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Issues 2 & 3




Social Security's Disability Insurance Program
a history

By David Pfeiffer

READ Dead -- and Back Again
The Social Security Disability Insurance program -- SSDI -- is the major income replacement program in the public sector for people with disabilities. It is a federally funded program administered by the states.

Remembering that there have always been levels of "deserving disabled" in the U.S., it should be no surprise to learn that SSDI is based on the idea that people should receive only that which they earned through work or investment. Workers pay into an insurance fund and if they become disabled, they can collect a benefit. The government merely collects and disburses the money -- much like a private insurance company would.

This notion helped enact SSDI into law. It also prevented later attempts to radically change the program.

Like other Social Security Administration programs, SSDI received wide popular support once enacted in 1956. The debates in the 1950s and 1960s concerned broadening its scope, not its existence. In the 1970s questions about the financial soundness of all the SSA programs were raised, but most people never questioned the need for such programs. In the 1980s the Reagan Administration did not try to repeal the legislation, but stepped up "eligibility reviews" in order to reduce the amount spent.

A review of the early history and growth of SSDI can help readers understand this program and why, even though the program itself is controversial, its existence has not been an issue

Early history of SSDI

SSDI goes back to the mid-1930s. The Social Security Act of 1935 established a system of retirement benefits for older persons and their survivors. Despite discussion about the need for disability insurance, it was not included in the Act. There was active opposition to any disability insurance program.

In the 1940s there was more discussion; finally, in 1950, Congress passed legislation which established a program of restrictive grants to the states to assist low-income disabled workers.

In 1955 the Social Security Administration proposed an income replacement program for disabled workers. President Dwight Eisenhower opposed it, but Senate Majority Leader Lyndon Johnson favored it. Prior to 1955, Senator Walter George of Georgia, a longtime opponent of such legislation, had chaired the Senate Finance Committee, and since such legislation had to go through George's committee, it had always died there.

Sen. George's successor as Chair of the Finance Committee in 1955, Sen. Harry Byrd of Virginia, also opposed the legislation and it was once again defeated at the committee level.

However, Johnson, as majority leader, was able to bring the legislation to the Senate floor for a vote in spite of its defeat in committee. Surprisingly, Sen. George came out in favor of the legislation, working hard to pass it (he was in a difficult re-election campaign and it was thought he changed his position to get votes). The combined efforts of Johnson and George in 1955 were successful, but just barely -- it passed by a 47-45 vote.

Many of the present provisions of the SSDI program came from compromises made to get the bill passed. One compromise incorporated into the legislation was that if a person engaged in any "substantially gainful activity" (defined as earning an amount less than the poverty level), then that person is not eligible for SSDI. It did not matter that the person was unemployed or if jobs were not available. Some exceptions were made for the person's age, education and work experience.

Another compromise that made it into law: one's disability must be either terminal or expected to last for at least 12 months in order to qualify one for SSDI.

SSDI requires a five-month waiting period after eligibility is established -- except for legally blind persons, who receive benefits very quickly. The blind community, under the leadership of the National Federation of the Blind, had enough political muscle to have that exception made. Benefits are paid until age of 62, when one moves over to the "OASI" part of Social Security -- Old Age and Survivors benefits, commonly referred to as retirement benefits.

The average monthly amount that persons receive from SSDI today is $759. Many SSDI recipients also receive SSI -- Supplemental Security Income -- the Social Security income program for low income people -- which averages $373 a month. The yearly average income for the 10 million people receiving these benefits today is $13,584, which is right at the poverty level for one person, and well below poverty level for a couple with children.

The application process is clear on its surface. An applicant goes into the local SSA office and files an application for benefits. If the applicant is eligible, in the sense of having worked in "covered" occupations (that is, companies that deducted Social Security taxes from the worker's paycheck) and having worked long enough (enough "quarters," as Social Security puts it), the application is forwarded to the state's Disability Determination Service (DDS).

The state DDS gathers the medical information from the applicant's physician and may send the person to a DDS-paid physician. At this point a determination is made as to whether the applicant is or is not "disabled." If found to be "disabled," the applicant's current employment status is examined. If the applicant is at the time engaged in "substantially gainful activity," the application is turned down. If the applicant is not working, or is earning less than the "substantially gainful activity" amount, then the severity of the disability is assessed: If the disability is not severe, then the application is turned down. If the disability is severe or terminal (and therefore it falls into one of SSA's categories or "listings"), and if it is expected to last at least twelve months, the application is approved. If it does not fall into one of SSA's eligible disability categories (AIDS did not for a while), but the disability is expected to last twelve months or more, then factors of age, education, and work history can be considered. There is a "grid" for different combinations of age, education, and work experience which determines the applicant's "residual functional capacity" to do various types of work. On the basis of the "grid," the application is approved or rejected.

If the application is rejected by the DDS, the applicant can ask for a reconsideration. If rejected again, the applicant can appeal to an SSA administrative law judge. A denial by the administrative law judge can be appealed to the SSA's Appeals Council. A denial at this level can be taken to a federal district court.

The procedure seems straightforward, but there are a number of factors which complicate it. First, the applicant has usually just gone through the trauma of becoming disabled. SSDI offers them a last chance for income before "going on welfare" -- SSI or other state programs -- and the prospect of one's application being denied and having to go on "welfare" is sometimes a worse trauma than the disability. DDS examiners are under pressure to keep the approval rate low, on the assumption that there are many persons who are not eligible who will apply to try to get benefits they don't deserve. And the outcome is usually based on technical and complex evidence. All these things make the process a highly charged and emotional one.

Growth and problems

During SSDI's first 20 years, both the number of people applying for benefits and the number approved for benefits grew dramatically. This growth was especially rapid during the 1970s. High unemployment rates made it even more difficult for disabled people to find a job, so "going on disability" interested more people. Improved benefits made the program attractive. And the increase in legal aid for low-income people made it easier to apply for benefits. And as more people were accepted into the program, more people learned of it. There were 725,000 SSDI applications in 1969; within five years they had nearly doubled. The number has declined since then, but remains over one million a year.

Costs also went up: from $2.5 billion in 1969 to $6.9 billion in 1974, to $17.3 billion in 1982, where it leveled off for a while. By 2000 it had grown to $91 billion.

During the last half of the 1970s, the U.S. economy underwent many strains. We had inflation, unemployment, and stagflation -- most of it at the same time. Even though the SSDI Trust Funds remained solvent, the other Social Security Trust Funds were threatened with bankruptcy. As a result many people called for "reform" of the Social Security system. In December 1982, the OASI program was allowed to borrow from SSDI, even though the longterm stability of SSDI was dependent upon the entire Social Security system -- for if the other Trust Funds were to borrow from SSDI, it too would soon go bankrupt.

Because of increasing national debt in the 1970s, there were calls for cutting the federal budget. But because of OASI's popular support, reformers had to look elsewhere in the Social Security program to make their cuts. Recognizing the rapid increase in costs of SSDI and the difficulty of defining "disability," budget cutters focused on that program: the strategy was to cut back the SSDI part of the social security tax, which would then offset the necessary increases for OASI.

A number of changes were put forward. State DDS offices were told to keep a record of specific individuals who might "recover" and thus no longer be eligible. The ongoing journals kept on certain individuals are known as "continuing disability investigations" -- CDIs. Before 1980 it was assumed that evidence of "recovery" would be difficult for the DDS examiner to obtain, but now it was suggested that the individual receiving the benefits have the burden of proof in these cases.

Since many of the people undergoing continuing disability investigations were not capable of managing their own affairs, and since many people -- disabled and not -- do not understand the bureaucratic process, a number of people would be removed through this process, which would have the effect of cutting the cost of the program.

At the beginning of the SSDI program, the Social Security, Administration, through the state DDS programs, was doing CDIs on 10 percent of its cases; by the 1970s, CDIs had dropped to less than four percent. At the start, SSA's review of up to 70 percent of state DDS decisions, had dropped to a five percent rate in 1972.

Some suggested that the drop in the review rate was the reason that the numbers of beneficiaries had increased. The recommendation was made that SSA return to its earlier review rates.

SSA administrative law judges reversed more denials in the 1970s, too -- their 42 percent reversal rate in 1970 had grown to 58 percent by 1980, even as state DDS agencies approved fewer for benefits. Administrative law judges were "soft," it was said, and were making mistakes in overturning DDS decisions. Tighter controls were needed, said the budget cutters.

A 1979 General Accounting Office study concluded that as many as 30 percent of those receiving SSDI benefits MIGHT not be eligible to receive them.

All of these concerns led to the Social Security Disability Amendments of 1980. This law said that SSA must review 15 percent of the DDS decisions in 1981, 35 percent in 1982 and 65 percent yearly thereafter. CDIs were to be done every three years, but the legislation was not completely clear as to who should be reviewed. And the administrative law judges' decisions were to be reviewed by SSA to discover the mistakes being made so that Congress could correct them by statute.

When Ronald Reagan took office in 1981, he acted quickly to reduce the costs of the SSDI program. Legislation submitted to Congress. would remove "age," "education" and "work experience" as factors to be considered. It would remove from the rolls anyone not "permanently disabled," and increase the waiting period to six months before benefits could be received -- except for persons who were blind, who did not have such a waiting period. The legislation would also require a that an individual have spent a longer time working to be eligible for SSDI.

The Reagan Administration said these SSDI reform measures (and others concerning the OASI program) would save some $50 billion by 1986. Half the savings would come from SSDI, even though its expenditures amounted to only 12 percent of the total SSDI-OASI programs.

Congress, including the Republican-controlled Senate, did not like Reagan's bill; it didn't even make it out of committee. But the Reagan Administration could act independently of Congress in some things: it could order the review process to be vastly speeded up, which it did, believing that up to 60 percent of those reviewed would be cut from the rolls. Revised SSA administrative regulations and guidelines shortened the time allowed for replying to CDI notification and speeded up other deadlines. They required people declared eligible many years earlier under one set of medical "listings" to be reviewed under new "listings." They placed the burden of proof on the applicant when the DDS physician disagreed with the applicant's physician, and pressured DDS examiners to process cases at a much faster rate. Some high-volume providers of medical examinations were doing as many as 35 exams a day.

As a result of all the Reagan Administration regulatory changes, a large number of people were dropped from the rolls. Many had not worked in number of years and had no other source of income.

A quarter to a third of those who were dropped had some form of mental impairment and could not understand what was happening; many ended up on the streets. Others went on "welfare," which simply switched the burden of cost from the federal government to state or local government. New York City estimated that it spent an additional $10 million in FY 1982 because of the dropping of disabled persons from SSDI. Massachusetts estimated that its welfare costs would increase $1 million each year if the terminations continued at the 1982 rate.

Questions arose. Many questioned how thorough the high-volume medical examiners could be. There were questions as well about the rejections of applicants coming through state DDS offices. Administrative law judges, though swamped with cases, were overturning around half of the decisions from DDS offices. A Congressionally mandated study of these administrative law judges' decisions could not find any glaring errors in them; rather, the study found numerous mistakes being made by the DDS examiners.

The disabled community did not remain quiet. Advocates lobbied effectively both to kill Reagan's bill and to enact new legislation requiring that any person already on SSDI be allowed to continue to receive benefit payments after an initial termination decision while the decision was being appealed and providing for a face-to-face hearing at the DDS level if benefits were terminated. Massachusetts Congressman later state Attorney General) Jim Shannon was at the forefront of these efforts.

In January, 1983, Reagan signed the new law, professing all the while that he had always been fully supportive of "truly deserving" disabled people.

Although the national debt disappeared in the Clinton administration, it has resurfaced during President George W. Bush's term in office. Since SSDI brings in more money than it pays out, every dollar not paid out is seen as a dollar reduction in the national debt (even though such thinking is not correct, because every dollar not paid out must remain in a trust fund for future use). Given the simple-minded way in which the politics of the budget is reported by the media, this is a good public relations reason to attempt to reduce the SSDI rolls, even if it is not realistic.

David Pfeiffer is Resident Scholar at the Center on Disability Studies at the University of Hawaii at Manoa, and editor of Disability Studies Quarterly (DSQ).

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