The Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) programs are important sources of financial support for the millions of working-age Americans who are limited in their capacity to work due to a long-term physical or mental impairment. In 2016, SSDI provided cash benefits that averaged $1,116 per month to 8.9 million disabled-worker beneficiaries and 1.9 million dependents of beneficiaries (Social Security Administration [SSA] 2016). Although the SSDI program is an important financial safety net for workers with disabilities, the program’s design has been criticized for discouraging employment. Consequently, it has been blamed in part for the persistently low rates of employment among people with disabilities compared to those without disabilities (among individuals ages 18 to 64, 34 percent versus 75 percent, respectively), as well as high relative poverty rates (28 versus 13 percent, respectively) (Kraus 2015). In addition, without reforms to the program or an influx of revenue, SSA projects the SSDI trust fund from which benefits are paid will be depleted by 2023. Depletion would likely result in benefit cuts of about 20 percent across the board.
To avert this potential crisis, researchers, advocates, and policymakers have considered several reforms to the SSDI program. To motivate reforms, policymakers have sometimes made poorly supported assertions about the large extent to which SSDI beneficiaries should be working and leave the SSDI rolls. At the same time, others assert there is little potential to ease pressures on the program through increased employment because the medical conditions of those who receive SSDI are so severe.
In March 2017, U.S. Senators Tom Cotton of Arkansas, Mike Lee of Utah, and Marco Rubio of Florida introduced the Social Security Disability Insurance Return to Work Act of 2017 (U.S. Government Printing Office 2017), which would place time limits on SSDI benefits for new beneficiaries who have been classified as “medical improvement expected” or “medical improvement likely.” Benefits would be limited to two years or five years, depending on the certainty with which the disability is expected to improve.
Several researchers have also proposed reforms with time-limited cash benefits combined with timely delivery of supports to facilitate return to work. Two of these proposals were developed for the McCrery-Pomeroy SSDI Solutions Initiative, a nonpartisan effort sponsored by the Committee for a Responsible Federal Budget. Hildred et al. (2016) propose a transitional benefits program (TBP) for new beneficiaries likely to have medical improvement, who would also have prioritized access to local employment supports. Stapleton et al. (2015) recommend reaching workers with disabilities earlier by replacing the current disability determination process with an integrated employment/eligibility service system (EES). EES would expedite SSDI awards for workers with the most severe conditions and tailored supports for others, preferably before they lose their attachment to an employer. The tailored supports could also include time-limited cash benefits or retention/hiring incentives for employers. These workers would become eligible for long-term SSDI benefits only if their condition deteriorated or their good-faith, supported effort to work fails. Both TBP and EES specify that those who did not make a good-faith effort at employment would lose cash benefits.
This brief provides an overview of time-limited benefits—as developed in several different proposals to reform SSDI—and an evidence-based assessment of their potential to reduce pressure on the SSDI trust fund and improve the well-being of individuals with disabilities. After describing the elements of proposed reforms that include time-limited benefits, we first review evidence supportive of time-limited benefits and follow this with a review that points to their limitations. We look to the research on existing disability insurance programs both domestically and internationally for evidence on key features that could determine success. The brief concludes with a discussion of implications for policymakers.
The current state of disability benefits
When disability insurance was first under consideration as an additional component to the Social Security Old Age and Survivors’ Insurance Program, many viewed it as a program of temporary benefits. The program would help workers through a rough patch by providing cash benefits and access to rehabilitation services until they were able to return to work. However, from the time the program was actually established in 1956 to the present day, the default has been that benefits continue until a beneficiary reaches the eligibility age for full retirement benefits (Kearney 2005-2006). Beneficiaries can lose their eligibility for benefits either because of sustained substantial employment (substantial gainful activity, defined in 2017 as $1,170 or more per month) or because SSA has discovered through a continuing disability review (CDR) that the beneficiary has experienced medical improvement and no longer meets the disability criteria. In reality, few beneficiaries fully return to work and leave the SSDI program. For example, among the cohort of individuals who first received SSDI (though not SSI) benefits in 2001, 2.2 percent left the program over the subsequent 10 years due to medical recovery and 3.1 percent had their benefits suspended for at least 12 months due to work (Anand and Ben-Shalom 2016). An earlier study following all new SSDI beneficiaries in 1996 for 10 years found that 3.7 percent had their benefits terminated due to work (Liu and Stapleton 2011).
The low rate of exit from the SSDI rolls has persisted despite policymakers’ numerous efforts to provide supports and incentives to return to work—for example, the Trial Work Period, the Extended Period of Eligibility, and the Ticket-to-Work program. Researchers often cite several reasons for the lack of progress. First, due to the long SSDI application and appeals process, most SSDI beneficiaries have been out of the labor force for at least several years when they first receive benefits (Liebman and Smalligan 2013); they have invested in an inability to work, become accustomed to relying on benefits, and have lost human capital and connections to employers. Second, although CDRs are supposed to identify those who have experienced sufficient medical improvement to return to substantial work, long CDR backlogs often prolong medically improved beneficiaries’ detachment from the workforce. When benefits are terminated due to medical recovery, it is without any guarantee of finding a job or additional medical supports or employment services that would facilitate return to work (Hildred et al. 2016).
What are time-limited benefits?
Under a system that includes time-limited benefits, a subset of workers with disabilities would receive cash benefits only for a transitional period. There are several ways to structure the system to incorporate this. Here, we discuss two approaches: transitional benefits program (TBP) and an employment/eligibility service system (EES).
Transitional Benefits Program (TBP): TBP proposes that these time-limited benefits, along with prioritized work supports (described below) apply only for the subset of beneficiaries who are expected to have medical improvement. Other new beneficiaries would receive long-term benefits as they would under the current program. Disability determination services (DDS) and administrative law judges (ALJs) would identify the subset of new beneficiaries who are likely to experience medical improvement. TBP proposes using a predictive analytics model using data from SSDI applications, electronic medical records, and data from the Centers for Medicare & Medicaid Services. The model could also determine the length of the transitional period; TBP emphasizes the importance of a prespecified duration to convey the expectation that transitional beneficiaries will return to work. At the end of their transitional period, beneficiaries who want to continue receiving benefits would have to reapply and qualify through a new disability determination process.
Employment/Eligibility Service System (EES): The EES proposal includes a time-limited benefits component but within a program with a fundamentally reformed eligibility process. The proposed program would rely on timely identification of workers with new impairments that put their employment at risk. Local offices of the state EES, which would replace the DDS, would conduct outreach to employers and workers and serve as an integrated gateway to both SSDI benefits and employment supports. Employers and workers would know to reach out to the EES if a medical condition was threatening a worker’s ability to continue to work. By swiftly identifying workers with new onsets, the EES would expedite both SSDI entry for those workers with the most severe and long-lasting or terminal medical conditions and access to work supports for others. These other workers would enter a “work supports” group. Case coordinators would identify tailored supports that could include health care, rehabilitation, and cash benefits if needed, to facilitate return to work. Those in the work supports group would only begin receiving longer-term SSDI benefits if they were unsuccessful in employment even with supports. Their experience in the work supports group would in effect serve as an empirical test of their need for long-term SSDI benefits. As long as workers made a good-faith effort in the work supports group, this test should be more reliable than the vocational factors and criteria ALJs use.
To aid in individuals’ reentry to work, both TBP and EES emphasize timely employment supports. TBP proposes that transitional beneficiaries receive priority access to employment services but through existing mechanisms such as the Work Incentives Planning and Assistance program, Ticket-To-Work program, and state vocational rehabilitation agencies. SSA would provide contact information of new transitional beneficiaries to existing community work incentive coordinators within SSA. These coordinators would reach out to beneficiaries early to guide the development of work incentive plans and connect beneficiaries to work support programs run by employment networks and vocational rehabilitation agencies. However, the timeliness of supports is constrained in TBP in that transitional beneficiaries would first need to clear the complex and lengthy disability determination process, and several years will have passed since they were separated from their employers. In contrast, because EES would replace the DDS with an integrated gateway to both SSDI benefits and employment supports, it would be better able to deliver early employment supports. Both TBP and EES would require a good-faith effort to return to work with these employment supports, and noncompliance would result in a loss of cash benefits.
The promise of a program with time-limited benefits
Time-limited benefits address two problems in the existing system. First, by prespecifying that cash benefits are time-limited, it removes the reliance on CDRs to identify beneficiaries with medical improvement. Second, by informing workers at the time of award that their cash benefits are temporary, and by increasing availability of rehabilitation and support services, it encourages and facilitates earlier efforts to return to work. In our review of the literature, we found some encouraging evidence that a program with time-limited benefits could be more effective than the existing SSDI program, at least for the subset of the population it would cover.
Identifying applicants who are likely to return to work. A well-targeted system with time-limited benefits requires identifying new applicants with a high likelihood of returning to work. Falsely classifying workers for transitional benefits if they did not subsequently experience sufficient rehabilitation to return to work would burden both the individual and SSA when the worker’s transitional period ended and he or she applied or reapplied for benefits. TBP proposes that DDS and ALJs use predictive analytics to identify these beneficiaries, whereas EES would combine information about health, the availability of supports, and other factors to assess whether there is a high probability that the worker could return to work within a specified period.
Research and existing SSA practices suggest there is some potential for identifying those with high likelihood of being able to return to work, but the rates of error are high. SSA currently uses predictive analytics to manage the workload for CDRs, in which a model selects those predicted to have the highest likelihood of medical recovery for a full medical review while others are reviewed by mail. Although only 10 percent of all CDRs and 27 percent of full medical reviews resulted in terminations in 2013 (SSA 2015), suggesting that CDRs are not well targeted, 80 percent of SSDI beneficiaries whose benefits were ceased remain off of SSDI for at least eight years, suggesting a higher success rate of the CDR itself (Hemmeter and Stegman 2013).
Providing appropriate supports. The success of a program with time-limited benefits before permanent SSDI benefits in reducing the SSDI rolls also relies on the assumption that many new beneficiaries who are expected to have medical improvement could return to work, if given the right supports. When the United States replaced the Aid to Families with Dependent Children (AFDC) program with the Temporary Assistance for Needy Families (TANF) program, which has a strict five-year maximum time limit, work requirements, and a number of other components, caseloads plummeted and employment rates rose. It is important to note that the AFDC/TANF and SSDI populations differ and there is disagreement on the extent to which the policy change versus changes in other policies such as the Earned Income Tax Credit and economic conditions contributed to the decline in caseloads (Blank 2002). However, the outcome at least demonstrates that dramatic changes in policy and the economic environment can reduce caseloads and increase employment.
Longitudinal studies following new SSDI beneficiaries have found that 28 percent of all beneficiaries and 46 percent of those ages 18 to 39 return to work for at least one year over the first 10 years of benefit receipt (Liu and Stapleton 2011). Recent studies also suggest that a substantial number of new beneficiaries could be employed had they not qualified for benefits. Estimates from Maestas et al. (2013) suggest that the percentage of new beneficiaries engaged in substantial gainful activity 24 months after award would be about 4 percentage points higher if they did not have benefits. Estimates from French and Song (2013) support this finding. The most encouraging evidence comes from a long-running pilot within the workers’ compensation system. The pilot, which took place in Washington State, found that comprehensive interventions provided soon after workplace injury reduced the number of nonworking individuals 12 months later by 21 percent (Wickizer et al. 2011), and preliminary estimates suggest a reduction in SSDI entry of 25 percent over eight years (Franklin et al. 2015).
Supporting evidence from other countries’ reforms. The success of several European countries that have implemented comprehensive disability insurance reforms is also encouraging for reforms in the United States, though none of the reforms focused on time-limited benefits alone, and the existing policy environment was different in each case. The Netherlands, Sweden, and Great Britain all replaced their programs with ones that essentially have two tiers, with the first tier providing temporary benefits and the second tier providing long-term disability benefits. Although the reforms varied by country and included many components for which individual effects cannot be isolated, beneficiaries receiving temporary benefits are all required to take part in rehabilitation and work-related activities. In Sweden, the temporary “sickness benefit” is capped at one year and only those deemed as having no work capacity at 180 days are allowed to receive benefits for the full year. In the Netherlands, subsequent application for long-term disability is contingent on the beneficiary showing proof sufficient rehabilitation efforts.
Reforms in these countries significantly increased new beneficiaries’ return to work, reduced caseloads, and demonstrated that when provided early, interventions can work (Burkhauser et al. 2014). The Dutch reforms are often cited as a role model for other countries because of their success; from 1980 to 2010, total spending on sickness and disability benefits as a share of gross domestic product decreased from 6.5 percent to 2.9 percent, and caseloads decreased from their peak of 800,000 in 2002 to 600,000 in 2010 (Fultz 2015). Great Britain, whose pre-reform Incapacity Benefit program most closely resembled the SSDI program, experienced a decline in the percentage of the working-age population receiving benefits from a peak of nearly 4 percent in 1995 to 2 percent in 2012 (Morris 2015). These dramatic decreases took place after the implementation of comprehensive reforms, including some unpopular ones that focused on re-reviewing existing beneficiaries. For this and other reasons we discuss in the next section, it is unrealistic to expect that results in the United States would be of similar magnitude.
Limitations of a program with time-limited benefits
Despite the evidence just cited, the literature provides many reasons to question that providing time-limited benefits for a subset of new beneficiaries alone will significantly alter trust fund solvency.
Affects only a small subset of beneficiaries. First, if as proposed in TBP and the Return to Work Act of 2016, the current system of benefits were replaced with transitional benefits only for those who were likely to experience medical improvement, the change would apply to a very small subset of SSDI beneficiaries. TBP estimates that of the 800,000 new SSDI beneficiaries each year, 3 percent, or 25,000, meet these criteria. Although nontrivial, shortening the period of benefits for such a small subset is unlikely to make a large dent in the trust fund. However, if this approach were successful, it could expand to include those whose medical conditions are unlikely to improve but who are likely to regain sufficient function to engage in substantial gainful activity as they adapt to their medical condition with the assistance of rehabilitation, technology, and accommodations.
Does not address delayed access to supports. A second but serious concern is reliance on return-to-work supports that individuals receive after completing the often lengthy disability determination process. The EES proposal addresses this by reforming the eligibility process so that workers could enter the system and access supports well before applying to SSDI under the current system. Substantial evidence from the United States and Europe suggests that waiting to offer supports until workers apply for SSDI may be too late. In the United States, extensive efforts to help existing SSDI beneficiaries return to work, including the Ticket-To-Work program, have had limited success (Livermore et al. 2013). In contrast, there is some evidence that providing supports by way of early interventions to individuals still employed can forestall or prevent receipt of SSDI and SSI (Whalen et al. 2012). As cited previously, there is strong evidence from the workers’ compensation system that comprehensive interventions provided soon after workplace injury can increase employment and reduce SSDI entry (Wickizer et al. 2011). Swedish reforms demonstrate that waiting even a year after disability onset to provide supports significantly reduces the chances of returning to work (Burkhauser et al. 2014).
Could trigger an increase in applications. A third concern is that requiring time-limited benefits before receipt of permanent benefits could unintentionally increase or decrease applications and allowances. Some workers may be discouraged from applying because of the required attempt to return to work. On the other hand, some workers may be tempted to apply because they want to receive the temporary support and services. This latter possibility might not be detrimental, however, as long as it does not crowd out private sources of support. Further, whether intentionally or not, DDS, ALJs, and EESs may apply a lower threshold for allowances knowing that benefit receipt is time-limited. If individuals who are uncertain whether their disabilities are would qualify them for benefits even perceive the threshold has fallen, an increase in applications may result. This happened in Norway, which introduced temporary benefits in 2004. Researchers found a 40 to 60 percent increase in applications among workers ages 20 to 39 from 2003 to 2005 (Organization for Economic Co-operation and Development 2010). If enough temporary awards later turn into permanent claims, this ultimately can lead to an increase in caseloads. It is also possible that the increase in applications for temporary support could be offset by a decrease in permanent awards due to timely receipt of employment supports.
Implications for policy reform
Given the financial and nonpecuniary benefits of employment, and the expressed interest of so many SSDI beneficiaries in employment, reforms that would make reliance on SSDI a temporary rather than a life-long need are compelling. Here we raise several implications as policymakers consider proposals for transitional benefits such as those proposed by Senators Cotton, Lee, and Rubio in the Return to Work Act of 2017.
Even if just for a small subset, gains could be meaningful. It may be tempting to dismiss a transitional component to reform proposals either because it may only apply to a small subset of new beneficiaries, or because of the fear that it may encourage additional individuals to apply to the program. However, even if applications did increase and became burdensome from an administrative perspective, workers and employers could experience gains if the transitional benefits succeeded in helping the worker return to work. In addition, this subset of the beneficiary population could be substantially better off under a transitional system that helps them return to work compared with the current system that provides cash benefits but essentially limits their ability to work (Liebman and Smalligan 2013). In addition, evidence from the European Union suggests reductions in disability caseloads are easier to achieve through the flow of new beneficiaries rather than the existing stock of beneficiaries (Burkhauser et al. 2014).
Mandatory participation in rehabilitation programs is critical. A transitional benefits system will likely be more successful in increasing return to work if participation in rehabilitation and employment support programs is mandatory. In the Netherlands, Sweden, and other countries with time-limited benefits, participation in rehabilitation activities is mandatory, and applications for long-term disability benefits are contingent on documentation that the beneficiary has taken part in such activities. In contrast, SSDI entrants can take advantage of the Ticket-to-Work program and various other work incentives if they want to, but none is required to even attempt to return to work. The strength of the participation requirements in Europe may partially explain the relative success of these programs. Both the TBP and EES emphasize compliance with work plans and a good-faith effort at returning to work as requirements for receipt of cash benefits.
Intervening earlier may help. Although countries in the European Union that have passed comprehensive reforms imposing some time limits on benefits have experienced reductions in caseloads, one must exercise caution before drawing conclusions on the potential for time limits to reduce caseloads in the United States. Before implementing reforms, these countries had recipiency rates and benefit levels that were much higher than those in the United States. In addition, these countries provided early intervention services much sooner after disability onset than is feasible by SSA under current law. Two factors account for these differences. First, identifying workers soon after onset is easier in the European Union because of the short-term sickness benefit that serves as the first tier of the disability insurance system in many of these countries. This benefit does not have the lengthy eligibility determination process that the United States has. Second, reforms in many of these countries involved employers. A key part of the Dutch reforms was having employers bear the full financial responsibility of the sickness benefit, initially for one year and subsequently for two years (Burkhauser et al. 2014). Finally, each of these countries has universal health care coverage, which may make it easier for workers to obtain health services they need to return to work.
Ensuring that the rehabilitation supports proposed under a transitional benefits system in the United States are successful would similarly require earlier provision of these supports. Unfortunately, current law requires that SSA spends funds only on SSDI applicants or current beneficiaries, limiting SSA’s ability to support any truly early interventions. The overhaul of the eligibility system that would replace DDS with EES directly aims to increase the timely delivery of work supports.
Although the existing evidence points to the promise and challenges of reforming SSDI to provide time-limited benefits for a subset of individuals with disabilities, it does not provide definitive evidence on the likely impact of such reforms in the United States. We recommend that Congress and the new administration pass legislation to pilot multiple approaches to providing transitional benefits, such as those proposed in TBP by Hildred et al. (2016) and in EES by Stapleton et al. (2015). These pilots would both provide direct evidence on the impacts of such reforms in different contexts and increase our knowledge of the supports and institutional factors that are likely to lead to success.
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This article is part of a series of faculty commentary around advancing policy to support workers with disabilities. Read the full series.
Professor Sevak’s research focuses on public policy and labor market outcomes for vulnerable populations including individuals with disabilities, older workers, and immigrants. Her research has been supported by the Social Security Administration, the U.S. Department of Education (National Institute on Disability and Rehabilitation Research (NIDRR)), and the U.S. Department of Health and Human Services (National Institute on Disability, Independent Living, and Rehabilitation Research (NIDILRR)).
In addition to her appointment as an Associate Professor in the Economics Department at Hunter College, Professor Sevak is a Faculty Associate at Roosevelt House Institute for Public Policy at Hunter College.
Stephanie H. Rosenbluth is currently an MPA student at Pennsylvania State University. She is also an analyst at Mathematica Policy Research where she supports researchers in studies on employment policy and individuals with disabilities. Stephanie completed her B.A. at Syracuse University.