Social Security: Disability%20Conf--SSAdvBoard

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REFORMING A DISABILITY

BENEFITS/SUPPORT SYSTEM

Forum on the Definition of DisabilityForum on the Definition of Disability

Social Security Advisory Board Social Security Advisory Board

Dirksen Senate Office BuildingDirksen Senate Office Building

April 14, 2004April 14, 2004

C. Eugene SteuerleC. Eugene Steuerle

The Urban InstituteThe Urban Institute



Background: Continually Rising

Prevalence & Dependency Rates

An indicator that something is out of An indicator that something is out of

sortssorts• Either we are denying too many peopleEither we are denying too many people

todaytoday

• Or we will be including too manyOr we will be including too many people tomorrow people tomorrow




Prevalence & Dependency Rates

Social Security predictions of DI prevalenceSocial Security predictions of DI prevalence

unrelated to actual prevalence of disabilityunrelated to actual prevalence of disability




Prevalence & Dependency Rates Adult dependence rate on governmentAdult dependence rate on government

programs rising with aging programs rising with aging

• May approach ½ of entire populationMay approach ½ of entire population

mainly dependent upon governmentmainly dependent upon government

• Not necessarily progressive Not necessarily progressive

• Will lead to cutbacks simply because of Will lead to cutbacks simply because of

declining revenue supportdeclining revenue support



The Incentive Structure: Administrators,

ALJs, Plaintiffs’ Lawyers

Incentives generally in direction of greater Incentives generally in direction of greater

prevalence prevalence

A test: put yourself in the role of an ALJA test: put yourself in the role of an ALJ

The analogy to welfare reform (DavidThe analogy to welfare reform (David

Stapleton)Stapleton)

• Perhaps the crucial step:Perhaps the crucial step:

• Governors’ decisions to rate welfareGovernors’ decisions to rate welfare

departments by how many people theydepartments by how many people they

got off of welfare rather than onto itgot off of welfare rather than onto it



The Incentive Structure: Administrators,

ALJs, Plaintiffs’ Lawyers• SUGGESTIONSSUGGESTIONS

• Hold sessions for retired ALJs & othersHold sessions for retired ALJs & others

involved in administrative systeminvolved in administrative system

• Make examination of incentives for allMake examination of incentives for all

parties part of EI & other experiments parties part of EI & other experiments

• Consider revamping reward structure for Consider revamping reward structure for

all administrators, ALJs and lawyersall administrators, ALJs and lawyers



The Incentive Structure: Participants DI analogy to Ticket-to-Work and

EITC/welfare reform• Common Conclusions

• Wedge between working & not working

crucial• Small incentive changes not enough to move

many people over hurdle •

Untested Differences• Carrots and sticks used in EITC/welfarereform

• Cash system turned on its head: cash benefits

(EITC) mainly for workers



The Incentive Structure: Participants

• SUGGESTIONS:• Measure replacement rates relative to

potential, not just prior, employment• Consider experiments with larger

differentials (e.g., grant a small group

option of permanent, perhaps smaller, DI benefit regardless of work response)• Consider alternative benefit mixes



Reformulating the Public

Finance Question Researchers too much like politicians:

never wanting to identify “losers”

Good public finance research wouldoffer expenditure-neutral alternatives,

even when impractical politically

Otherwise always mixing positive andnormative analysis



Reformulating the Public

Finance Question• SUGGESTIONS:

• Require researchers to report results and

make policy recommendations first on anexpenditure-neutral basis

• Later they can suggest higher spending if

worthwhile on a marginal basis• All experiments should be based uponsome possibility of bringing to scale



Early Intervention• Lessons from the private sector: private

disability compensation programs• Early intervention important

“Manage cases against risk”

Psychology of “dropping out” The formation of habits & friendships

• All costs, including administrative,

calculated in overall benefit-cost analysis(in private insurance, insures expenses do

not exceed available premiums)



Early Intervention

• SUGGESTIONS:• Measure approaches & abilities of

counselors in EI programs Psychological factors are often more

important than economic

Count all administrative costs when performing cost/benefit analysis Count all (including non-SSA)

economic and psychological gains

Documents

Social Security: Disability%20Conf--SSAdvBoard