Social Security Disability Insurance (SSDI) Reform: An Overview of Proposals to Manage the Growth in the SSDI Rolls
Released: 2015-01-09T00:00:00

Summary:
Social Security Disability Insurance (SSDI) provides benefits to nonelderly workers with certain disabilities and their eligible dependents. As in Old-Age and Survivors Insurance (OASI)—Social Security's retirement program—SSDI benefits are based on a worker's past earnings. To qualify, individuals must have worked and paid Social Security taxes for a certain number of years and be unable to engage in substantial gainful activity (SGA) due to a severe mental or physical impairment that is expected to last for at least one year or result in death. In 2015, the monthly SGA earnings limit for most individuals is $1,090. In general, disabled workers must be unable to do any kind of substantial work that exists in the national economy, taking into account age, education, and work experience.
Recently, some Members of Congress and the public have expressed concern over the growth in the SSDI program. Between 1980 and 2013, the number of disabled workers and their dependents more than doubled, rising from 4.7 million to 11.0 million. This increase has placed pressure on the Disability Insurance (DI) trust fund, from which SSDI benefits are paid. Over the same period, spending on benefits increased by more than 50%, from 0.54% of gross domestic product (GDP) in 1980 to 0.84% of GDP in 2013. Without legislative action, the DI trust fund is projected to be depleted by the end of 2016. After that, ongoing tax revenues would be sufficient to pay about 80% of scheduled benefits.
Most researchers agree that changes in the demographic characteristics of the working-age population account for a large share of the growth in the number of individuals on SSDI. Demographic changes consist of (1) the aging of the baby boomers, (2) the influx of women into the labor force, and (3) the overall growth in the working-age population. However, there is considerable disagreement among researchers over how much non-demographic factors contributed to the growth. Non-demographic factors include (1) changes in opportunities for work and compensation (e.g., slow wage growth for low-skilled workers and high unemployment), (2) changes in federal policy that made it easier for some people to qualify as disabled, and (3) the rise in the full retirement age for unreduced Social Security retirement benefits. In general, people who support higher spending on SSDI focus on changes in the demographic characteristics of workers. In contrast, individuals who want to limit program spending typically focus on the effect of changes in the economic incentives to apply for SSDI and legislative changes to the program's eligibility criteria.
To assist lawmakers in addressing the sustainability of the program, this report provides an overview of proposals to manage the long-term growth in the SSDI rolls. Most of the proposals focus on reducing the inflow (enrollment) of new beneficiaries into the program. These proposals involve (1) tightening eligibility criteria, (2) improving the administration of the program, and (3) providing incentives for employers to help keep employees working when they become disabled. On the other hand, some of the proposals seek to increase the outflow (termination) of beneficiaries from the program. These proposals entail (1) providing stronger incentives for beneficiaries who can work to return to the labor force, and (2) increasing the number of periodic continuing disability reviews, which stop benefits for people found to be no longer disabled. This report does not examine options to reduce benefit levels or increase program revenues.
Although many of the options discussed in this report have the potential to slow or even reverse the growth of SSDI receipt and thus generate savings to the program over the longer term, such proposals are highly unlikely to significantly forestall the projected exhaustion of the DI trust fund. To avoid a 20% cut in benefits in late 2016, lawmakers would almost certainly have to use cash infusions to bolster the assets of the DI trust fund. For example, Congress could reallocate the Social Security payroll tax rate to give the DI trust fund a larger share (as was done in 1994), or it could authorize interfund borrowing from the OASI trust fund or Medicare's Hospital Insurance (HI) trust fund. These short-term financing options would give lawmakers more time to develop and implement some of the longer-term proposals mentioned in the report if they wished to slow the growth in the disability rolls.

subsections: section_title: Introduction
paragraphs: Concern among some Members of Congress and the public over the financial sustainability of the Social Security Disability Insurance (SSDI) program has grown. Under current law, the Federal Disability Insurance (DI) Trust Fund—which finances the benefits and administrative costs of the SSDI program—is projected to be exhausted by the fourth quarter of calendar year 2016. If depleted, the DI trust fund would be able to pay about 80% of scheduled SSDI benefits.
The declining solvency of the DI trust fund is the result of an increasing imbalance between SSDI's income and outlays. Between 1980 and 2013, non-interest income to the DI trust fund (adjusted for inflation) increased 181%, while spending on benefits grew 219%. The increase in spending is due largely to the growth in the number of beneficiaries on SSDI. Over the same period, the number of disabled workers and their dependents more than doubled, rising from 4.7 million in 1980 to 11 million in 2013. Because benefit payments account for nearly all program spending, the growth in the SSDI rolls has contributed heavily to the financial difficulties of the DI trust fund.
To assist lawmakers in addressing the sustainability of the program, this report provides an overview of reform proposals to manage the long-term growth in the SSDI rolls. The report is divided into four sections. The first section provides a brief background on SSDI, including program eligibility criteria, benefits, and the initial determination and adjudication process. The second section discusses the growth in the SSDI rolls since 1980 by examining historical entry and exit trends in the program. The third section investigates some of the causes of growth in SSDI, including changes in the demographic characteristics of the working-age population, changes in opportunities for work and compensation, and changes in federal policy. The fourth section examines various options to manage the growth in the SSDI rolls, namely, (1) stricter eligibility criteria, (2) improved administration of the program, (3) stronger return-to-work incentives, and (4) policies to encourage employers to help disabled workers continue to work. 
Many of the options discussed in this report could reduce spending by slowing or even reducing the growth of SSDI over the long term; however, such options are unlikely to produce savings in time to prevent the projected exhaustion of the DI trust fund in 2016. For information on financing options to extend the solvency of the DI trust fund in the short term, see CRS Report R43318, Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues , by [author name scrubbed].
section_title: Background on SSDI
paragraphs: Enacted in 1956 under Title II of the Social Security Act, SSDI is part of the Old-Age, Survivors, and Disability Insurance (OASDI) program administered by the Social Security Administration (SSA). OASDI is commonly called Social Security. Like Old-Age and Survivors Insurance (OASI), SSDI is a form of social insurance that replaces a portion of a worker's earnings based on the individual's career-average earnings in jobs covered by Social Security. Specifically, SSDI provides benefits to insured workers under the full retirement age (FRA) who meet the statutory test of disability and to their eligible dependents. FRA is the age at which unreduced Social Security retirement benefits are first payable (currently 66). In November 2014, 10.9 million individuals received SSDI benefits, including 9 million disabled workers, 150,000 spouses of disabled workers, and 1.8 million children of disabled workers.
subsections: section_title: Eligibility
paragraphs: To qualify for SSDI, workers must be (1) insured in the event of disability, and (2) statutorily disabled. To achieve insured status, individuals must have worked in covered employment (i.e., jobs covered by Social Security) for about a quarter of their adult lives before they became disabled and for at least five of the past 10 years immediately before the onset of disability. However, younger workers may qualify with less work experience based on their age. In 2014, SSDI provided disability insurance to an estimated 151 million workers.
To meet the statutory test of disability, insured workers must be unable to engage in any substantial gainful activity (SGA) because of a medically determinable physical or mental impairment that can be expected to result in death or has lasted or can be expected to last for at least one year. In 2015, the monthly SGA earnings limit is $1,090 for most workers and $1,820 for statutorily blind individuals. In general, workers must have a severe condition that prevents them from doing any kind of substantial work that exists in the national economy, taking into account age, education, and work experience.
section_title: Benefits
paragraphs: Cash benefits begin five full months after a beneficiary's disability onset date. Initial benefits are based on a worker's career-average earnings, indexed to reflect changes in national wage levels (up to five years of the worker's low earnings are excluded). Benefits are subsequently adjusted to account for inflation through cost-of-living adjustments (COLA), as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, benefits may be offset if a disabled worker also receives workers' compensation or other public disability benefits. In November 2014, the average monthly benefit was $1,146 for disabled workers, $309 for spouses of disabled workers, and $343 for children of disabled workers. 
In addition to cash benefits, disabled workers and certain dependents are eligible for health coverage under Medicare after 24 months of entitlement to cash benefits (29 months after the onset of disability). In 2012, Medicare spending per disabled beneficiary averaged about $9,900. 
Some SSDI beneficiaries may also qualify for Supplemental Security Income (SSI). SSI provides cash payments to aged, blind, or disabled individuals with limited income and assets. Both programs are administered by SSA and use the same definition of disability; however, unlike SSDI, SSI has no work or contribution requirements. In most states, SSI recipients are automatically eligible for Medicaid. Over 1 million disabled workers ages 18-64 received both SSDI and SSI benefits in December 2013.
section_title: Determination and Adjudication Process
paragraphs: To apply for SSDI, an individual must first file an application with a local SSA field office. Applications that meet the work history and earnings requirements are then forwarded to a state Disability Determination Services (DDS) office for a medical determination. DDSs—state agencies that are fully funded by the federal government—decide whether applicants meet national disability standards established by SSA. State DDS examiners and medical and psychological consultants typically use medical evidence collected from the claimant's treating sources (physicians, psychologists, or other acceptable medical sources) to determine the severity of the claimant's impairment(s). If a claimant's condition is determined to be severe and meets (or is of equal severity to) the medical criteria in SSA's Listing of Impairments , the claimant is considered disabled and therefore eligible for SSDI. Claimants who do not meet the medical criteria in the listings proceed to a more individualized assessment that examines their residual functional capacity to perform any past relevant work or other work that exists in the national economy. If a claimant cannot perform such work, the claimant is awarded benefits.
Claimants whose initial applications are denied may appeal. During the appeals process, claimants may present additional evidence or arguments to support their case as well as appoint a representative to act on their behalf. The appeals process is composed of four stages: (1) reconsideration by a different examiner from the state DDS office, (2) a hearing before an administrative law judge (ALJ), (3) a review before the Appeals Council, and (4) filing suit against SSA in U.S. district court. Almost all appeals reach the ALJ stage; few proceed to the Appeals Council or federal court.
section_title: Trends in the SSDI Program Since 1980
subsections: section_title: Enrollment
paragraphs: Between 1980 and 2013, the number of SSDI applications submitted to SSA's field offices doubled, from 1.3 million to 2.6 million. As Figure 1 illustrates, most of that growth began around 2000. The number of awards for SSDI increased 111% over this same period, from 420,000 in 1980 to 888,000 in 2013. At the same time, the overall incidence (enrollment) rate rose from 4.4 awards per 1,000 disability-exposed to 6.3. The incidence rate is the ratio of the number of new beneficiaries awarded benefits each year to the number of workers who are insured in the event of disability but not currently receiving benefits (i.e., the disability-exposed population ). 
section_title: Termination
paragraphs: Entitlement to benefits ends when a disabled worker no longer meets the eligibility criteria for SSDI. Although the overall number of disabled-worker terminations increased 77% between 1980 and 2013, from 435,000 to 769,000, the ratio of annual disabled-worker terminations to the average number of disabled-worker beneficiaries (the termination rate ) actually decreased 41%, from 145 disabled-worker terminations per 1,000 disabled-worker beneficiaries to 86. 
As depicted in Figure 2 , three main factors drive the termination rate: death, recovery, and conversion. The beneficiary death rate decreased 42% between 1980 and 2013, from 48 disabled-worker terminations per 1,000 disabled-worker beneficiaries to 28, reflecting the trend in the U.S. population of declining mortality rates across all age groups. 
Recovery refers to individuals whose benefits were terminated because of medical improvement or earnings above SGA. From 1980 to 2013, the recovery rate declined 77%, from 29 disabled-worker terminations per 1,000 disabled-worker beneficiaries to 6.7. A conversion termination occurs when SSA automatically converts a disabled-worker benefit to a retired-worker benefit due to a disabled worker reaching the FRA. Over this same period, the conversion rate fell 25%, from 68 disabled-worker terminations per 1,000 disabled-worker beneficiaries to 51.
The rise in the recovery rate during the early 1980s stemmed mainly from the enactment of the Social Security Disability Amendments of 1980 ( P.L. 96-265 ), which expanded the use of continuing disability reviews (CDR) for all non-permanently disabled beneficiaries. CDRs are periodic medical reevaluations conducted to determine if beneficiaries continue to meet SSA's definition of disability. The frequency of CDRs is linked to a beneficiary's probability of recovery. A major review of the SSDI program after the passage of the 1980 amendments resulted in a marked increase in the recovery rate between 1980 and 1982. However, the political backlash over the implementation of the reviews led to a temporary moratorium on CDRs for most mental impairment cases as well as an increase in the percentage of beneficiaries designated as "permanently disabled" and therefore subject to less frequent reviews. These actions, coupled with changes to the disability determination and review process stemming from the Social Security Disability Benefits Reform Act of 1984 ( P.L. 98-460 ), contributed to the subsequent decrease in the recovery rate.
The 1997 increase in the recovery rate largely resulted from the passage of the Contract with America Advancement Act of 1996 ( P.L. 104-121 ), which terminated the benefits of SSDI and SSI recipients whose drug addiction and alcoholism (DA&A) significantly contributed to their disability. However, because DA&A beneficiaries represented less than 3% of all disabled adults on SSDI and SSI in 1996 and new applicants could no longer claim disability based on DA&A, P.L. 104-121 's impact on the overall trend in the SSDI recovery rate was minimal.
Starting in 2002, the recovery rate contracted again, in part, because of a reduction in the number of medical CDRs conducted by SSA. The Contract with America Advancement Act of 1996 authorized additional funds for CDRs but only for FY1996 through FY2002. In FY2003, the additional funding for CDRs lapsed and SSA shifted its focus away from CDRs toward processing the growing number of initial disability claims. As a result, the number of medical CDRs performed by SSA dropped from an all-time high of 877,000 in FY2000 to 208,000 in FY2007, before climbing back up to 526,000 in FY2014 ( Figure 3 ).
section_title: Program Size
paragraphs: Between 1980 and 2013, the overall number of SSDI beneficiaries increased 134%, from 4.7 million to 11 million. Most of the growth in the program stemmed from disabled workers, whose ranks tripled, from 2.9 million in 1980 to 9 million in 2013 ( Figure 4 ). In contrast, the number of spouses of disabled workers on SSDI decreased 66% during this period, from 462,000 in 1980 to 157,000 in 2013. The number of children receiving benefits grew rather modestly compared with the number of disabled workers on SSDI, from 1.4 million children in 1980 to 1.9 million in 2013.
subsections: section_title: Prevalence Rates
paragraphs: The size of the SSDI rolls is largely the function of two factors: the incidence (enrollment) rate of beneficiaries into the program and the termination rate of beneficiaries from the program. From 1980 to 2013, a marked rise in the incidence rate, coupled with a steady decline in the termination rate, resulted in an appreciable increase in the number of beneficiaries on SSDI. The prevalence rate measures the total number of disabled workers relative to the overall insured-worker population at the end of the year. The insured-worker population is the sum of the disability-exposed population and the number of individuals who are already receiving SSDI benefits. Between 1980 and 2013, the gross (unadjusted) prevalence rate grew from 2.8% to 5.9% ( Figure 5 ).
When one adjusts the prevalence rate to control for the effects of changes in the age-sex distribution of the insured-worker population, the upward trend is less pronounced. Age-sex adjusting permits a more meaningful comparison over extended periods, insofar as it "isolates the changing trend in the true likelihood of receiving benefits for the insured population, without reflecting changes in the age distribution of the population." From 1980 to 2013, the age-sex-adjusted prevalence rate grew from 3.1% to 4.6%.
Because the baby-boom generation is aging and older workers are more likely to qualify for SSDI, the gross rate would have increased even if the rate for each age group remained constant. The growth in the gross rate is due to both population aging (discussed below) and growth in the age-sex adjusted rate. The gap between the age-sex-adjusted rate and the gross rate is the growth that is attributable to changes in the age and sex distribution of the insured population.
section_title: Causes of the Growth in the SSDI Rolls
paragraphs: Ascribing shares of the growth in the SSDI program to specific factors has engendered disagreement among researchers, advocates, and some Members of Congress. In general, people who support higher spending on SSDI focus on changes in the demographic characteristics of insured workers. In contrast, individuals who want to limit program spending typically focus on the effect of changes in the economic incentives to apply for SSDI and legislative changes to the program's eligibility criteria.
As Figure 5 highlights, some of increase can be explained by demographic factors such as the aging of the workforce; however, the increase in the age-sex-adjusted rate means the growth in the SSDI rolls is also attributable to non-demographic factors, some of which are not well understood. This section examines some of the more salient explanations for the growth in the program and discusses other potential factors.
subsections: section_title: Changes in the Demographic Characteristics of Insured Workers
subsections: section_title: Growth in the Working-Age Population
paragraphs: One factor behind the increase in the total number of beneficiaries on SSDI is the overall growth in the working-age population ( Figure 6 ). 
From 1980 to 2013, the population ages 20-64 rose from 134 million to 192 million, while the insured-worker population ages 20-64 grew from 94 million to 146 million. The growth in the working-age population accounts for largest the share of the increase in the total number of beneficiaries on SSDI.
section_title: The Influx of Women into the Labor Force
paragraphs: The latter half of the 20 th century witnessed a marked expansion of women in the workforce, which has contributed to the growth in SSDI. Between 1950 and 1999, the annual labor force participation rate for women age 16 and older nearly doubled, from 34% to an all-time high of 60%. As a result, the share of women ages 15-64 who were insured for disability increased from 51% in 1980 to 67% in 2014. The portion of men who were insured declined slightly over this period, from 77% to 71% ( Figure 7 ).
The growth in the share of women insured for disability coincided with an increase in the rate at which insured women were awarded benefits. As Figure 8 shows, both male and female age-adjusted incidence rates increased markedly between the late 1980s and early 1990s. However, male age-adjusted incidence rates declined following the 1990-1991 recession while female rates held steady. Researchers refer to this trend as women's "catch-up." Since the late 1990s, age-adjusted incidence rates for women have been more or less at parity with men's rates. Although the reason for the gap between incidence rates during the 1980s is not entirely clear, researchers have speculated that past generations of women may have been less likely to know about SSDI and more likely to turn to family members or means-tested programs, such as Aid to Families with Dependent Children (AFDC), when affected by work-limiting impairments. 
section_title: The Aging of the Workforce
paragraphs: The aging of the large baby-boom generation—individuals born between 1946 and 1964—played a marked roll in increasing the number of individuals on SSDI. Beginning in 1996, working-age baby boomers increasingly aged and became more prone to disability, resulting in a shift in the age distribution of the insured-worker population from younger workers to older workers. This shift helped to increase the gross incidence and prevalence rates, inasmuch as older workers have a higher likelihood of benefit receipt relative to younger workers. Between 1996 and 2013, the portion of SSDI awards to disabled workers ages 50 to FRA increased from 54% to 66% ( Figure 9 ). One reason for this is that older workers report suffering from work-limiting disabilities at higher rates relative to younger workers.
Another factor is that the definition of disability is effectively less strict at higher ages. In making a disability determination, DDS examiners take into account the claimant's medical condition as well as vocational factors such as age, education, residual functional capacity, and work experience. Under its regulations, SSA considers advancing age to be a limiting factor in a claimant's ability to adjust to other work. Therefore, older workers are more likely to receive benefits than are younger workers, even if they have the same disability. The trustees expect the gross prevalence rates to grow at a slower pace in the future as baby boomers increasingly become eligible for full Social Security retirement benefits.
section_title: Changes in Opportunities for Work and Compensation
paragraphs: Changes in financial incentives also contributed to the growth in the program. In deciding whether to apply, workers compare the value of SSDI benefits (cash payments and health coverage) with their opportunities for work and compensation. When the economy is strong, more individuals who could qualify for SSDI might decide to seek or continue employment. On the other hand, when labor market conditions are adverse, more individuals may find SSDI benefits preferable to the jobs and compensation available to them in the economy. Although the initial determination process screens out most non-meritorious claimants, SSA may grant awards to some claimants on the margin of program entry who could potentially work but choose not to due to economic circumstances. This subsection outlines how changes in the financial incentives to apply for SSDI likely increased the incidence of benefit receipt.
subsections: section_title: High Unemployment
paragraphs: During periods of economic weakness, individuals who might otherwise choose to work may be more likely to apply for SSDI benefits as a form of unemployment assistance. There is a positive relationship between the unemployment rate and the SSDI application rate. With the exception of the period between 1980 and 1984, instances of high unemployment are associated with an increase in SSDI applications. As shown in Figure 10 , the recent recession (December 2007 to June 2009) contributed to a conspicuous spike in the number of SSDI applications submitted to SSA; between 2007 and 2010, applications for SSDI increased 32%, from 2.2 million to 2.9 million.
The relationship between the unemployment rate and the approval rate is somewhat more ambiguous, inasmuch as the award year may not coincide with the application year due to a prolonged determination and appeals process. Several studies have found an inverse relationship between the approval rate and the unemployment rate. In other words, a claimant's likelihood of receiving an award at the initial determination level decreases as the unemployment rate rises. This is thought to occur because adverse labor market conditions induce more marginally disabled individuals to apply for benefits. Nevertheless, the overall number of SSDI awards issued by SSA appears to increase during economic downturns. One possible reason for this is that some individuals who could qualify for SSDI but choose instead to work when the economy is strong are often less likely to find reemployment opportunities following a job loss when the unemployment rate is high. Between 2007 and 2010, the number of SSDI awards granted by SSA increased 22%, from 819,000 to 1 million.
section_title: The Value of Cash Benefits
paragraphs: Over the past few decades, SSDI appears to have become more attractive to lower-skilled workers because their potential SSDI benefits replace a larger portion of their earnings than before. The share of a worker's pre-disability earnings replaced by cash benefits is known as the replacement rate . Although the replacement rate depends on a worker's past earnings, the Social Security benefit formula also reflects changes in the average earnings of all workers in the national economy, as measured by the Average Wage Index (AWI). Due to the progressive nature of the benefit formula, replacement rates are greater for workers with low lifetime wages than for high-wage workers ( Table 1 ).
Some part of the growth in SSDI is driven by rising replacements rates for low-skilled workers, which have made SSDI benefits more desirable than work for an increasing share of workers. The increase in the relative attractiveness of SSDI benefits was likely strongest for low-wage workers, because they experienced slower real earnings growth over the last three decades than medium and high-wage workers. This increase in wage inequality has interacted with the structure of the benefits formula to increase replacement rates for lower-skilled workers. That means that SSDI is more attractive to those workers than it had been in the past.
While researchers generally agree that replacement rates "are rising due to the widening distribution of income," there is some disagreement over the extent to which this increase induced low-wage workers to apply for SSDI benefits. 
section_title: The Value of Health Coverage
paragraphs: Access to affordable health coverage also affects an individual's decision to apply for SSDI, but the net effect of changes in health policies on SSDI is unclear. As noted earlier, disabled workers and certain dependents are eligible for coverage under Medicare after 24 months of entitlement to cash benefits (29 months after disability onset). Congress extended Medicare to SSDI beneficiaries under the Social Security Amendments of 1972 (P.L.92-603) because the "use of health services by people who are severely disabled is substantially higher than that by the nondisabled ... yet the disabled have limited incomes in comparison to those who are not disabled, and most disabled persons are unable financially to purchase adequate private health insurance protection."
Health care is generally more expensive for individuals with disabilities. One study found that health care expenditures per capita were over four times greater for workers with disabilities than those without disabilities. Persons with disabilities have higher health care expenditures because they typically use more health services and have secondary conditions that further impair overall health. These higher costs can make health care coverage prohibitively expensive for some individuals with disabilities. In 2013, 39% of individuals with disabilities had private health insurance coverage, compared with 71% of individuals without disabilities. The lower coverage rate for individuals with disabilities under private health insurance is due, in part, to the availability of government-sponsored health care coverage under Medicare and Medicaid.
Some research suggests that the desire to gain access to Medicare induced some individuals with disabilities to apply for SSDI. However, it is difficult to know exactly how many individuals awarded SSDI were motivated to apply in order to gain access to Medicare. One study found that 22% of SSDI beneficiaries ages 18-64 lacked health insurance coverage prior to their entitlement to SSDI.
The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) is likely to influence SSDI application rates in the future, though the law's net effect on the SSDI prevalence rate is difficult to determine. On the one hand, the ACA may reduce SSDI applications by increasing access to affordable health coverage, making access to Medicare less valuable. On the other hand, the ACA may increase SSDI applications by making it easier for individuals who get health coverage through their work to apply, because they could obtain Medicaid coverage or subsidized coverage in the exchange during the 24-month waiting period for Medicare. Recent research indicates that the health care law's effect on SSDI application rates is likely to vary by locality due to factors such as (1) the availability of Medicaid in a state, (2) local health insurance coverage rates, and (3) the availability and type of state Medicaid buy-in programs.
section_title: Changes in Federal Policy
paragraphs: In addition to demographic and economic changes, various amendments to the Social Security program played a role in increasing the number of people on SSDI. While some of the changes to Social Security were designed to address specific issues with SSDI, modifications to other parts of the program indirectly affected the incentives for individuals to apply for disability benefits. The following subsection examines how changes in the full retirement age for Social Security retired-worker benefits and in the evaluative criteria used to determine disability contributed to the growth in the SSDI rolls. 
subsections: section_title: The Social Security Amendments of 1983
paragraphs: The Social Security retirement program faced serious financial challenges in the early 1980s. High inflation and low wage growth starting in the 1970s had eroded the balance of the OASI trust fund, which finances the benefits and administrative costs of the OASI program. In 1982, the Social Security trustees projected that the OASI trust fund would exhaust by the middle of 1983. 
To improve the financial condition of the OASI trust fund, Congress enacted the comprehensive Social Security Amendments of 1983 ( P.L. 98-21 ). Among the 1983 amendments' many substantial changes was an increase in the FRA from 65 to 67. Between 2002 and 2009, the FRA gradually increased until it reached 66 for workers born between 1943 and 1954. The FRA is scheduled to rise again, reaching 67 for workers born in 1960 and later. 
Raising the FRA reduced OASI spending but increased DI spending in several ways. First, it increased the number of workers who are eligible for SSDI. From 2003 to 2014, the number of insured workers ages 65-FRA rose from over 200,000 to more than 2.4 million. Because workers aged 65-FRA are more likely to have a qualifying disability, the increase in the number of insured workers led to an increase in the number of workers awarded benefits. In 2013, over 7,400 workers aged 65-FRA were awarded benefits.
Second, the increase in the FRA lengthened the duration of benefit receipt for SSDI recipients near retirement age. Disabled workers move from SSDI to OASI when they reach the FRA. As the FRA increased above 65, beneficiaries remained on SSDI longer. In December 2013, over 455,000 disabled workers ages 65-FRA received benefits.
Third, the rise in the FRA increased the value of SSDI cash benefits relative to early retirement benefits. Insured workers who choose to retire between the ages of 62 and FRA are subject to a permanent reduction in their monthly cash benefits. Prior to the 1983 amendments, the reduction for claiming retirement benefits at age 62 was 20%; with the increase in the FRA to 66, the reduction at age 62 rose to 25%. That reduction will rise to 30% for workers whose FRA is 67. Because SSDI benefits are approximately the same as full retirement benefits, the increase in the FRA likely impelled some additional workers to apply for SSDI benefits in order to maximize their total cash benefits. Although recent studies suggest that an increase in the value of disability benefits relative to early retirement benefits induces individuals to apply for SSDI benefits, researchers are divided over whether such individuals are actually awarded benefits.
section_title: The Social Security Disability Benefits Reform Act of 1984
paragraphs: As noted earlier, the Social Security Disability Amendments of 1980 ( P.L. 96-265 ) markedly expanded the use of continuing disability reviews (CDRs) as a means of reducing the growth in program costs. CDRs are periodic medical reevaluations conducted to determine if beneficiaries are still disabled. Between January 1982 and fall 1984, SSA issued benefit termination notices to 490,000 of the 1.2 million SSDI beneficiaries subjected to a CDR. However, the rise in beneficiary terminations due to CDRs sparked a degree of public outcry and had "a very damaging effect on the public perception of SSA's administration of the disability program." News stories at the time often depicted the financial and emotional difficulties faced by recently terminated beneficiaries and their dependents. Ultimately, of the 490,000 beneficiaries who received termination notices, approximately 200,000 had their benefits reinstated on appeal.
In response to the contention over the increased use of CDRs, Congress unanimously enacted the Social Security Disability Benefits Reform Act of 1984 (DBRA; P.L. 98-460 ). DBRA changed the statutory standards for evaluating disability in a variety of ways. First, it revised the medical eligibility criteria for CDRs so that SSA could terminate the benefits of a recipient due to medical improvement only if the agency found substantial evidence of medical improvement related to the recipient's ability to work since the most recent favorable determination. Under the 1980 amendments, SSA had treated medical CDRs as a new determination and could revoke benefits even if a beneficiary's health had not changed.
Second, it required the Secretary of Health and Human Services to revise the criteria under the "mental disorders" category in the Listing of Impairments . Before the reforms, disability determinations relied primarily on medical factors, which tended to disadvantage claimants with mental impairments from benefit receipt. The revised listings for mental impairments—first published in 1985 —"reduced the weight given to medical factors and put a greater weight on functional capacities, such as the applicant's ability to perform activities of daily living. " 
Third, it required SSA to consider the combined effect of multiple non-severe impairments on the claimant's ability to engage in SGA. Prior to DBRA, a disability determination could not proceed unless the claimant had one or more independently severe impairments. Lastly, DBRA provided a temporary statutory standard (through the end of 1986) for evaluating pain. Before the reforms, there was no "specific statement in the law" as to how pain should be evaluated. SSA issued new pain regulations in 1991.
In enacting DBRA, Congress sought to protect the rights of "those correctly and properly allowed on the rolls" while continuing to remove non-meritorious beneficiaries from the program. To accomplish this, Congress established a national, uniform process for determining disability, which complemented objective medical criteria with more subjective criteria such as pain and functional capacity. Congress, though, explicitly stated that the intent of DBRA was not to change the basic standard of eligibility for SSDI.
Nevertheless, a number of researchers argue that despite Congress's intention, the establishment of new evaluative criteria contributed to the growth in the disability rolls by making it easier for claimants with "difficult-to-verify" impairments to qualify for SSDI, such as mental and musculoskeletal disorders. For example, the revision to the "mental disorders" category in the Listing of Impairments , which gave greater weight to functional capacities, may have permitted more claimants with mental impairments to qualify for SSDI. Similarly, the allowance of the combined effect of multiple non-severe impairments and the evaluation of pain may have made it easier for claimants suffering from musculoskeletal disorders (impairments involving bones, muscles, tendons, or ligaments) to enroll in the program.
As Figure 11 illustrates, the percentage of awards due to mental and musculoskeletal impairments increased markedly following the passage of DBRA. Between 1985 and 2001, the share of newly awarded beneficiaries with mental impairments increased from 18% to 26% before declining to 17% in 2013. According to one researcher at SSA, the increase in awards resulting from mental disorders in 1986 "is directly attributable to changes in the decision making process due to the 1984 Social Security Disability Benefits Reform Act." From 1986 to 2012, the share of all beneficiaries with mental impairments increased from 24% to 31%.
The change in musculoskeletal impairments was even more pronounced. Between 1985 and 1994, awards based on musculoskeletal disorders remained roughly constant, rising from 13% to 13.4%. However, due to a change in the reporting method for awards, the percentage of awardees with musculoskeletal impairments jumped to 22% in 1995, later increasing to 36% in 2013. From 1986 to 2013, the share of all beneficiaries with musculoskeletal impairments grew from 18% to 31%.
For an alternative perspective, Figure 12 shows the change in the incidence of various diagnostic groups over time. Although the incidence of other diagnostic groups, such as circulatory-related disabilities, stayed roughly constant over the past 30 years, the growth in musculoskeletal and mental awards was such that the share of awards based on other disabilities declined ( Figure 11 ). In other words, as mental and musculoskeletal awards increased in absolute terms, other impairments remained generally steady. However, because the overall rate of mental and musculoskeletal awards increased, the share of other impairments decreased.
The growth in the share of beneficiaries with mental and musculoskeletal impairments may have also increased the disability rolls by increasing the average length of time that beneficiaries stay on SSDI. Mortality rates for beneficiaries with mental or musculoskeletal impairments are lower than average, while their conversion rates are higher than average. As a result, they experience a longer-than-average duration of benefit receipt. Furthermore, because beneficiaries with mental impairments enter the program at younger-than-average ages, their time on SSDI could last decades.
section_title: Other Potential Factors
subsections: section_title: Changes in the Health of the Working-Age Population
paragraphs: It is unclear whether overall changes in population health have affected the size of the SSDI program. Although mortality rates at all ages have fallen markedly over the last half-century, indicating generally improved health, the rise in conditions such as obesity and diabetes—which may increase the risk for certain diseases and other health problems—might have increased the share of the population with severe disabilities.
Thus far, researchers have failed to reach a consensus on whether working-age adults are healthier or unhealthier. Some research indicates that reported rates of disability have grown, especially among the younger working-age population. On the other hand, some researchers have found that the likelihood of near-elderly individuals (ages 50-64) to report a work-limiting disability has declined, while the health of younger workers has stayed roughly the same. 
Part of the problem in determining trends in the prevalence of disability in the working-age population stems from the fact that there is no single, universally accepted definition or measure of disability. Although many of the large surveys used by researchers specifically ask questions pertaining to disability, the wording and complexity of the questions often differs. Because many surveys are self-reporting, the definition of what constitutes a work-limiting disability often rests entirely on the subjectivity of the respondent. As a result, trends in the prevalence of disability vary by survey and by the definition of disability.
Given the inconclusive literature, it seems unlikely that changes in the prevalence of disability in the working-age population can adequately explain the growth in the SSDI rolls. 
section_title: Variation in the Disability Determination and Appeals Process
paragraphs: Some researchers have suggested that inconsistency in the disability determination and appeals process contributed to the growth in the program, but the evidence on the issue is inconclusive. Depending on the case, variation can both increase and decrease the overall allowance rate. Disability examiners and ALJs with high allowance rates may be offset by examiners and judges with low allowance rates.
As earlier noted, DDS examiners use a combination of medical and functional evidence to determine whether an impairment precludes a claimant from engaging in SGA. Although DDS examiners base their initial determinations on uniform guidelines established by the SSA, regional differences in demographic, health, and employment characteristics may produce variation in initial allowance rates among DDS offices. However, one study found an appreciable degree of variation in determination outcomes across examiners within the same DDS office. The study estimated that up to 60% of applicants "could have received a different initial determination from at least one other examiner in the DDS office." Even though the appeals process mitigated some of this variation, the study concluded that up to 23% of claimants could have ultimately received different outcomes had other examiners in the DDS office performed the determination. 
Some have speculated that the uncertainty of an outcome at the initial determination level due to variation across DDS examiners likely encouraged denied claimants to pursue the appeals process, increasing their likelihood of SSDI receipt. The aforementioned study found that claimants denied by stricter examiners were more likely to appeal their determinations. Although most of the awards granted by SSA are made at the initial determination level, the hearing level has the highest allowance rate of any step in the determination and appeals process. In FY2013, the allowance rate at the hearing level was 48%, compared with 33% at the initial level, 11% at the reconsideration level, 1% at the Appeals Council level, and 2% at the federal court level. The study found that 75% of denied claimants who contested their initial determinations had their denials overturned eventually on appeal. 
Others contend that variation in the allowance rates at the hearing level of the appeals process contributed to the number of workers on SSDI. A 2013 report by SSA's Office of the Inspector General (OIG) discovered wide variances in the allowance rates among some ALJs within the same hearing office. Additionally, an earlier OIG report found a direct relationship between the number of cases adjudicated by outlier ALJs (i.e., judges at the extreme ends of the distribution scale) and allowance rates. ALJs with the highest allowance rates adjudicated more dispositions relative to the office average, while ALJs with the lowest allowance rates adjudicated fewer dispositions compared with the office average. A 2014 OIG report estimated that judges with 700 or more dispositions and allowance rates of 85% or higher improperly allowed benefits in approximately 24,900 cases over a seven-year period, resulting in "questionable costs" of more than $2 billion.
Even in the absence of such variation, those claimants improperly granted awards by outlier examiners and judges might have eventually been found disabled in the future. One study found that over 60% of claimants denied at the hearing level of the appeals process were later awarded benefits within 10 years. One possible explanation is that the health of some initially rejected claimants with marginal disabilities may deteriorate to the point that they meet SSA's definition of disability several years later. Therefore, inconsistency in the disability determination and appeals process may simply accelerate receipt of benefits for some workers.
section_title: Reform Proposals
paragraphs: This section examines options to manage the long-term growth in the SSDI program. These options have been proposed by numerous sources, including researchers, advocacy organizations, federal agencies, and the Social Security Advisory Board (SSAB). For an overview of options to reduce benefit levels or to increase program revenues, see CBO's 2012 report, Policy Options for the Social Security Disability Insurance Program , available at https://www.cbo.gov/publication/43421 . 
As noted previously, while many of the proposals discussed in this report have the potential to slow or even reverse the prevalence of SSDI receipt and thus generate savings to the program over the longer term, such proposals are unlikely to produce savings in time to forestall the projected exhaustion of the DI trust fund. To avoid a 20% cut in benefits in 2016, lawmakers would likely need to enact some kind of short-term financing, such as a reallocation of the Social Security payroll tax rate or interfund borrowing.
subsections: section_title: Tighten Eligibility Criteria
paragraphs: One policy option to reduce the growth in the SSDI rolls is to tighten the program's eligibility requirements. In general, the aim of tightening eligibility criteria is to mitigate the number of marginally disabled individuals on the program while continuing to grant awards to the most severely disabled individuals. Because marginally disabled individuals have some remaining capacity to work, rejecting their applications would generally cause less harm to them than to more severely disabled individuals. That said, there is no guarantee that all marginally disabled individuals can work. Although it is difficult to discern which type of claimants would be affected by more stringent eligibility requirements, a recent study found that marginal program entrants are more likely to be younger, suffer from mental impairments, and have low earnings histories. Henry Aaron, chair of the Social Security Advisory Board, summarized that "the challenge for society is to choose a definition that best balances its willingness to award benefits to some people who do not 'deserve' them and to deny benefits to some who do."
Enacting stricter eligibility criteria would also affect other federal spending and tax programs. On the one hand, tightening standards would not only directly reduce spending through a higher rejection rate; it would also likely discourage some individuals from applying for SSDI in the first place. Additionally, stricter standards would likely encourage some prospective applicants to continue to work, which would increase tax receipts. On the other hand, some people who could no longer qualify for SSDI would seek other federal support. For example, individuals with sufficiently low income and assets could potentially qualify for SSI, increasing federal spending.
subsections: section_title: Eliminate Eligibility for SSDI Benefits at Age 62 or Later
paragraphs: As noted earlier, workers between the ages of 62 and FRA who apply for early Social Security retirement benefits are subject to a reduction in their monthly benefits. In contrast, workers between the ages of 62 and FRA who apply for SSDI benefits receive about the same benefit that they would have received had they applied for retirement benefits at their FRA. Some Members of Congress have expressed concern that the differential between disability and early retirement may induce workers between the ages of 62 and FRA to apply for SSDI as a means of increasing their total benefits. In 2013, 9% of the nearly 869,000 awards issued by SSA went to individuals between the ages of 62 and FRA.
To reduce the growth in the SSDI rolls, policymakers could eliminate eligibility for SSDI benefits starting at age 62. Instead, workers between the ages of 62 and FRA would be eligible only for early retirement benefits. Under current law, the penalty for taking early retirement at age 62 is a 25% to 30% monthly reduction in cash benefits, depending on year of birth. CBO recently estimated that preventing workers from applying for SSDI benefits after their 62 nd birthday or receiving SSDI benefits if they became eligible after that date starting in 2016 would reduce federal outlays by $10.6 billion between 2015 and 2024, or 0.6% of scheduled outlays for SSDI.
One reason to eliminate eligibility starting at age 62 is that it could "encourage individuals that seek disability benefits as an early retirement program to remain in the work force." However, opponents point out that this option would adversely affect older workers with little or no capacity to work in the national economy, especially those workers near or below the poverty line.
section_title: Increase the Recency-of-Work Requirement
paragraphs: To become insured under the Social Security program, workers must accrue work credits—known as quarters of coverage —based on their earnings in covered employment. In 2015, workers are credited with one quarter of coverage for each $1,220 in earnings, up to the maximum of four quarters of coverage per year. To qualify for SSDI, workers must have earned a minimum number of quarters of coverage based on their age and generally must have earned at least 20 quarters of coverage during a 40-calendar quarter period ending with the quarter in which their disabilities began. In other words, disability claimants must have worked for five of the past 10 years to be eligible for SSDI. That "recency-of-work" requirement—sometimes known as the 20/40 rule—restricts the program to individuals who have worked of late and for a reasonable length of time in covered employment. 
CBO recently estimated the impact of increasing the recency-of-work requirement on beneficiary enrollment. According to the agency, requiring non-blind disability claimants to have worked four of the past six years (instead of five of the past 10) starting in 2016 would reduce federal outlays by $32.4 billion between 2015 and 2024, or 1.8% of scheduled outlays for SSDI.
The stricter recency-of-work requirement would likely affect individuals with intermittent work histories, specifically workers with prolonged and sustained bouts of absence from covered employment due to unemployment or withdrawal from the labor force. One study found that while working-age men (ages 25-54) report leaving the labor force primarily because of disability, working-age women typically report leaving the labor force to care for someone in their household. Consequently, the more stringent recency-of-work requirement may disproportionately affect women who drop out of the labor force to act as caregivers. 
section_title: Adjust the Age Categories for Vocational Factors
paragraphs: Another option is to raise the age categories for "vocational factors." In addition to assessing an applicant's medical condition, DDS examiners take into account the individual's ability to perform any past relevant work or other work that exists in the national economy. Vocational factors such as age, education, and work experience—in combination with the individual's residual functional capacity—help an examiner to determine whether an applicant's impairment precludes him or her from engaging in SGA. Since vocational factors such as education and work experience typically become less stringent with age, SSA is more likely to award benefits to older insured workers. 
Currently, SSA categorizes older workers across four age ranges: 45-49, 50-54, 55-59, and 60 and older. CBO examined the effects of increasing the 45-49 and 50-54 age ranges by two years to 47-51 and 52-56 and making 57 to FRA the new maximum range, thereby eliminating the 45, 46, and 60 and older categories. According to CBO, if this option had been implemented in 2013, it would have decreased the number of SSDI beneficiaries by 50,000 or 0.5% in 2022, as well as reduced program expenditures by $1.0 billion in that year. 
SSA explored raising the age categories in the past but ultimately decided against it. In 2005, SSA issued a Notice of Proposed Rulemaking (NPRM) to increase the age categories for older insured workers by two years. However, after collecting feedback from the public, SSA withdrew the NPRM in 2009.
section_title: Improved Administration of the Program
paragraphs: One option is to improve the way in which SSA administers the program so that fewer non-meritorious people receive benefits. Variation in the application of program rules can distort the disability determination and adjudication process, resulting in SSA granting awards to non-meritorious claimants or denying benefits to claimants with little or no capacity to work. Similarly, diminished program integrity—whether through waste, fraud, or abuse—may permit some beneficiaries to remain on SSDI even after their health improves. This subsection outlines reforms to the administration of the program that could conceivably reduce the growth in the SSDI rolls.
subsections: section_title: Permit SSA to Be Represented at the Hearing Level of the Appeals Process
paragraphs: In general, a claimant displeased with the decision at the reconsideration level of the appeals process may request a hearing before an ALJ, in writing, within 60 days upon receipt of the previous determination. At the hearing level, a claimants may present additional evidence or arguments to support the case and appoint a representative to act on his or her behalf. Most claimants are represented by attorneys at ALJ hearings. Since SSA is not represented at the hearing, the proceeding is considered inquisitorial or non-adversarial. Under the inquisitorial process, an ALJ investigates the merit of an appeal by informally questioning the claimant and any scheduled witnesses (e.g., medical or vocational experts). 
Proponents of this process argue that the informal nature of the proceedings and lack of cross-examination by an opposing attorney encourages claimants to share more information with the ALJ. Moreover, supporters note that in Richardson v. Perales , the Supreme Court found that SSA hearings should be "understandable to the layman claimant, should not necessarily be stiff and comfortable only for the trained attorney, and should be liberal and not strict in tone and operation. This is the obvious intent of Congress so long as the procedures are fundamentally fair."
Opponents contend that inquisitorial process makes it harder for ALJs to make informed decisions on a consistent basis, because they must remain impartial while simultaneously representing the interests of both claimants and SSA. According to the Association of Administrative Law Judges (AALJ), having to wear all three "hats" during a hearing sometimes places an ALJ in an untenable situation, in which the judge must represent clients whose interests are at odds with one another. The difficulty of maintaining impartiality while simultaneously representing the interests of both parties may cause an ALJ to overlook a key piece of evidence or argument, thereby affecting the outcome of the decision. 
To improve the accuracy of ALJs' decisions, the AALJ, the SSAB, and some Members of Congress have advocated switching from an inquisitorial to an adversarial process in which claimants and SSA are each afforded representation. The AALJ and SSAB argue that the vigorous cross-examination of claimants by SSA representatives would provide ALJs with additional information, resulting in better decisions. According to SSAB, under the inquisitorial process, some ALJs may be reluctant to question claimants aggressively for fear of appearing to be biased. SSAB contends that switching to an adversarial process would allow ALJs to investigate the history and extent of claimants' medical impairments more thoroughly, resulting in better-reasoned decisions and greater judicial consistency.
Another potential advantage of the adversarial process is that government representation may reduce the number of cases that an ALJ would need to hear, which could further improve the quality of their decisions. In 2013, SSA Deputy Commissioner Glenn Sklar testified that the agency expects ALJs to issue 500-700 decisions annually. Some researchers speculate that the pressure to adjudicate a high number of disability claims quickly has led to poorer ALJ decisions and consequently a higher allowance rate. According to a 2013 Senate report, this pressure stems from a 2007 plan by SSA to reduce its backlog of disability hearings. One reason why the pressure to hear a large volume of cases may have increased the overall allowance rate is that issuing an award is generally not appealed by a claimant and is therefore subject to less scrutiny than a denial would be. A 2014 story on SSA's disability backlog in the Washington Post noted that "judges complain that saying 'yes' is a lot easier—and faster—than saying 'no.' A negative decision often requires a lengthier write-up, which goes through all the different ailments that might have rendered this person disabled. That means 10 pages of text to prepare for a future appeal. A 'yes' decision is rarely appealed. So, they say, it takes less writing." The AALJ contends that switching to an adversarial process would allow government attorneys to settle cases with a high probability of reversal before the hearing level, giving ALJs more time to adjudicate complicated cases or ones with a lower likelihood of being reversed. By allowing government representatives to decide which cases to defend, the adversarial process could reduce the pressure for ALJs to decide a high number of claims, which, in turn, could improve the quality of their decisions. 
At a hearing in November 2013, SSA refuted the characterization that it is sacrificing quality by granting claims "too readily" and insisted that it is "making quicker, higher quality disability decisions." The agency also noted that between FY2007 and FY2013, the share of ALJs with allowance rates of 85% or greater fell from 20% to 3%. 
subsections: section_title: Difficulties with Switching to an Adversarial Process
paragraphs: Successfully implementing an adversarial process at the hearing level poses several challenges for SSA. First, it would require additional expenditures to hire attorneys and appropriate staff. Disability hearings are already quite costly for SSA. In FY2011, the unit cost of adjudicating a disability hearing was about $2,750, compared with about $1,060 to process an initial disability claim. Those extra costs would offset any savings from reduced benefit outlays.
Second, a federal judge issued an injunction against SSA's previous adversarial pilot program in 1986, so an adversarial process might require new legislative authority. In 1982, SSA initiated the Social Security Administration Representation Project (SSARP) in five hearing offices across the country to test "whether the participation of SSA representatives in disability cases at the administrative hearing level can contribute toward improving the quality and timeliness of hearing dispositions." Under the SSARP, government representatives reviewed hearing requests, initiated case development, and represented the agency whenever a claimant had an appointed representative at a hearing. 
The SSARP sparked concern among some Members of Congress and the public over the "fairness of SSA's disability adjudication process." One month into the pilot program, seven disability claimants challenged the SSARP in the Western District of Virginia seeking injunctive and declaratory relief. In Salling v. Bowen , a district judge issued an injunction against the SSARP, finding that its procedures did not meet the standard for due process and were not "fundamentally fair." The judge also held that the pilot program violated the Social Security Act and intruded on the independence of ALJs. Although SSA appealed the court's decision, the agency ultimately discontinued the SSARP and revoked its regulations in 1987. According to the General Accounting Office (GAO; now the Government Accountability Office), the preliminary results of the pilot were never verified and a final report was never issued.
Third, the effects of switching to an adversarial process are difficult to predict. To determine the effectiveness of government representation, SSA would need to know:
whether representation can improve the quality of ALJ decisions, and if so, whether higher-quality decisions reduce the overall allowance rate, and if so, whether the adversarial process can be done in a cost-effective manner.
section_title: Update SSA's Listing of Impairments
paragraphs: During the disability determination process, DDS examiners and medical and psychological consultants typically use medical evidence collected from the claimant's treating sources to determine the severity of the claimant's impairment. To assess whether the impairment precludes the claimant from working, state disability examiners evaluate it against SSA's Listing of Impairments (hereinafter "listings"). The listings describe medical impairments that are considered severe enough to prevent an individual from performing any gainful activity for each of the 14 major adult body systems. Most of the impairments described in the listings are permanent or expected to result in death. All other listings must show that the impairment has lasted or is expected to last for at least one year. If the claimant's impairment meets (or is of equal severity to) the criteria in the listings, SSA considers the claimant disabled and therefore eligible for benefits. Claimants who do not meet the medical criteria in the listings proceed to a more individualized assessment that examines their remaining ability to work, taking into account certain vocational factors.
Although the listings serve as a useful guide for DDS examiners, the percentage of awards determined at the listings stage has decreased substantially over the years. Between FY1980 and FY2010, the share of initial allowances based on claimants meeting the medical listings declined from 58% to 38%, while the portion based on claimants having an impairment equal in severity fell from 16% to 8% over the same period ( Figure 13 ). SSAB, GAO, and SSA's OIG all attribute this decline to the increasingly outdated nature of the listings. In 2000, the OIG found that SSA had not updated certain listings in over 10 years; moreover, SSA had not updated the listings for mental disorders in 15 years. In 2003, GAO identified SSDI as a high-risk program because it relied on listings that did not reflect the impact of medical and technological advances on work-limiting impairments. 
To improve the quality and accuracy of disability determinations, SSA initiated a two-tiered process for updating its medical listings beginning in 2003. Under the new process, the agency is to first complete a comprehensive revision of each listing category, taking into account any medical disorder or disease that may inhibit an individual's ability to work. Once the comprehensive update is complete, SSA is to conduct periodic reviews of each listing category to ensure that the listings are current. SSA has completed comprehensive revisions to nine of the 14 major adult body systems.
SSA has experienced delays in completing comprehensive updates to the remaining five major adult body systems. For example, SSA has still not completed a final revision of the listing for mental disorders—SSDI's second most diagnosed impairment—which last received a comprehensive update in 1985. SSA officials attribute the delay to a shortage of qualified staff and to the enormous complexity of implementing and revising new medical listings. 
Updating the listings to take into account medical and technological advances, as well as changes in the labor market, could allow DDS examiners to better identify individuals with severe work-limiting disabilities, while screening out non-meritorious claimants who could potentially engage in SGA. The impact of updated medical listings on the prevalence of benefit receipt remains unclear, because claimants denied at the medical listings stage of the determination process may still be awarded benefits based on vocational factors. 
section_title: Update SSA's Occupational Information System
paragraphs: If a claimant fails to meet the eligibility criteria described in the medical listings, SSA is to proceed with a more individualized assessment that examines the claimant's ability to engage in SGA. To "minimize subjectivity and promote national consistency," SSA employs a system of medical and vocational rules designed to assist examiners in discerning whether a claimant can perform any past relevant work or other work that exists in the national economy. SSA considers claimants who cannot perform such work to be disabled and therefore eligible for SSDI.
Currently, SSA uses the Department of Labor's (DOL) Dictionary of Occupational Titles (DOT) to determine the physical and mental demands of available work in the national economy. Because DOT last received a major update in 1977, its occupational information is considered largely outdated. Although DOL replaced DOT with the Occupational Information Network (O*NET) in 1998, SSA concluded that O*NET's occupational information was insufficient to meet its requirements. A 2012 Senate report expressed concern that DOT's increasingly outdated information may result in awards to claimants who could work in unlisted occupations. 
To improve program integrity, SSA in December 2008 established the Occupational Information Development Advisory Panel to develop a new occupational information system (OIS) for use in the vocational stages of the disability determination process. In July 2012, SSA signed an interagency agreement with the Bureau of Labor Statistics (BLS) to test the viability of using BLS's National Compensation Survey (NCS) to collect occupational data for the new OIS. In FY2013, SSA and BLS conducted a three-phase test to assess the NCS's accuracy and reliability in capturing occupational data that are relevant for disability determinations. SSA expects to start developing the new OIS in FY2015 and implement it by FY2016.
In the future, SSA's updated OIS may help to mitigate the growth in the SSDI rolls. According to SSA, the occupational information in DOT reflects an industrial economy, whereas today's economy has become more service oriented. Therefore, modern occupations that require less physical exertion may allow individuals with certain disabilities to remain in the labor force. On the other hand, some individuals may be more likely to qualify for SSDI when evaluated using the updated OIS. For example, older individuals with disabilities may have difficulty adjusting to the intensity and pressure of many of today's employment opportunities, while individuals with less extensive education may be less suited to "cognitively demanding" work. 
Another complicating issue is that individuals with disabilities still tend to work in occupations that require physical labor. For instance, one study found that individuals with cognitive or multiple disabilities are more likely to work in physically demanding, low-skilled jobs. Consequently, an updated OIS may not reduce the number of individuals with certain chronic conditions from applying for benefits.
section_title: Increase the Number of Full Medical CDRs Conducted by SSA
paragraphs: As noted earlier, medical CDRs are periodic reevaluations conducted to determine if beneficiaries are still disabled. If SSA finds substantial evidence of medical improvement related to a beneficiary's ability to work, the agency typically considers the beneficiary no longer disabled. By increasing the number of full medical CDRs conducted each year, SSA could increase the recovery rate of beneficiaries with work-related medical improvements, which would help to reduce the disability rolls.
According to SSA, periodic medical evaluations are one of the most cost-effective tools for improving program integrity. Of the more than 443,000 full medical CDRs conducted in FY2012, SSA estimates that it will cease paying benefits to over 76,000 individuals and their eligible dependents after all appeals (a cessation rate of 17%). For every dollar spent on CDRs in FY2012, the agency estimates approximately $14.60 in future savings to the federal government. Prior to that, the CDR process yielded an estimated savings-to-cost ratio of $10 to $1. (Note that benefit savings from CDRs are not counted for congressional scorekeeping purposes. )
However, a loss of dedicated funding for program integrity activities between FY2003 and FY2008 left SSA with fewer resources with which to conduct disability reviews, resulting in a CDR backlog ( Figure 14 ). In 2010, the OIG estimated that if SSA had conducted all full medical CDRs when they were originally scheduled between 2005 and 2010, the agency would have removed an additional 90,000 to 180,000 SSDI and SSI beneficiaries from the rolls, thereby avoiding between $1.3 billion and $2.6 billion in benefit payments from 2005 to 2010. Despite recent efforts to reduce the backlog, SSA estimated that there were 1.3 million pending medical CDRs at the end of FY2013.
Reducing the CDR backlog has posed a challenge for SSA, in part because of a reduction in DDS staffing levels over the years. In response to budget deficits following the last recession, some states instituted furloughs or hiring freezes of state employees, including DDS examiners. The reduced staffing at DDSs limited SSA's ability to conduct periodic medical reviews and contributed to the backlog of CDRs. To address the lower staffing levels, SSA transferred a portion of disability cases from furloughed DDS offices in some states to non-furloughed DDS offices in other states. Additionally, the agency received funding in FY2009 and FY2010 to increase the number of DDS staff by more than 2,900 employees. However, due to an agency-wide hiring freeze that began in FY2011, SSA did only limited critical hiring between FY2011 and FY2013. The combination of attrition and hiring freezes during this period resulted in a net decline in DDS staffing levels ( Table 2 ).
To address the mounting backlog of CDRs and enhance program integrity, advocacy organizations, researchers, and the Obama Administration have all expressed their support for increasing CDR funding. The Budget Control Act of 2011 (BCA; P.L. 112-25 ), which places caps on discretionary spending, includes a provision to adjust the caps to permit additional appropriations to SSA for program integrity activities such as CDRs and SSI redeterminations. SSI redeterminations are periodic reviews to ensure that beneficiaries meet SSI's financial eligibility requirements. 
The Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) appropriated a total of $1.197 billion for CDRs and SSI redeterminations, which was the maximum amount allowed under the BCA for FY2014. With this level of funding, SSA completed nearly 526,000 full medical CDRs and 2.6 million SSI redeterminations (see Figure 3 ). The FY2014 appropriation also allowed the agency to hire about 2,600 DDS employees, including both replacement staff and additional hires. 
For FY2015, the Administration requested the full amount authorized for program integrity activities under the BCA: $273 million in base funding and $1.123 billion in cap adjustment funding. The Administration estimates that the $1.396 billion in total program integrity funding would allow SSA to perform at least 888,000 full medical CDRs and 2.6 million SSI redeterminations in FY2015. Congress appropriated the maximum amount for FY2015 in the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ). 
According to SSA, the agency would need $11.8 billion in program integrity funding during FY2014-2023 to eliminate the CDR backlog by FY2018 and prevent it from growing back again through FY2023. This level of funding would allow SSA to conduct an estimated 8.8 million full medical CDRs. However, at the funding levels prescribed in the BCA, SSA projects that it would be able to conduct only 7.8 million full medical CDRs at a cost of $10.3 billion.
For FY2016, the Administration proposes replacing the discretionary spending caps established under the BCA with a dedicated source of mandatory funding to enable SSA to conduct more CDRs and SSI redeterminations on a consistent basis. Under this option, SSA estimates that it would conduct more than 8 million full medical CDRs at a cost of $10.7 billion during FY2014-FY2023.
subsections: section_title: Limitations of Full Medical CDRs
paragraphs: While additional funding and new hires would allow the agency to perform more full medical CDRs, the shortage of veteran examiners complicates the issue. Part of the problem stems from the fact that DDS examiners experience high rates of turnover. According to GAO, over 20% of DDS examiners hired between September 1998 and January 2006 left or were terminated within their first year. Of the examiners who remain, it takes about two years of experience before SSA considers them to be fully trained. Thus, even with additional hiring, it may take the agency years to reestablish a robust pool of highly experienced disability examiners.
Additionally, because of diminishing returns, future marginal savings from additional CDRs would be less than the past average. When SSA performs CDRs, it prioritizes the beneficiaries who are most likely to have substantial medical improvement related to their ability to work. However, as the number of completed CDRs increases, the chance of benefit cessation declines for subsequent reviews. 
The savings-to-cost ratio would also decrease if former SSDI beneficiaries who were terminated due to medical improvement reapply and return to the program. According to one study, of those whose eligibility ceased after CDRs from 2003 to 2008, an estimated 20% of former SSDI-only beneficiaries will come back onto the rolls within eight years.
It is important to note that program integrity activities alone would be unable to substantially improve the financial outlook of the SSDI program, because potential savings from CDRs take time to accumulate and apply to multiple programs. For example, SSA projects that the full medical CDRs conducted in FY2012 will result in a present value of nearly $7 billion in lifetime savings to the federal government; however, these savings are spread out over decades and are attributable not only to SSDI but also to OASI, SSI, Medicare, and Medicaid.
section_title: Return-to-Work Incentives249
paragraphs: Another policy option to combat the growth in the SSDI rolls is to provide stronger incentives for beneficiaries to return to work. Currently, SSA allows beneficiaries to test their ability to work by participating in a trial work period (TWP), during which participants may earn any amount for nine months within a rolling 60-month period without having their benefits reduced or their entitlement to SSDI terminated. In addition, SSA provides employment and support services. Still, few beneficiaries leave the program. In 2013, SSA terminated the benefits of 0.4% of all disabled-worker recipients due to earnings above SGA. 
subsections: section_title: Increase Awareness of Return-to-Work Services
paragraphs: To address some of the barriers to employment faced by disabled workers, Congress enacted the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ), which established the Ticket to Work and Self-Sufficiency program (hereinafter "Ticket to Work"). Ticket to Work assists beneficiaries between the ages of 18 and 64 in returning to the labor force by providing a voucher or ticket for employment, vocational rehabilitation (VR), or other support services through public or private contractors known as Employment Networks (EN), as well as through traditional state VR agencies. Participation in the Ticket to Work program is voluntary, and ticket holders (beneficiaries) decide when and whether to assign a ticket to a particular state VR agency or EN. Under the program, state VR agencies and ENs receive payments from SSA for services provided to ticket holders based on specific work-related performances measures.
Thus far, the Ticket to Work program has met with little success. Although program participants are more likely to be employed than other beneficiaries, only about 2.3% of all active tickets issued by SSA are in use (i.e., assigned to an EN or state VR agency). According to GAO, EN representatives partially attribute Ticket to Work's low beneficiary participation rate to "a lack of understanding and awareness of the program." Meanwhile, some disability-advocacy organizations contend that the fear of losing benefits may deter beneficiaries from participating.
To improve the return-to-work rate of SSDI recipients, researchers Bonnie O'Day and David Stapleton have proposed testing early intervention policies that provide beneficiaries with employment and other support services shortly after receipt of benefits. The researchers argue that current programs have failed to increase the return-to-work rate, because many beneficiaries "have been separated from the labor force, often for years, before they are offered assistance." The researchers posit that beneficiaries may have a greater chance of returning to work if they receive services earlier during their stay on SSDI. 
One early intervention option is to require all future beneficiaries to participate in work preparation counseling to educate them about available services. Beneficiaries may be more likely to participate in programs they understand. Although mandatory work preparation counseling would require new funding, the counseling might be cost-effective if it improves the return-to-work rate of SSDI recipients, especially if it targeted those with the best chance of success.
SSA oversees two voluntary grant programs aimed at increasing beneficiary awareness of return-to-work services. In addition to the Ticket to Work program, P.L. 106-170 also established the Work Incentives Planning and Assistance (WIPA) program and the Protection and Advocacy for Beneficiaries of Social Security (PABSS). WIPA awards grants to community organizations that provide education and assistance for beneficiaries interested in returning to work, and PABSS provides grants for legal assistance and advice on how to obtain VR, employment, or other services.
Estimating the overall impact of mandatory counseling on the SSDI beneficiary return-to-work rate is difficult because the results of SSA's current employment-counseling initiatives are inconclusive. According to one study, the use of WIPA services possibly has a positive effect on the employment outcomes of SSDI and SSI beneficiaries. However, it is difficult to discern whether beneficiaries who received WIPA services would have enjoyed the same employment outcome in the absence of such services. 
section_title: Benefit Offset
paragraphs: One reason why few workers leave the rolls due to substantial earnings is that some beneficiaries deliberately "park" their earnings from work below the SGA threshold. After completing the TWP and a 36-month extended period of eligibility (EPE), beneficiaries who earn more than the SGA limit have their benefits terminated. One study found that between 0.2% and 0.4% of all SSDI beneficiaries parked their earnings below SGA in a typical month from 2002 to 2006 in order to retain their benefits. 
Beneficiaries may park their earnings below SGA (sometimes called the "cash cliff") in part because their impairment prevents them from working consistently. Another study found that 59% of Ticket to Work participants reported working at a job for at least one month during 2003-2005; however, of those participants who later left work, the most cited reason was due to poor health. Parking one's earnings below SGA may weaken a work-oriented beneficiary's attachment to the labor force, possibly resulting in an erosion of skills and thus a reduced likelihood of returning to work following a health-related withdrawal from the labor force.
To remedy the phenomenon of parked earnings, several disability-rights organizations have advocated eliminating the fixed cash cliff (SGA threshold) and replacing it with a gradual benefit-offset model that allows beneficiaries to increase their earnings while remaining on SSDI. The SSI program operates under a benefit-offset system, deducting $1 in benefits for every $2 in earnings over $65. Advocates argue that a benefit-offset model would make SSDI beneficiaries "financially better off" by allowing them to maximize their total income and work potential. A benefit-offset model could also improve the finances of the SSDI program by reducing the amount of cash benefits paid out to recipients. Additionally, adopting a benefit-offset model could increase beneficiaries' attachment to the labor force by making work more attractive. 
On the other hand, benefit offset may induce only a small number of beneficiaries to increase their earnings (i.e., those beneficiaries who park their earnings). Although benefit outlays from the DI trust fund would decrease under this scenario, such savings would have little impact on the solvency of the DI trust fund. Additionally, by making it easier for recipients to maintain their eligibility for benefits, benefit offset could decrease the SSDI termination rate further, which, in turn, could increase the total number of beneficiaries on the rolls. Furthermore, benefit offset may increase the attractiveness of SSDI benefits, impelling more workers to apply to the program.
SSA is currently in the process of conducting a Benefit Offset National Demonstration (BOND) project, in which treatment participants lose $1 in benefits for every $2 in earnings exceeding a BOND Yearly Amount (BYA) equal to 12 times the monthly SGA limit. Some BOND participants are also eligible for Enhanced Work Incentives Counseling (EWIC), which is designed to address a range of issues related to returning to work, including access to medical treatment, employment services, and job training. In implementing BOND, SSA seeks to test whether benefit offset can increase earnings and reduce dependence on SSDI for work-oriented beneficiaries.
In preparation for BOND, SSA implemented a four-state pilot program known as the Benefit Offset Pilot Demonstration (BOPD) from 2005 to 2008. According to SSA, participation in the BOPD had a positive effect on the earnings of individuals in the treatment group; however, the pilot also increased average benefit payments because of partial payments made to beneficiaries whose benefits would have been suspended under normal program rules for earning above SGA.
In August 2013, SSAB called for the early termination of BOND. The board cited the implementation problems associated with the pilot program and BOND's low participation rate as evidence that BOND would likely fail to increase beneficiary return-to-work rates in a cost effective manner. SSAB estimated that terminating BOND would save approximately $17 million in FY2015.
section_title: Promote Supported-Work Policies
paragraphs: Some researchers have suggested shifting the focus of SSDI reform away from terminating beneficiaries already on the rolls toward attenuating the inflow of new beneficiaries into the program. Advocates of this approach—sometimes referred to as supported work —argue that offering employment supports shortly after the onset of disability would allow more workers who experience disability to keep working. Most supported-work policies use financial incentives to encourage employers to provide preventive, accommodative, rehabilitative, and other return-to-work services. Although Title I of the Americans with Disabilities Act (ADA; P.L. 101-336 , as amended) requires employers to provide some level of reasonable accommodation for employees with disabilities in the workplace, some employers fail to comply with the provisions of the ADA. Faced with few employment opportunities, individuals with disabilities who could conceivably work given appropriate accommodation may turn to SSDI as a last resort. This subsection provides an overview of two supported-work policies that have the potential to reduce the incidence of benefit receipt.
subsections: section_title: Experience Rate the Employer's Portion of the Payroll Tax Rate
paragraphs: Experience rating is a process for determining insurance premiums based on the cost of an insurance pool's past claims. In essence, an insurer calculates a firm's insurance premium based on the likelihood, or risk, of the firm submitting a future claim given its previous behavior. Many types of employer-sponsored insurance use experience rating to determine premiums, including state workers' compensation (WC), unemployment insurance (UI), and private disability insurance (PDI). Because premiums are a function of past claims, firms' costs reflect their use of the insurance program, creating incentives for them to reduce the number of claims.
To reduce the incidence of SSDI receipt, several researchers have suggested that the federal government should experience rate the employer's portion of the payroll tax used to fund SSDI. Currently, employers pay the same payroll tax rate, regardless of the rate at which their employees enroll in the program. However, an experience rated system would link payroll tax rates to the claim rate, which would give employers an additional incentive to support disabled workers. 
Proponents of experience rating often point to its use in the Netherlands' disability insurance (DI) system as evidence of its potential impact in the United States. Between 1998 and 2003, the Netherlands gradually incorporated experience rating into its DI system. According to one study, instituting experience-rated DI premiums resulted in a 15% reduction in the Dutch DI incidence rate. Since the early 2000s, the Netherlands has witnessed a marked decline in its DI prevalence rate. 
Experience rating could be implemented relatively simply. Employers already report payroll tax data to the Internal Revenue Service (IRS), which the agency shares with SSA. Moreover, most employers are accustomed to the concept of experience rating because of their experience paying state WC and UI premiums. By compiling both payroll tax and beneficiary award data, SSA could experience rate the SSDI payroll tax "without imposing substantial new reporting requirements or administrative burdens on employers."
Opponents of experience rating argue that the policy would adversely affect some workers. For example, experience rating could make employers hesitant to hire or retain workers "perceived to be a high risk for disability." Employers may discriminate against older workers, people with chronic conditions such as diabetes, or individuals prone to risky behaviors. To address this possibility, supporters of experience rating suggest implementing risk adjustments specific to factors such as age, occupation, and health status, as well as enforcing existing anti-discrimination laws.
Critics also point out that experience rating could reduce the compensation of low-wage workers. For instance, some employers subject to higher payroll tax rates could shift the additional cost onto workers in the form of reduced take-home pay or benefits. Employers unable to shift additional labor costs onto their employees may instead offset the higher payroll tax rate by hiring fewer workers in the future. Since low-wage individuals tend to work in professions with high rates of disability, they may be disproportionately affected by employer cost avoidance and therefore more likely to suffer financially. Opponents argue that workers harmed by employer cost avoidance could end up on SSDI, increasing the size of the program. 
Furthermore, some critics say that while the system changes employers' incentives, it fails to address the incentives for workers to apply for SSDI. For example, some workers may apply in response to factors beyond the employers' control, such as low market wages.
section_title: Employer-Sponsored Private Disability Insurance
paragraphs: Another option to reduce the number of SSDI beneficiaries is for the federal government to promote employer-sponsored private disability insurance (PDI). PDI provides beneficiaries with a partial wage replacement and return-to-work services. As of March 2014, 40% of all workers in private industry had access to short-term disability (STD) insurance, and 34% had access to long-term disability (LTD) insurance. STD insurance typically lasts a fixed number of weeks or months, while LTD insurance can last anywhere from a year to several decades. PDI is less expensive than other forms of employer-sponsored insurance, such as health care. In addition, employers can partially offset the cost of PDI by requiring employees to contribute to the insurance plans. 
Some researchers have advocated that the federal government should promote employer-sponsored PDI to reduce the growth in the SSDI rolls. Employer-sponsored PDI plans could reduce the incidence of SSDI benefit receipt, because they provide employment-support services soon after the onset of disability when the likelihood of recovery is highest. By intervening with robust supported-work services early in the disability process, PDI may keep workers with disabilities attached to the labor force and therefore reduce the number who apply for SSDI. 
Offering employers financial incentives is one way to promote employer-sponsored PDI. For example, SSA could lower the tax rate of employers who purchase PDI and whose insurance agents coordinate with SSA to manage disability cases in a cost-effective manner. Alternatively, the federal government could award subsidies or tax credits to firms that provide PDI. 
A second way to promote PDI would be to require all employers to provide it. Companies that refuse to provide PDI would be subject to possible legal action, financial penalties, or both. Currently, New Jersey, New York, Hawaii, and Puerto Rico require employers to contribute toward some form of STD insurance, generally known as temporary disability insurance (TDI). Employer-mandated PDI has become increasingly popular in many European countries. The Netherlands, for example, requires employers to cover the cost of sick pay for two years following the onset of a disabling condition, while the U.K. requires employers to pay up to six months of statutory sick pay. 
Researchers David Autor and Mark Duggan have proposed requiring all employers to provide short-term PDI, which would provide workers with rehabilitation services, workplace accommodation, and a partial wage replacement for two years. Under this proposal, plans would be purchased on the existing PDI market, and employers would be permitted to require employees to contribute up to 40% of the cost of their coverage. Following the exhaustion of employer-sponsored PDI, beneficiaries who are found to be disabled would qualify for SSDI. Workers with extremely severe or terminal disabilities would be exempt from the two-year PDI requirement and would qualify for SSDI immediately.
Using the financial incentives approach would be relatively simple, because the federal government already encourages employers to hire workers with disabilities by offering tax credits to offset the cost of providing workplace accommodation. Having SSA work with employers and insurers under an experience-rating system would likely require significantly more resources than the tax credit proposal, but the system could be structured to limit federal costs. In spite of these advantages, financial incentives might be ineffective. As noted above, the federal government currently offers employers tax incentives to hire workers with disabilities; however, the evidence that such incentives actually drive employers to hire such workers has been "limited and inconclusive." Similarly, the lure of a lower payroll tax rate under an experience-rating model may not cause employers to purchase PDI, especially if the cost of providing PDI outweighs any savings from the reduced payroll tax rate.
A mandate, on the other hand, would likely have a larger effect. The prospect of having to pay financial penalties due to noncompliance is typically a more powerful incentive for employers than tax credits. Although a government mandate does not guarantee universal compliance because some employers could simply pay the appropriate penalty, requiring employers to provide PDI might still have a marked effect on the inflow of beneficiaries into the SSDI program.
One of the biggest unknown factors of the mandate approach outlined by Autor and Duggan is whether the private insurance market can offer an economically feasible two-year PDI plan. Most insurers sell PDI plans as either short-term (around 26 weeks) or long-term (anywhere from a year to several decades). Although both types of PDI cost employers about the same amount per hour worked, LTD insurance plans typically have stricter eligibility standards. For instance, LTD plans may have more stringent definitions of disability or have a larger list of pre-existing medical conditions that make employees ineligible. LTD plans are generally stricter because beneficiaries could receive benefits for years or even decades. To offset some of the risk associated with LTD plans, insurers often require beneficiaries to apply for SSDI after the onset of disability and deduct any SSDI income from a beneficiary's LTD benefit. However, because the Autor and Duggan proposal does not permit insurers to offset part of their costs by requiring beneficiaries to apply for SSDI, such two-year PDI plans may not be financially viable in the current insurance market.
Autor and Duggan contend that their proposal would be economically feasible for insurers because their PDI plan would be less generous that current LTD policies. Based on their conversations with private insurers, they believe that two-year policies would not substantially increase the costs associated with PDI. 
Additionally, private insurers could simply raise premiums to a level sufficient to make two-year PDI policies profitable. The extent to which insurers could raise rates would depend on the structure of the federal mandate as well as on state insurance laws. However, if insurers raised premiums too high and compliance penalties for employers were too low or not adequately enforced, then employers could choose not to provide PDI.
subsections: section_title: Acronyms