Cumulative Expenditures under the DI, SSI, Medicare, and Medicaid Programs for a Cohort of Disabled Working-Age Adults

Rapidly rising costs under the Medicare, Medicaid, and Social Security disability programs have been of long-standing concern to policy makers. A key driver of increasing program costs is disabled working-age adults, who frequently are eligible for benefits under multiple programs (Livermore, Stapleton, and O'Toole 2011; Riley and Rupp 2012). The Social Security Disability Insurance (DI) program provides cash benefits to disabled workers with sufficient earnings experience and automatically leads to Medicare entitlement after a 24-month waiting period. Supplemental Security Income (SSI) is a federal means-tested cash benefit program targeting aged, blind, and disabled individuals; in most states, SSI eligibility also qualifies the recipient for Medicaid with no waiting period (Rupp and Riley 2012). As of 2012, DI enrollment stood at 10.1 million, with program expenditures of approximately $131 billion (Social Security Administration [SSA] 2012a). There were 4.9 million disabled adult enrollees under the SSI program, accounting for about $34 billion in program expenditures (SSA 2012b). Several recent initiatives have attempted to control costs under these four programs (CMS 2012a,b; SSA 2012c,d). Some analysts have called for more fundamental reforms that would seek to enable disabled workers to remain in the workforce and off the disability rolls. Efforts to keep disabled individuals in the workforce and return-to-work initiatives are potentially costly, and it is difficult to evaluate potential savings, given long durations on DI and SSI, their impact on Medicare and Medicaid coverage and expenditures, and individual heterogeneity. Important policy questions about these programs are inherently longitudinal because long-term effects may substantially differ from immediate effects or even effects accounting for the standard 10-year federal budget cycle. Most data available for program evaluation are cross-sectional, which can be very misleading if taken as an indication of relative program cost associated with a new award. Duration on the disability rolls, often spanning decades, varies substantially by individual characteristics. This paper describes a methodology to estimate expenditure patterns under the four programs over the working-age life cycle of a cohort of disabled individuals first awarded DI and/or SSI benefits in CY2000. We also update these expenditure estimates to reflect benefit levels and beneficiary characteristics of new awardees in 2012. From a policy perspective the estimates presented in this paper will permit a more complete assessment of public expenditures associated with disability benefit awards than analyses that are constrained to one program or have limited follow-up. Potential applications involve evaluating savings associated with preventing or delaying entry to the disability rolls, and analyzing the financial impact of initiatives to encourage beneficiaries to re-enter the workforce. We build on previous work by Hennessey and Dykacz (1989), Rupp and Scott (1995), and Bye et al. (1991). The previous studies were limited to independent analyses of DI awardees (Hennessey and Dykacz 1989) and SSI awardees (Rupp and Scott 1995); both estimated benefit eligibility separately and did not analyze expenditures. One study (Bye et al. 1991) estimated Medicare expenditures for DI awardees. To our knowledge, this is the first study that estimates combined cumulative DI, SSI, Medicare, and Medicaid expenditures using linked administrative data.