Social Security Disability Insurance (SSDI) Reform: An Overview of Proposals to Manage the Growth in

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.