What is Social Security Disability Insurance?
Social Security Disability Insurance (DI) pays monthly benefits to workers who are no longer able to work due to a significant illness or impairment that is expected to last at least a year or to result in death within a year. It is part of the Social Security program that also pays retirement benefits to the vast majority of older Americans. Benefits are based on the disabled worker’s past earnings and are paid to the disabled worker and to his or her dependent family members. To be eligible, a disabled worker must have worked in jobs covered by Social Security. In January 2014, 8.9 million disabled workers received benefits.
How Much Is the Disability Benefit?
The disability benefit is linked through a formula to a worker’s earnings before he or she became disabled. The following figures show how the disability insurance benefits compare to prior earnings for a worker who became eligible for benefits in 2013 at age 55.
|Earnings Before Disability, in 2012 (Lifetime Average*)||Annual DI Benefit, in 2013||Percent of Earnings Replaced by Benefit|
($110,100 in 2012)
*Average indexed earnings
The average benefit paid to disabled workers in January 2014 was $1,146 a month or about $13,752 a year.
Who Pays for Disability Insurance Benefits?
Workers and employers pay for the DI program with part of their Social Security taxes. Workers and employers each pay a Social Security tax that is 6.2 percent of workers’ earnings up to a cap of $117,000 in 2014. The cap is adjusted each year to keep pace with average wages. Of the 6.2 percent, 5.3 percent goes to pay for Social Security retirement and survivor benefits and 0.9 percent pays for disability insurance. The combined tax paid by workers and employers for disability insurance is 1.8 percent of wages, while the combined tax for retirement and survivor benefits is 10.6 percent, for a total of 12.4 percent.
How much does the DI program cost?
In 2013, the disability insurance trust fund received $111.2 billion, mainly from the 0.9 percent tax on wages that workers and employers both pay. Total payments from the DI trust fund were $143.4 billion, mainly for benefits to disabled workers and their families, resulting in an annual deficit of $32.2 billion in 2013. The cumulative assets in the disability insurance trust fund totaled $90.4 billion at the end of 2013. Administrative expenses were 1.9 percent of outgo from the DI fund, and the remaining portion paid for benefits.
Who is eligible for DI benefits?
The Social Security test of disability is very strict. To be eligible for disability benefits, the Social Security law says that the applicant must be “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or is expected to last for a continuous period of at least 12 months.” Furthermore, the impairment or combination of impairments must be of such severity that the applicant is not only unable to do his or her previous work but cannot, considering his or her age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy (Social Security Act, section 223(d)).
A person is considered to be involved in substantial gainful activity if he or she earns more than a certain amount. If a non-blind individual earns more than $1,070 a month in 2014, he or she would not be eligible for disabled worker benefits. The amount is adjusted each year to keep up with average wages. (In some cases earnings can be reduced by the costs associated with work, such as paying for a wheelchair or services of an attendant. If deductible work expenses bring net earnings below $1,070 a month, the individual can be eligible for benefits.) The substantial gainful activity level for blind individuals in 2014 is $1,800 a month.
State agencies, operating under federal guidelines, make the medical and vocational determinations for the Social Security Administration about whether applicants meet the test of disability in the law. Medical records, work history, and the applicant’s age and education are considered in making the determination.
There is a five-month waiting period after the onset of disability before payments begin. If someone suffered a disabling injury in January and met Social Security’s disability definition, he or she would become eligible for the first disability payment for July.
What are the most common disabilities for DI recipients?
Many beneficiaries have multiple conditions. Of the nearly 9 million individuals receiving disabled worker benefits at the end of 2012, 32 percent had mental impairments as the main disabling condition, or primary diagnosis. They include 4 percent with intellectual disability and 28 percent with other mental disorders. Musculoskeletal conditions – such as arthritis, back injuries and other disorders of the skeleton and connective tissues – were the main condition for 30 percent of the disabled workers. (Musculoskeletal conditions were more common among beneficiaries over the age of 50.) About 8 percent had heart disease or other conditions of the circulatory system as their primary diagnosis. Another 9 percent had impairments of the nervous system and sense organs. The remaining 21 percent include those with injuries, cancers, infectious diseases, metabolic and endocrine diseases, such as diabetes, diseases of the respiratory system and diseases of other body systems. Moreover, many beneficiaries have life-threatening conditions: about 1 in 5 men and nearly 1 in 6 women who enter the program die within five years.
Attributes of Disabled-Worker Beneficiaries
Disabled-worker beneficiaries are at risk of being poor or near poor. About 28 percent of disabled workers, compared to 18 percent of all working-age adults, have incomes below 125 percent of the poverty threshold. Moreover, about 80 percent of DI beneficiaries rely on Social Security for more than half their income, and nearly a third (31 percent) of disabled worker beneficiaries rely on these benefits for all of their total income.
SSDI recipients are also more likely to be older, with the average age of beneficiaries at 53 in 2012. Within this group, seven out of ten (71 percent) are over 50 years old while about three in ten (31 percent) are over 60 years old.
When comparing with other adults, disabled workers are more likely to have a lower level of education: more than half have only a high school diploma or less, and more than 15 percent did not finish high school. They are also more likely to be African American: 21 percent of disabled worker beneficiaries, compared to 13 percent of the general public, are African American.
What Is Supplemental Security Income?
Supplemental Security Income (SSI) is a federal program that pays monthly benefits to low-income aged, blind and disabled individuals. The Social Security Administration runs the program, which is financed from general tax revenues, not from Social Security taxes. The SSI test of disability for adult applicants is the same as the test in the Social Security disability insurance program. Only people who have low incomes and limited financial assets are eligible for SSI. The federal SSI payment in 2014 for an individual with no other countable income is $721 a month ($1,082 for married couples if both are eligible). Payments are reduced as other income rises, and some states supplement the federal payment. In December 2013, 6.8 million low-income adults received SSI. These beneficiaries include 4.8 million adults under age 65 who were eligible based on disability or blindness and 2.0 million adults aged 65 and older. Women comprise the majority of adults receiving SSI. In addition, 1.3 million children under age 18 receive SSI based on disability or blindness.
Health Care Coverage for Disability Beneficiaries
Individuals who are drawing Social Security disability insurance (DI) become eligible for Medicare after receiving DI for two years. Low-income individuals who receive SSI are generally eligible for Medicaid immediately. Health coverage is critically important for those receiving disability benefits, because individual insurance policies are likely to be unaffordable or unavailable. Many people with chronic health conditions or disabilities are at risk of very high health care costs. They often cannot gain coverage in the private insurance market, and even when they do have private coverage, it often does not cover the range of services and long-term supports that they need. Current gaps in health care coverage for people with disabilities limit their labor market options in several ways.
Is DI out of sync with the Americans with Disabilities Act?
The Social Security Advisory Board, which was created by Congress to advise the President, the Congress, and the Commissioner of Social Security, posed the question of whether the DI program and its test of disability is out of “sync” with the Americans with Disabilities Act (ADA). In April 2004, NASI drew on findings of its Disability Policy Panel report, Balancing Security and Opportunity, to testify before the Board as follows:
“The need for a disability wage-replacement program does not go away because we have the Americans with Disabilities Act (ADA). Nor is the need for such a program eliminated by advances in medicine, changes in the demands of jobs, new assistive technology, or other environmental accommodations. These developments may increase employment opportunities for some categories of individuals with disabilities. For example, the ADA expands opportunity for people who have highly valued skills whose main impediments to work had been based on discrimination, architectural barriers, or other impediments that the ADA alleviates. But other individuals may face increasing impediments to work as the work environment and demands of work change. For example, in an increasingly competitive world of work, emphasis on versatility and speed may impede employment prospects for people with mental impairments. Because the phenomenon of work disability will remain with us in a competitive economy, wage replacement programs remain essential.”
Is the Social Security Definition of Disability Out of Date?
The Social Security Advisory Board has asked whether the Social Security definition of disability should be changed in some fundamental way. NASI’s Disability Policy Panel studied this question at length and reached the following conclusions:
Programs for people with disabilities should use definitions of disability as eligibility criteria that match the purpose of the program. A single, one-size-fits-all definition would not suit the varied needs of the highly diverse population of people with disabilities, nor would it match the particular purposes of different programs.
If the purpose of the program is to establish civil rights protections, a broad definition of disability, such as in the ADA is used: “Disability means … a physical or mental impairment that substantially limits one or more major life activities, a record of such an impairment, or being regarded as having such an impairment.”
If the purpose is to define eligibility for vocational rehabilitation, then the legal definition of eligibility is based on need for and likelihood of benefiting from such services.
Programs that provide personal assistance or long-term care services generally define eligibility in terms of the need for those particular services, such as need for assistance with activities of daily living.
Earnings-replacement insurance programs that are designed to replace income from employment all use a definition of disability based on loss of ability to work. This is true in private disability insurance, as well as in public programs. The wage-replacement benefits of disability insurance are not designed to pay for the added expenses associated with disability – such as personal assistance or vocational rehabilitation. Although these services might be needed, wage replacement benefits are designed to help pay everyday living expenses – such as food, housing, and utilities – when wages are lost.
The Social Security test of work disability is very strict. A less strict test of inability to work would benefit people with partial disabilities and it would cost more.