Enrollment for the Social Security Disability Insurance Program reached a record high of 8.85 million into 2014, an increase of 1.6 million since the start of the Great Recession in 2007. This sudden surge is pushing the financially impoverished system towards the brink of insolvency. The penurious conditions intensify as the generation of “baby boomers” ages and the stampede for benefits increase along with laid-off workers. As the CBO report states, the increase in expenditure and the backlog of applicants is enough to cause the funds to dry up which might lead to a complete depletion of funds by 2016; two years earlier than predicted. Can this be attributed to the fundamental flaws in the management of the SSDI program? A majority of economists say yes.
The argument put forward by economists is that the US disability programs act as more of a long term unemployment program rather than being a last resort for those who are unable to work due to their health related impairments.
Why is there a shortfall in the Disability Trust Fund?
Social security is a pay-as-you–go system; which means that benefits are immediately paid from the payments collected. Disability Insurance is funded by the contribution of the workers through a dedicated share of payroll tax contributions along with the contributions of employers making an equal contribution towards it. The system received a jolt during the recession in 2007 when wages became stagnant and lay-offs became rampant. The post-recession period saw a surge in applications. The issue with this was that most of the applications were marginal cases who could have continued to work with proper intervention. The administrative flaws led to a Catch22 situation- pushing the program to a verge of insolvency.
As the number of applications skyrockets, policy makers brainstorm to find ways to improve the system, they are faced with two precarious issues – (a) reducing the time limit for legitimate applicants in getting the benefits and (b) finding legitimate applicants. While Congress is trying to plug in the loopholes targeting overpayments and identifying those people who no longer qualify for disability benefits, it can be an ordeal for those legitimate applicants as the application process becomes more complex. Time can only tell whether the officials can shed their presumptions and identify legitimate applicants and help them get their benefits without much delay.
Economists say a transfer of funds from Old Age and Survivors Insurance trust fund to the Disability Insurance trust fund can provide the necessary Band Aid or alternatively, a small increase in payroll tax rate could pump in some oxygen to the cash strapped program; although this could be a bitter pill to swallow.