New paper: "Not All Disabilities Are Alike: Implementing a Rating System for SSDI."

The National Center for Policy Analysis released a new paper by Pam Villarreal, "Not All Disabilities Are Alike: Implementing a Rating System for SSDI."

Despite today's workplace accommodations for the disabled, improved diagnoses and treatments, and less physically demanding jobs, the number of individuals receiving disability payments has increased dramatically over previous decades.  Prior to 1990, the annual percentage of workers receiving benefits grew about half a percent per year.

Since 1990, the percentage of workers receiving Social Security Disability Insurance (SSDI) benefits has grown an average of 4.8 percent annually.  As a result, the Disability Trust Fund, which is funded by 1.8 percentage points of the payroll tax (split evenly between workers and employers), is expected to be depleted by the end of 2016. As of December 2013:

•  There were 10.2 million individual disabled workers, disabled widowers or disabled adult children receiving Social Security Disability.
• Disabled beneficiaries ages 18 to 64 were 4.8 percent of the total nonsenior adult population.
• The average beneficiary age was 53 years and the average monthly benefit was $1,146.

Unfortunately, despite these numbers, there is little political will for a complete overhaul of SSDI.  Policymakers have proposed just a few reforms, mainly focused on efforts to combat fraud.  But more could be done regarding how beneficiaries are paid and how to provide better work incentives:

• Restructure the all-or-nothing payment system to reflect varying degrees of disability, as does the Veterans' Disability system.  A lower level of benefit payments could be awarded to individuals who have a higher probability of improvement.
• Eliminate the "Ticket to Work" program and lift the maximum monthly income limit for work. The current SSDI system offers a voluntary "Ticket to Work" program in which beneficiaries can work for up to three years without losing their disability benefits. However, the program had little effect on beneficiaries returning to work. In exchange for a reduction in payments due to rating disability by degree, the monthly maximum limit on labor income ($1,090 in 2015) that disqualifies a beneficiary from receiving disability benefits could be eliminated.