Coyote Blog

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.