Social Security Disability Insurance: Factors Affecting Beneficiaries' Return to Work
Released: 1998-07-29T00:00:00

Letter

Background

Established in 1956, DI is an insurance program funded by Social Security payroll taxes. There are a number of criteria an individual must meet to be eligible for DI benefits, including a sufficient work history and a lost capacity to work due to a disability. Medicare coverage is provided to DI beneficiaries after they have received cash benefits for 24 months (individuals do not have the option to purchase Medicare during this waiting period).

To be considered disabled for DI benefits, an adult must be unable to engage in any substantial gainful activity because of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last at least 1 year. Moreover, the impairment must be of such severity that a person not only is unable to do his or her previous work but—considering age, education, and work experience—is unable to do any other kind of substantial work that exists in the national economy.

The Social Security Act states that SSA is required to promptly refer people applying for disability benefits to state vocational rehabilitation agencies for services in order to maximize the number of such individuals who can return to productive activity. To reduce the risk a beneficiary faces in trading guaranteed monthly income and subsidized health coverage for the uncertainties of employment, the Congress established various work incentives—including a trial work period, an extended period of eligibility, and Medicare coverage buy-in. These incentives are intended to safeguard cash and health benefits while a beneficiary tries to return to work.

The trial work period allows DI beneficiaries to work for a limited time without their earnings affecting their disability benefits. Each month in which earnings are more than $200 is counted as a month of the trial work period. When the beneficiary has accumulated 9 such months (not necessarily consecutive) within a 60-month rolling period, the trial work period is completed. The extended period of eligibility begins the month following the end of the trial work period. The extended period is defined as a consecutive 36-month period during which cash benefits will be reinstated for any month the beneficiary’s earnings are less than the substantial gainful activity level (in 1997, $500 for people with disabilities; $1,000 for people who are blind). Cash benefits may be paid for an even longer period of time if a person is unable to perform any substantial gainful activity.

Another work incentive allows for continued Medicare coverage for at least 39 months following a trial work period, as long as the individual continues to be medically disabled. When this premium-free period ends, medically disabled individuals may elect to purchase Medicare coverage at the same monthly premium—over $300 for full coverage in 1996—paid by individuals age 65 or older who are not insured for Social Security retirement benefits.

Factors That Affect Beneficiaries’ Movement Into the Workforce

Most working DI beneficiaries we interviewed reported that financial need and enhancing self-esteem were the main reasons for attempting work. They reported a number of factors as helpful to becoming employed (see table 1). The two most frequently reported factors—health interventions and encouragement—appear to have been the most critical in helping beneficiaries become employed. First, health interventions—such as medical procedures, medications, physical therapy, and psychotherapy—reportedly helped beneficiaries by stabilizing their conditions and, consequently, improving functioning. Not only were health interventions perceived as important precursors to work, but they were also seen as important to maintaining ongoing work attempts. Encouragement to work was also critical. Respondents told us they received encouragement from family, friends, health professionals, and coworkers.

Social Security Disability Insurance: Factors Affecting Beneficiaries’ Return to Work My family members. . . .encourag me to go to work and not rely on disability income. They were helpful to me in assessing the merits and benefits of potential job offers. . . . I am using a combination of Prozac and lithium medications to control my condition and Social Security Disability Insurance: Factors Affecting Beneficiaries’ Return to Work me to work regularly where I don’t use my sick days. Therapy with my counselor for over 4 years has really allowed me to work and function in a work environment.

Medication for epilepsy help keep condition under control, which minimizes seizures and the risk of getting fired. . . . check from time to time to make sure everything is okay even suggests taking days off. infectious disease doctor encouraging and is very supportive. He wrote a letter to employer explaining condition and my capabilities. parents are very supportive medications have made me physically able to work. providing emotional support.

All my treatments—chemo, radiation, and my eye surgery—helped me to get well and become physically able to work. If I did not have treatments, I would be dead. [The ADA] keeps employers aware that employees cannot be dismissed because of . . . .disabilities.

Psychotherapy and group therapy been helpful. Also, medication has been helpful. . . . My psychotherapist has gone out of his way to help me. I can call him at any time. The pastor of my church has also counseled me. At the college I attended, a director of the disabled talks to my professors and tells them about my condition so that they can take this into account when assigning work and evaluating my performance. . . . ADA has helped because I believe that they would not have hired me because of my problems. equipment, and ADA provisions were useful. In general, similar proportions of respondents with physical impairments and those with psychiatric impairments cited these factors as helpful to being employed. However, people with physical impairments found coworkers and the trial work period more helpful than did those with psychiatric impairments.

Our study results are generally consistent with published research regarding factors associated with employment for people with disabilities. For instance, many of the respondents we talked to reported a high motivation to work, were educated beyond high school, or were in their thirties or forties. For many, work seemed to be economically advantageous because they were earning at least moderate-level wages and receiving very few program benefits—such as housing assistance and food stamps—that are contingent upon low earnings. Consistent with other research, medical interventions, technology, accommodations, and social support were found to facilitate return to work. Unlike other studies, transportation appears to be neither a strong facilitator for nor an impediment to employment. However, this may be due to the fact that our respondents were selected from major metropolitan areas.

Role of SSA Work Incentives and Staff Involvement

Based on our discussions with beneficiaries, DI program incentives for reducing risks associated with attempting work appear to have played a limited role in beneficiaries’ efforts to become employed. Although the trial work period was considered helpful by 31 respondents, several indicated it had shortcomings. For instance, they indicated the amount signifying a “successful” month of earnings ($200) was too low, an all-or-nothing cutoff of benefits after 9 months was too abrupt, and having only one trial period did not recognize the cyclical nature of some disabilities. Respondents’ mixed views of the design of the trial work period suggest that while they value a transitional period between receiving full cash benefits and losing some benefits because of work, they might be more satisfied with a different design. Finally, over one-fifth were unaware of the trial work period and therefore may have unknowingly been at risk of losing cash benefits. threshold for determining continued eligibility. Using the deduction could make it easier for a beneficiary to continue working while on the rolls without losing benefits. Moreover, 42 respondents were unaware of the option to purchase Medicare upon leaving the rolls. As a result, some of these beneficiaries may decide to limit their employment for fear of losing health care coverage, while others, planning to leave the rolls, may think they are putting themselves at risk of foregoing health care coverage entirely upon program termination.

Generally, respondents told us SSA staff with whom they interacted provided neither much help in nor much of a hindrance to return-to-work efforts. Fifty-nine respondents answered “no” when asked if people from SSA assisted them in becoming employed. However, 52 respondents told us that they did not have experiences with SSA that made it difficult to become employed. For the 17 people reporting difficulties, the most common examples cited were the limited assistance offered and poor information provided by SSA. Also, some beneficiaries noted that the $500 monthly earnings threshold used in the formula to determine if a person with a disability other than blindness is working at a gainful activity level (and therefore no longer eligible for benefits) is set too low.

When examining respondents’ comments indirectly related to our questions, we found that about one-third indicated frustration or dissatisfaction with some aspect of SSA or the DI program. For example, some respondents told us they felt that the program was humiliating and lost sight of people’s needs. Moreover, some respondents indicated that SSA suddenly informed them that they needed to repay cash benefits mistakenly paid to them in the past.

SSA has funded (in conjunction with the Department of Education’s Rehabilitation Service Agency) a research project that developed models for training private sector disability case managers about Social Security DI provisions and work incentives. Moreover, SSA expects that private vocational rehabilitation providers, participating under its experimental Alternate Provider Program and other proposed initiatives, will provide beneficiaries information and encourage them to work.

Longer Term Work Decisions Were Also Affected by Health Concerns

Not surprisingly, personal health appears to be an overriding issue as beneficiaries consider their future status in the DI program and at the worksite. Among the 44 respondents without employer-based health insurance coverage, 29 plan to stay on the DI rolls into the foreseeable future or are unsure of their future plans. In contrast, 15 of 24 respondents with such coverage plan to exit the rolls. Moreover, when asked if anything would make it harder to work, about one-half of the 46 respondents who responded affirmatively said that poorer health would inhibit employment. Similarly, some said that improved health would facilitate work. Again, we found little difference in future work and program plans between people with physical and psychiatric impairments.

Work Incentives Illustrate Difficult Trade-Offs in Disability Reform

As noted earlier, some work incentives were perceived to be more helpful than others. However, changes to work incentives may help some individual beneficiaries or groups of beneficiaries more than others. Data from Virginia Commonwealth University’s Employment Support Institute illustrate this point. For example, figure 1 shows that under current law, a DI beneficiary’s net income may drop at two points, even as gross earnings increase. The first “income cliff” occurs when a person loses all of his or her cash benefits because countable earnings are above $500 a month and the trial work and grace periods have ended. A second income cliff may occur if Medicare is purchased when premium-free Medicare benefits are exhausted.

Allowing people to keep more of their earnings would make the program more generous and could cause people who are currently not in the program to enter it. Such an effect could reduce overall work effort because those individuals not in the program could reduce their work effort to become eligible for benefits. Moreover, improving the work incentives could also keep some in the program who might otherwise have left. Allowing people to keep more of their earnings would also mean that they would not leave the program, as they once did, for a given level of earnings. Such a decrease in this exit rate could reduce overall work effort because people on the disability rolls tend to work less than people off the rolls. The extent to which increased entry occurs and decreased exit occurs will affect how expensive these changes could be in terms of program costs.

The costs of proposed reforms are difficult to estimate with certainty because of the lack of information on entry and exit effects. Moreover, determining the effectiveness of any of these proposed policies in increasing work effort and reducing caseloads would require that major gaps in existing research be filled.

Mr. Chairman, this concludes my formal remarks. I will be happy to answer any questions you or other Members of the Subcommittee may have.

Related GAO Products

Social Security Disability Insurance: Multiple Factors Affect Beneficiaries’ Ability to Return to Work (GAO/HEHS-98-39, Jan. 12, 1998).

Social Security Disability: Improving Return-to-Work Outcomes Important, but Trade-offs and Challenges Exist (GAO/T-HEHS-97-186, July 23, 1997).

Social Security: Disability Programs Lag in Promoting Return to Work (GAO/HEHS-97-46, Mar. 17, 1997).

People With Disabilities: Federal Programs Could Work Together More Efficiently to Promote Employment (GAO/HEHS-96-126, Sept. 3, 1996).

SSA Disability: Return-to-Work Strategies From Other Systems May Improve Federal Programs (GAO/HEHS-96-133, July 11, 1996).

Social Security: Disability Programs Lag in Promoting Return to Work (GAO/T-HEHS-96-147, June 5, 1996).

SSA Disability: Program Redesign Necessary to Encourage Return to Work (GAO/HEHS-96-62, Apr. 24, 1996).

PASS Program: SSA Work Incentive for Disabled Beneficiaries Poorly Managed (GAO/HEHS-96-51, Feb. 28, 1996).

Social Security Disability: Management Action and Program Redesign Needed to Address Long-Standing Problems (GAO/T-HEHS-95-233, Aug. 3, 1995).

Supplemental Security Income: Growth and Changes in Recipient Population Call for Reexamining Program (GAO/HEHS-95-137, July 7, 1995).

Disability Insurance: Broader Management Focus Needed to Better Control Caseload (GAO/T-HEHS-95-164, May 23, 1995).

Social Security: Federal Disability Programs Face Major Issues (GAO/T-HEHS-95-97, Mar. 2, 1995).

Social Security: Disability Rolls Keep Growing, While Explanations Remain Elusive (GAO/HEHS-94-34, Feb. 8, 1994).

Vocational Rehabilitation: Evidence for Federal Program’s Effectiveness Is Mixed (GAO/PEMD-93-19, Aug. 27, 1993).

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