Tuesday, April 6, 2010

Disability insolvency in 2018 – what will Congress do?

Investors Business Daily's Jed Graham reports on a seemingly small but important fact: Social Security's Old and Survivors (OASI) program is legally distinct from its Disability Insurance (DI) program, even if their finances are generally lumped together. The DI program is in far worse financial shape than OASI, such that its trust fund is currently projected to be exhausted in 2018. At that point, Congress must do something to keep checks flowing, even if that something is merely to allow for cross subsidization between the OASI and DI trust funds.

It would be nice, though, if we looked at real reforms. On one hand, I'm more open to tax increases for disability than retirement, since on the retirement end people can easily "tax themselves" simply by saving more. That's tougher to do with regarding to private disability insurance. At the same time, though, I'm worried about the increase in disability applicants coming from categories – particularly depression and musculoskeletal problems (read: back pain) – that are hard for SSA to confirm or disprove. My trade-off would be to allow for some higher taxes in exchange for tightened eligibility, but it's hard to predict whether Congress can make the tough choices.

Click here to read the whole story.


Bruce Webb said...

Considering there are 850,000 DI claims back-logged and per my source a Deputy Commissioner who has simply been dragging her feet on this, I am not sure looseness in eligibility standards is really the problem here.

Bruce Webb said...

Per the 2009 Report the actuarial gap for the DI program was 0.31% of payroll, or about $1.50 a week each for the employer and employee of a median income household. Which is why our NW Plan puts that fix in place right away while delaying any changes to OASI until 2026.

Andrew G. Biggs said...

I think the backlog is currently around 700,000, which is less than a year or two ago. Still a lot -- one reason for which is the multiple levels of appeal -- but they're making progress.