Disability Insurance Basics

By James Kwak

A while back I wrote a post critical of a Planet Money/This American Life episode on disability insurance. Among other things, I thought that the episode made too much of the fact that the number of people on federal disability insurance (SSDI or SSI) has gone up since the financial crisis.

The book I’m currently reading with my daughter at family reading time (she just finished a fictional book about a Polish immigrant girl in a mining community in the late nineteenth century) is Social Insurance: America’s Neglected Heritage and Contested Future, by Theodore Marmor, Jerry Mashaw, and John Pakutka. It’s a pretty good overview of the programs that are typically thought of (at least by the left and center-left) as social insurance in this country. Here’s what they say about recent trends in disability insurance (pp. 166–67):

“It has long been understood by those who study disability insurance that during times of economic distress, the incidence of claimed disability increases. Impairments that might have been overcome during times of economic growth and high rates of employment become the basis for claims of disability. . . . As a recession drags on and jobs are not plentiful, many no doubt make the choice to see if a musculoskeletal malady or a mood disorder qualifies them for disability insurance benefits.”

In the longer term—meaning before the financial crisis—disability rates have been creeping upward. The main reasons are: (1) an aging population; (2) the slow increase in the full retirement age for Social Security, which keeps people on SSDI (as opposed to OASI) longer; and (3) the increasing frequency of musculoskeletal and mood disorder claims (e.g., depression). These are all completely normal things, unless you want to go back to the bad old days when mental illnesses like depression were not considered on pair with physical illnesses. At the margin, there is certainly fraud in the system, but in fact it’s quite hard to get disability benefits, and the standards aren’t getting any more lenient.

Sometimes the real story isn’t all that mysterious.

11 responses to “Disability Insurance Basics

  1. George Peacock

    http://www.econtalk.org/archives/2012/04/autor_on_disabi.html I listened to this interview last year. Need to listen again.

  2. I don’t even bother with planet money anymore because it is too often misleading. Life is too short, and there are plenty of other podcasts, and blogs to follow which are less likely to mislead those that follow them just to support shallow opinions about markets.

  3. 60 Minutes aired a segment on disability fraud, and other might disagree with your conclusion that we are dealing with ‘completely normal things’:

    http://apps.npr.org/unfit-for-work/

    Please correct me if I’m wrong:
    DB are Fed payments.
    Unemployment benefits largely State funded.
    States have an incentive to move the the unemployed to DB, especially if their benefits have expired.
    And so do the the Feds because people on disability are no longer carried in the unemployment stats.
    Add an enabling health care industry,
    and attorneys – believe their fees to file claims on client’s behalf are reimbursed,
    and the AMA which is campaigning for obesity to be a declared a disability,
    and the system seems to be heading to failure.

  4. Bruce E. Woych

    Blaming the victim is a common practice when a contradiction demands self assessment or a systemic evaluation of a foundation or institution under stress / distress. It is a paradox that poverty and austerity can be scrutinized for corruption so desperately when vast amounts of wealth are left to a presumption of merit alone. Ultimately when the going gets tough, the tough do break down more frequently despite the motivational zeal of managerial interests. Ironically, for insurance, as contraction and monetary leverage increases the pressures upon path dependent profit growth, the incentives are inverted perversely against social responsibility in favor of internal accountability (and that essentially translates to the bottom line for all concerned and from every sector of the economic survival grid).

  5. Moses Herzog

    Wow, I guess it could be useful for sounding out words, but you’re setting a pretty high bar there for the Democrat party prodigy there aren’t you Mr. Kwak??? Remember, a common mistake Asian parents make is stuffing curriculum down their kids throats they don’t have a natural interest in. It often has the REVERSE affect parents go for in kindling interest.

    That being said….. may I make a humble suggestion for family reading time??? Janet M. Currie’s “The Invisible Safety Net”.

    I dare say it will make for much stronger attention span and even grasping of the material.

    And cue “You dirty R-A-C-I-S-T!!!” comments starting 1……2…..3…… NOW!!!

  6. Moses Herzog

    As a side note, I have an aunt who duped the government for literally decades she has a disability. She claimed disability due to spine problems. She basically had an agreement with her doctor to purchase never-ending pain meds and unnecessary surgeries with him in return for signing off on her disability claim. She only was called in to court once to “prove” (I don’t know the technical legalize for this process, anyone is welcome to educate me below) her disability, in which that Doctor, (we’ll call him “Dr. Thom”) would lie for her so she could pass the court grilling. Of course “Aunt B.” was a master actress only to be possibly rivaled by Meryl Streep in Oscar winning level thespian talents. And I guarantee the woman could turn on crying tears at will like most of us turn on a water faucet. She got her disability and is still collecting it to this day in her nursing home.

    I once saw the woman STAND STRAIGHT UP lifting a 30+ pound bag of groceries above her shoulders to clear a tall dumpster (in her late 40s after multiple years of cashing checks) when she was hungry to eat dinner once. Not so much as a grunt , groan, or grimace….. Along with other unbelievable Olympic feats of physicality which would stretch this comment thread out long enough to try people’s patience.

    That being said, I think she is in the minority of those who make claims.

  7. Moses Herzog, being disabled, have been taken before at least 5 Administrative Judges an once before an arbitrator. I would say you have found the needle in a hay stack with the aunt. Plus anyone who has back problem can tell you it’s the reliability of the person showing up, not the fact that a person my be able to do a feat once on a given day.

  8. We need look no further than the difference between a cyclical economy and a healthy economy when determining the state of the economy, or the state of the disability. Two wrongs still don’t make a right, and miracles still do happen, just not to you.

  9. Moses Herzog

    Some interesting data related to Medicare fraud. One in particular is fascinating, relating to an ophthalmologist’s medicare fees. I am making an educated guess that there will be many other doctors with eyebrow raising numbers as the data is sifted through by those persistent enough to do so. Keep in mind how many physicians b-i-t-c-h and moan about how low medicare payments are, especially when doctors are prescribing pills with many times the cost of other equally effective pills.

    It is interesting to note, as Republicans keep screaming from the rooftops that unions are “evil”, medical doctors have their own Union which they call American Medical Association. (AMA) The American Medical Association often spews out BOLDFACE LIES, which LAZY mainstream media regurgitate (repetitively on cue) to rationalize exorbitant fees charged by Doctors and Hospitals.

    Never you mind though, the amount of times you will hear the Paul Ryans, Chris Christies and Tom Coburns of the world criticizing the American Medical Association during an election campaign you’ll be able to count on one hand, minus the phalanges. But those union members at the factory making Twinkies don’t give money to Republican PACs, so “those basturds are the devil”.

    http://www.washingtonpost.com/business/economy/how-a-secretive-panel-uses-data-that-distorts-doctors-pay/2013/07/20/ee134e3a-eda8-11e2-9008-61e94a7ea20d_story.html

    http://www.usatoday.com/story/news/nation/2014/04/09/government-releases-medicare-physician-payment/7462923/

    http://www.washingtonpost.com/business/economy/data-uncover-nations-top-medicare-billers/2014/04/08/9101a77e-bf39-11e3-b574-f8748871856a_story.html

  10. I heard some people run red lights and break speed limits. The road system is rife with fraud. It’s time we abolish it and use trains. That’s about how good the NPR dilettantes’ argument is.

    There are reasons people want things and excuses they use to get them. Disability insurance ‘fraud’ is what the Ayn Rand types use to get real people to think they don’t ‘deserve’ their hard earned benefits (you only get social insurance if you WORK) as much as Mitt deserves his 15% capital gains rate.

  11. Simon- your dismissal of disability fraud is altogether too naive and not backed by data. It is categorically NOT hard to get disability insurance approval ; yes it takes time, and involves a number of forms and seeing doctors etc. But – as a praciticing physician myself- I don’t know a SINGLE practicing psychiatrist who will not attest to any patent they have claiming they are depressed who won’t fill out the necessary forms. I have asked a number of them why, and they all say who are they to judge ? so, in practice, and fact, anyone who wants to scam the system, simply has to schedule an appointment with a psychiatrist, claim they are depressed, and follow through with several visits. NB- very importantly, once they receive disability, they DONT have to get the psychiatrist to attest they continue to be disabled. As for the epidemic of back injuries, most orthopedists and generalists have zero interest in treating back pain patents without documented somatic /structural in juries on imaging, so they also are quite compliant with attesting to the “disability” and being able to dismiss the patient from their practice- again once labeled as “disabled” in the federal system, the recipients do not have to rectify their disability……how can this possibly be real ? when most people are no longer doing manual labor, these in juries should go down, not explode. It should surprise nobody that both these diagnosis don’t have standardized, replicable objective or tsp basis for their determination. Disability insurance is the most corrosive and abused component of our social welfare system and injects the most ernciouspernicious moral hazards we comfort in our societies efforts to help those who are truly needy. It has long since morphed into a back door long term unemployment insurance scam. It needs to be drastically reformed, and we would be mush better off with a straightforward expansion of unemployment benefits. It understandably injects a level of cynicism that jeopardizes support for useful programs. It is a cancer desperately in need of reform. Your op-ed is a tremendous and fatuous disservice.