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Social Security Disability Insurance Reform Speech at the Heritage Foundation

November 9, 2015
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Contact: Caroline Rabbitt (202) 224-2353

 

Ambassador Miller, thank you for the kind introduction. It's a privilege to speak before this distinguished panel. Rachel Greszler & Romina Boccia your work at Heritage has been instrumental to the cause of reform. Both staff and legislators rely on your analyses and when Disability reform does eventually come, your great work will have advanced the cause significantly. Kim Hildred, your work on transitional benefits was a critical component to my own legislation, which I will discuss shortly.

We all know the challenges with Social Security Disability Insurance: it's grown far too large-well past the rate of demographics-there's a lack of program integrity, and those who should recover never leave the program.

But I want to highlight today two other specific concerns with Social Security Disability: first, the effect of Social Security Disability on communities-what might be called the Disability Tipping Point. And second, on ways to better help those who can recover return to work.

A dynamic of Social Security Disability that's sometimes underappreciated is how regional and concentrated the program has become. In Arkansas, we have the third highest-rate of Social Security Disability Insurance usage, behind only West Virginia and Alabama. About 7.5% of the working-age population in my state collects Disability benefits.

By contrast, the Dakotas, Nebraska, and Wyoming all have about 3% of their working age-population on Disability, less than half of Arkansas's rate. And within Arkansas the disparity is even more striking at the county level.

Arkansas, along with the other states in what's been called Greater Appalachia, has counties where close to 20% of the population is on Disability. That is an astonishing figure-one in five residents are on Disability in these places. That also means Disability is the largest source of income in those counties.

On the other hand, other counties in Arkansas, particularly the fastest growing ones, have rates of Disability well below the national average.

The evidence is pretty clear: there's an inverse relationship between the rate of Disability usage and population growth-which most economists would agree is a good proxy for economic vitality.

Sadly, our 20 counties with the highest rates of Social Security Disability suffered a population decline of more than 2% in the last four years alone, while the rest of the state grew by more than 2%.

By contrast, the 20 counties in Arkansas with the lowest rates of Social Security Disability usage boomed, with population growth of more than 4% over the same time. This correlation is too striking to ignore.

The same trend is true nationwide. Buchanan County, Virginia, with 22% of the population on Social Security Disability, had more than a 4% decline in population in four years. McDowell, West Virginia, with a 21% rate of Social Security Disability saw more than an 8% decline in population.

The fastest growing counties in the country-in North Dakota, Texas, and Northern Virginia-have less than 2% of their population on Disability, or about one-tenth the rate of the declining counties.

It's hard to say what came first or caused the other: population decline or increased Disability usage. Or maybe economic stagnation caused both. Regardless, there seems to be, at least at the county or regional level, a Disability Tipping Point. When a county hits a certain level of Disability usage, Disability becomes a norm. It becomes an acceptable way of life and an alternative source of income to a good-paying, full-time job-as opposed to a last-resort, safety-net program to deal with catastrophic injury or illness.

After a certain point, when Disability keeps climbing and becomes endemic, employers will struggle to find employees and begin or continue to move out of the area. Population continues to fall, and a downward spiral kicks in, driving once thriving communities into decline. Not only that, but once this kind of spiral begins, communities could begin to suffer other social plagues, such as heroin or meth addiction and associated crime.

An urgent policy goal should be to stop these tipping points from being reached. There's nothing compassionate about accepting these rates of disability usage. It's bad for the communities affected, and it's worse for the disability recipients. After all, they will receive poverty-level checks for the rest of their lives. Those who can work but are instead on Disability will likely never again receive a paycheck, never enjoy working with others, making friends at work, developing new skills, and achieving the fulfillment that comes with the dignity of work.

These tipping points, along with the general increase in the number of Disability recipients, have also endangered the program's financial health. Including Medicare benefits for recipients, the program now costs more than $200 billion per year, or the equivalent of about half of all non-defense discretionary spending. In turn, the financial uncertainty around the Disability program puts at risk the genuinely and permanently disabled who depend on the program.

I'm introducing legislation to address this challenge. It will have three main parts:

First, Social Security will distinguish between those who are genuinely and permanently disabled and those who are disabled but are expected to recover. Today, the system treats a paraplegic the same as someone with a severely broken leg but who's expected to recover in a year. Those who are expected to recover will be categorized as "likely" or "potential" to recover.

Second, it will allow beneficiaries in these categories to earn an income while on the program through a benefit offset. These beneficiaries can take time for rehabilitation and then gradually rejoin the workforce. With the offset, they won't be at risk of losing their benefits as they begin to earn more money on the path back to full-time work. Further, this offset can improve the program's integrity, because judges can review whether a beneficiary used the offset if the beneficiary reapplies to the program for permanent status.

Third, my legislation will set timelines for these individuals to exit the program and return to work. If their recovery goes more slowly than expected and they're not yet ready to return to work, they can reapply. But if they're no longer disabled, we must help them leave the program and return to the workforce.

The past years have shown that this approach is necessary if we want to increase the number of beneficiaries returning to the workforce. Social Security's Ticket to Work program, for instance, has operated for more than sixteen years. There are also dozens of other resources available to beneficiaries from countless federal agencies. Yet after billions of dollars of studies, pilots, and other programs, the return-to-work rate has dropped to nearly zero.

I believe that our challenge isn't a lack of good intentions or a lack of federal programs. Our challenge is a lack of expectations and incentives for those who can recover, and my legislation attempts to fix this.

These reforms won't solve all the problems with Social Security Disability. But they will address one of the most urgent crises in the program, and the one perhaps most corrosive to affected communities.

Thank you all for your interest in this issue, for your outstanding work on this important topic, and for allowing me to address you today. Now, we'll turn to the real experts on the panel.