Social Security Disability Payments on the Rise

From Robert Powel at Yahoo Finance

On the contrary, Landis noted that disability claims are up, as are SSI public assistance claims. And to some, including John Laitner, the director of the University of Michigan Retirement Research Center, that spells trouble.

The Old Age Survivors Insurance (OASI) fund, from which retirement benefits are paid, continues to grow modestly, Laitner said. The OASI fund is expected to grow from $2.4 trillion in 2010 to an estimated $2.5 trillion in 2011. (See page 3 of Facts & Figures.) But the Disability Insurance (DI) trust fund is shrinking, and has reached a very low level. The DI fund is expected to fall from $180 billion in 2010 to an estimated $154 billion in 2011.

What's more, disability awards have grown faster since 1970 than those for retirees, Laitner said. The annual number of awards to disabled retired workers rose from 1.3 million in 1970 to 2.6 million in 2010, while for disabled workers it increased from 350,000 in 1970 to 1 million in 2010. And if that wasn't bad enough, the average age of retired beneficiaries has risen slightly since 1960, but the average age of disabled beneficiaries has fallen.

According to Facts & Figures: "The average age of disabled-worker beneficiaries in current-payment status has declined substantially since 1960, when DI benefits first became available to persons younger than age 50. In that year, the average age of a disabled worker was 57.2 years. The rapid drop in average age in the following years reflects a growing number of awards to workers under 50. By 1995, the average age had fallen to a low of 49.8, and by 2010, it had risen to 52.8. By contrast, the average age of retired workers has changed little over time, rising from 72.4 in 1960 to 73.7 in 2010." (See page 17.)

Said Laitner: "In my opinion, long-run concerns about the financial solvency of both OASI and DI are warranted, but between the two, DI seems to raise the most immediate alarm."

I only have anecdotal evidence, and that can be dangerous, but I cannot tell you how many fully able-bodied people come to our company and say "I have a lifetime full disability payment but I am fully able to do any work.  I can't show any income because I would lose my disability... can you pay me under the table somehow? [of course we cannot]."  My strong suspicion from observing the disability process from the outside is that there is a ton of fraud.

I have met people whose lifetime dream and goal is to get a disability designation.  I once had a worker who was applying for a full disability.  Asked by someone in the process about my assessment of her ability, I submitted some material about her job requirements and the types of things she seemed able to do.  She actually hired a lawyer who threatened to sue me if I in any way interfered with the process of her getting her disability designation.  It may not seem like a fortune to you or I, but I have met a number of folks who treat a lifetime disability designation as equivalent to hitting the lottery.

Of course, reform here will be nearly impossible.  You only have to look at some of the public employees groups that have lucrative disability programs where union-vetted doctors routinely handout disability designations to nearly every retiree.  Any attempt at reform will merely be met with heart-rending stories in the media about folks with true disabilities needing help, ignoring the fact that any effort to cut down on fraud is actually to help these folks by insuring the financial solvency of the fund that pays them.


  1. Chris K.:

    I know a social security administrative judge. From my understanding the default position is to accept a claim of disability. This particular judge works very hard to verify claims but others in her office seem to rubber stamp all applicants. As long as its easier for a government employee to award a payment this kind of fraud will continue.

  2. agesilaus:

    I have a workman comp back injury and have never tried to shrirk work with my employer becuase of it. Indeed I have had reprimands for trying to adapt my work environment to compensate for the injury. I just look at the workman comp as a way to pay for the medical costs associated with the back problem.

    However I was taken aback when other employees urged me to apply for full SS disability benefits, six months after I retire. Apparently you have to out of work for 6 months to qualify. I was advised to apply, and that I would be turned down most likely. However i could then get a government paid attorney to represent me at an appeal which 90% of the time is successful. This it seems is the common path taken by people.

  3. Ted Rado:

    Every one of us could tell stories of abuses of the various public assistance programs that we have personall observed. The question is: what can we do about it? Nobody wants to see suffering, hence anyone who argues against these programs is accused of being an unfeeling monster or worse.

    Many years ago, relatives, friends, and religious organizations took in or helped the needy. Since they were intimately familiar with the particular circumstances, it was difficult for a lazy cousin to hoodwink anybody.

    When I was a boy, two of my friends had live-in grandparents. They shared in housework, chores, raising the kids, etc. and shared their income with the parents. It was advantageous to all.

    I have often wondered if the old arrangement wasn't an incentive for good family relations. If you didn't get along with your kids, you had no place to go in your old age.

  4. Don Lloyd:

    The premises about funding in this post are seriously mistaken. The OASI and the DI together apparently make up the Social Security Trust Fund, which is incapable of funding anything, consisting as it does solely of IOU obligations that SS can lay on the US Treasury. Obligations that are mandated (and that exceed current payroll tax receipts) to be paid to recipients will presumably be borrowed from the public, just as would happen in the same amounts if there were no fund at all and minor tweeks to the law were made.

    The SSTF balance of IOUs (non-tradable special US debt securities) come into existence when Congress effectively borrows (and spends) any current payroll tax surplus. This means that the SSTF contains no assets capable of being tapped, since the two sides of the IOUs are both parts of the Federal government.

    Even if the SSTF accumulated actual money, or gold, or any other financial asset, the overall net effect would be inferior to just printing new money at the time of future payments of shortfalls(not a good idea). The same would be true of almost anything the SSTF could accumulate, except for something like canned cat food which could be distributed directly to make up a shortfall without producing price inflation.

    If Congress didn't borrow and spend the payroll
    tax surplus (if any), then the overall effect is the same as burning the surplus, and inflating in the future. So the question is whether the Congressional spending will produce a larger future supply of goods and services than just leaving the surplus in the hands of the workers.

    Regards, Don

  5. Cloudesley Shovell:

    Another driver is that in many cases disability payments are not considered income but rather compensation for injury and are thus not taxed.

  6. Mark:

    Children with disabilities get SSA too. And if you think it is just kids in wheelchairs, kids diagnosed with social disorders get SSA too.

    Every kid with ADD or ADHD gets a stipend for several hundred a month. And we wonder why so many kids are diagnosed with ADD.

  7. blokeinfrance:

    Well at least there's a fund, though Don Lloyd may correct me. In Europe there's no fund, it's just paid as a transfer from current taxation. The UK has 2 million (out of a workforce of about 15m) on disability benefit, and France is beginning to show similar rates.

  8. astonerii:

    It is almost like you think these SSDI groups are of an inferior culture or something. It is just another lifestyle choice. Similar to the gay lifestyle, just a choice to live differently than the other people. They are just trying to maximize their liberties and freedoms. Someone raised with strong moral values in a society that valued those moral values would never fall into that culture. While government cannot legislate moral behavior, what can be done is to make immoral behavior so costly as to not be a valid choice but for the most die hard sociopaths.

  9. Vilmos:

    This problem also exists in other countries.

    Here is a blood-boiling example from the UK:

    ------ Excerpt starts -----

    > Last week I visited (as a doctor) a family in a council
    > estate. The mother was concerned about her 12 year old
    > son. She was very pleased that her older son was now on
    > incapacity and would therefore do well for himself in
    > terms of money.

    ------ Excerpt ends -----

    I'm not surprised that somebody who came from a poor country (India in this case) can spot this problem so well.


  10. Jonathan Barnes:

    This is must see video for all of us to see, as Social Security is definitely a hot topic here:

  11. chuck martel:

    My former neighbor was a graduate of a Missouri penal institution where instruction in maximizing government benefits is the main course of study. A burly, athletic, intelligent fellow, he was on SSDI and traveled everywhere by bicycle.

  12. Dr. T:

    @Mark: "... Every kid with ADD or ADHD gets a stipend for several hundred a month. And we wonder why so many kids are diagnosed with ADD."

    The parents gain almost nothing from the false diagnoses of ADD and ADHD. (Over 90% of those diagnoses are incorrect.) Most of the SSA money goes to the drug companies and to the physicians, psychologists, and behavioral therapists who treat the kids. They are the primary financial winners. The schools "win" by drugging away undesirable behaviors (such as seven-year-old kids who cannot sit still for three hour). Some parents think they "win" because their ADD- or ADHD-labeled child gets special considerations, but they don't realize that the label and the drugs cause enough harm to vastly outweigh the special considerations.

  13. Bill:

    As a lawyer who has many downscale clients, I see this very frequently. From my perspective, Social Security Disability fraud is rampant. There is a certain subset of the population who is content to "earn" maybe $2000 per month by stealing it from others. The government is merely a conduit for their theft by fraud. Of course, the government is a willing accomplice here as I cannot find any other explanation as to why such seemingly healthy and able people are on disability.

  14. tomw:

    "There is a certain subset of the population who is content to “earn” maybe $2000 per month by stealing it from others."

    Maybe thinking of it this way will help: The annual cost to incarcerate a prisoner in most prisons runs at the low end in middle $30,000. Of course, California and other 'special' states spend even more on a per-capita basis, not to mention the well-funded{NOT!!!} pension and benefits the guards will receive ...
    To pay the useless louts that $2k is a net savings, no? Similarly, the penny ante bugler or stick-up man who nets his $200 in cash, and after getting caught, learns to be a REAL criminal, on your dime, will cost even more to house after he's learned his trade so well.
    We can't win. But I have a thought that runs along the lines of: "Don't work? Don't eat."

    There's an epidemic of ADHD and ADD ... DIAGNOSIS. I find it so hard to believe that there are now so many afflicted compared to historical incidence rates. The diagnosis rate has just skyrocketed.

  15. ElamBend:

    Recently I asked a farmer friend of mine about his home town, a very small town in rural northern Missouri, which I had been familiar with 20 years ago. He told me it had gone really downhill. Now most small towns are shrinking, getting old and losing whatever light manufacturing they may have had; but what he told me was a revelation: He said the real turning point came when people on SSDI started moving to town for the extremely cheap living. He said often these same folks were addicted to drugs (sometimes that WAS the disability) and many problems have been occurring. That's how you leverage that low income, you cut expenses. Talking to him, I got the impression that it started with people who had some tie to the community, but they've spread the word to their no-account friends who have joined them up there in the rural ghetto.

    Beyond just SSDI, a lot of rural counties would cease to function economically without the federal government. Take away SSI and SSDI and lose two major sources of income. Takeaway medicaid and medicare and you lose another major source of income. People would move. The Farmers take subsidies, but farming would survive without it, but the people with government jobs that administer those subsidies, well they'd have to move too. That's the future of rural America. Larger and larger farms, hunting preserves and a few low population towns (think 'stations' like in Australia).

  16. H Williams:

    When a disability claim is denied, a claimant has a right to appeal and have a hearing before an administrative law judge.

    I imagine all citizens would be shocked to find out that while virtually all claimants are represented by a lawyer, the government IS NOT represented at all! No lawyer is there to cross examine the claimant.

  17. Bob Smith:

    As I recall, in a number of states police and fire pensions are exempted in whole or part from state income tax if the employee retired disabled. Putting aside the economically absurd notion that somebody who receives money from the government pays taxes, it should not be surprising that an amazingly high number of officers in those states retire with a "disability".

  18. Mark:

    I found out an interesting fact.

    If you are on disability you get to retire at 62 with full benefits rather than reduced. You also get onto medicaid 2 years after getting disability whether you are age eligible or not.

    Also in the 70's this problem of "looseness of the program" was known and it was tightened up to the point where claims went down in the early 80's recession, when the claims usually go up in recession, but for some reason in the early 80's the rules were loosened and by 1984 the claims were skyrocketing. To fix this money was stolen from the SSA retirement fund, and that will probably happen to fix it this time.

    They need to make the gravy a bit less thick for the disabled, and get stricter about who is considered disabled, then the problem will go away.

  19. sch:

    No question there is fraud and abuse, and as noted it is worst among government employees who
    face a more relaxed standard for disability. The real problem is the lack of jobs, a huge
    number of the 'disabled' would never have stopped working if they had had a decent job to
    start with and some chance of upward mobility. Who wants to have a career nursing home attendant
    job cleaning up perineal messes all day long and trying to heave 300# geriatrics from one
    position to another, or standing all day flagging cars past at a road construction site.
    A 4-5% employment rate would do wonders for the numbers applying for disability. Problem is,
    once on the rolls, it is practically impossible to get them off after a year or two. You
    learn to adjust to the income level, scrounge occasional cash from pickup work and get by,
    'hustlin' as some put it. A vibrant economy could accomodate the chronic back pain people,
    the mildly psychiatrically disabled, but the present outlook is pretty grim for all but the
    most talented and abled, hence the rise in 'disability'. Of course it doesn't help the
    the ADA has vastly expanded the definition of disability since its passage, and seeking out
    violations of the ADA is a growth industry in the legal profession.

  20. sch:

    One other POV: google for the blog by Winston Smith, an English social worker type
    who gives considerable insight into the types rampaging through English cities recently.

  21. Benjamin Cole:

    With so many jobs out there that do not require a strong back, I favor wiping out disability entirely.

  22. AWM:

    In Holland the government took this to a new level in the 80's and 90's when to accomodate the large scale layoffs of manufacturing companies as these jobs moved east, they colluded with companies to declare many of their older (50+) workers as 'disabled'. It looked better for the unemployment figures and, of course, companies were happy to offload older workers they felt less productive etc.

    Now, as the money is drying up, the government is slashing diability benefits for newer claimants, leading to genuinely disabled people suffering while many hundreds of thousands under the old scheme are still claiming large (it's not subsistance money here as in the US) monthly payments when they are perfectly able to work. And to answer the point raised about lack of good jobs, well, there's many immigrants from Eastern Europe who have moved here to do the jobs that the 'disabled' indigenous population could otherwise do and who seem more than happy to do these jobs, good or bad.

    Most feel we need a safety net but what we have been doing for the last twenty or thirty years is to effectively destroy our society, and you only have to look at what has been going on in the UK lately to see the evidence for it.

  23. the other coyote:

    I just received a deposition summary from outside counsel representing my company on a workers comp claim. This fellow showed up for his deposition under the influence of oxycontin (his primary care physician ran a pill mill before fleeing the country when the feds caught up), so his testimony may be suspect, but he admitted that he began receiving SS disability within 2 months of his supposed accident. The funny thing is he was back on the job four weeks after his supposed accident. So he was collecting disability and working at the same time.

    I could not agree with Benjamin Cole more. Get rid of SS disability altogether. If we see Hoovervilles popping up on the White House lawn, we can start the system back up again, just be more careful about who's allowed benefits and how much they get.

    Readers of this post really should visit the SS administration's outlay page to see where their money goes.

  24. JoshK:

    I grew up in a pretty rough neighborhood and one of the most lucrative home businesses was the disability prep teacher. These were people who would coach the applicant through the entire process for a few hundred $ once the checks started coming in.

    Also, if you subscribe:

  25. Benjamin Cole:

    Speaking of, here in LA County a sheriff can say he no longer has the strength in his trigger finger to pull the trigger, and he gets a disability pension.