: Policy Implications for Social

Security Disability Insurance.” Percentages exclude the 27 percent of adults who died during the

2-year period.

dGAO/HRD-90-2, Nov. 6, 1989.

Independent

Decisionmakers Often

Disagree With DDS/SSA

About Awards and Denials

Two of the four studies compared SSA disability decisions with nonbinding

disability decisions made by independent decisionmakers. In one

comparative study (Nagi, 1969), teams of clinicians (each team was

composed of a social worker, a physician, a psychologist, an occupational

therapist, and a vocational counselor) used professional judgment to rate

Page 69 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix V 

Summary of Studies on Accuracy of

Disability Determinations

2,454 applicants for disability benefits along a continuum from “fit for

work under normal conditions” to “not fit for work.” The decisions were

categorized into “disabled” and “nondisabled” and compared with

decisions made by DDS/SSA offices.79

The findings indicated that 30 percent of team decisions were opposite

from DDS/SSA decisions and that discrepancies were somewhat more likely

to result from DDS/SSA’s approving an application denied by the teams

rather than DDS/SSA’s denying an application approved by the teams. Of the

cases denied by the teams, 37 percent were allowed by DDS/SSA; of the

cases allowed by the teams, 27 percent were denied by DDS/SSA.

In a second and more recent study, researchers compared disability

decisions made by DDS offices for claims relating to mental impairments

with independent judgments of a team of mental health workers (Okpaku

and others, 1994). Both groups used SSA criteria to make determinations on

a sample of 158 adults who were receiving or applying for disability

benefits on the basis of mental disorders. DDS offices, using normal

operating procedures, either accepted or denied claims. A decision from

the team of mental health workers was made for each case by tallying

individual votes: team members could vote to “allow” or “deny” a case, or

vote “maybe.” Whichever decision received the most votes was the team

decision; a case was “undecided” if a plurality did not exist.

The team voted “maybe” or was undecided on 47 percent of all cases.

Among these, 79 percent were approved by the DDSs. Among the cases for

which the team reached a decision to allow or deny benefits, the team

reached opposite conclusions from the DDSs in 24 percent of cases. Of the

cases allowed by the team, 88 percent were allowed by the DDSs; of the

cases denied by the team, 55 percent were allowed by the DDSs. The

researchers concluded that the team was more conservative than the DDSs

in determining who should receive benefits and who should not.

The fact that the team could not decide whether to allow or deny an

applicant benefits in almost half of all cases reflects, we believe, the

difficulty in deciding who is unable to engage in any gainful activity.

Interestingly, team members whose professional work involved much

direct observation of the work behavior of severely impaired adults were

more likely to vote against approval for disability than other team

members. In attempting to explain this finding, the researchers suggested

79At the time of the study, as part of the usual disability determination procedure used by SSA, SSA

staff reviewed all DDS decisions before issuing a final determination.

Page 70 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix V 

Summary of Studies on Accuracy of

Disability Determinations

that “staff who work directly on getting clients employed and are trained

to focus on their strengths may view them as less disabled.”80

Medical Criteria as Basis

for Decisions May Poorly

Predict Work Potential

Research suggests that SSA’s Listing of Impairments overestimates inability

to work and has limited capacity to distinguish accurately between people

who can work and people who cannot work. Using data from the

Framingham Heart Study population cohort, researchers identified a

sample of adults living in the community who had physical impairments

that met or equaled those in the listings (Brehm and Rush, 1988). The

study tracked the adults’ work histories and found that after 2 years of

being diagnosed with an impairment, about 61 percent of men and

32 percent of women were employed.81 Moreover, employment rates for

adults aged 54 or younger were even higher: 83 percent for men and

42 percent for women. After an additional 2 years, almost identical rates of

employment were found (excluding an additional 12 percent of adults who

died between the examination periods).

While findings from the Brehm and Rush study suggest that the listings

may overestimate work incapacity in some cases, findings from our earlier

study suggest that the disability determination process may result in the

denial of benefits to people who may have low capacity to work and

function without support and services (GAO, 1989). In the study, we

contacted a sample of people whose applications for DI benefits had been

approved and a sample of people whose DI applications had been denied.

About 3 years after their cases had been decided, we asked about their

employment and health status. Fifty-eight percent of applicants who were

denied benefits reported that they were not working at the time of the

study (of this group, over two-thirds reported being out of work for at

least 3 years). We then compared the self-reported functional and health

status of people accepted into DI against the status of the

nonworking-denied group and found the two groups to be nearly

indistinguishable.

80Okpaku and others, “Disability Determinations for Adults With Mental Disorders: Social Security

Administration vs. Independent Judgments.”

81These percentages exclude the 27 percent of adults who died during the 2-year period.

Page 71 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix VI 

Comments From the Social Security

Administration

Page 72 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix VI 

Comments From the Social Security

Administration

Page 73 GAO/HEHS-96-62 Social Security Disability Redesign
Appendix VII 

Major Contributors to This Report

Cynthia A. Bascetta, Assistant Director, (202) 512-7207

Brett S. Fallavollita, Evaluator-in-Charge

Barbara H. Bordelon, Senior Evaluator

Susan Y. Higgins, Senior Evaluator

David F. Fiske, Senior Evaluator

Page 74 GAO/HEHS-96-62 Social Security Disability Redesign
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Page 82 GAO/HEHS-96-62 Social Security Disability Redesign
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Page 83 GAO/HEHS-96-62 Social Security Disability Redesign
Related GAO Products

PASS Program: SSA Work Incentive for Disabled Beneficiaries Poorly

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

SSA’s Rehabilitation Programs (GAO/HEHS-95-253R, Sept. 7, 1995).

Social Security Disability: Management Action and Program Redesign

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

1995).

Supplemental Security Income: Growth and Changes in Recipient

Population Call for Reexamining Program (GAO/HEHS-95-137, July 7, 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: 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).

Disability Benefits for Addicts (GAO/HEHS-94-178R, June 8, 1994).

Social Security: Most of Gender Difference Explained (GAO/HEHS-94-94,

May 27, 1994).

Social Security: Major Changes Needed for Disability Benefits for Addicts

(GAO/HEHS-94-128, May 13, 1994).

Social Security: Continuing Disability Review Process Improved, But More

Targeted Reviews Needed (GAO/T-HEHS-94-121, Mar. 10, 1994).

Social Security: Disability Rolls Keep Growing, While Explanations

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

(105580) Page 84 GAO/HEHS-96-62 Social Security Disability Redesign
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