Social Security released a briefing paper that studied the decline of the disability rate in recent years, and although the paper concluded that “the cause of the recent decline is unclear,” there are contributing factors. Those contributing factors can include the economy and the fact that Social Security has made several decisions and changed its rules over the years to make qualifying medically for Social Security disability more difficult. Below is a summary of the briefing paper.
- A sharp fall in the disability incidence rate—a measure of the flow of disability insured workers onto the DI rolls—since 2010 offsets the sharp rise in the disability incidence rate from 2007–2010. These changes have been difficult to anticipate.
- A rising disability incidence rate has been the largest contributor to the increase in the disability prevalence rate—the number of workers on the disability insurance rolls—in the early 1990s and during the early years of the recession, but the disability incidence rate has declined sharply in recent years. Two other factors contributing to the rise in the disability prevalence rate in recent decades—the aging of baby boomers into the disability-prone years and the growth in the proportion of women insured for disability—may have run their course. Declining mortality among disabled workers continues to put upward pressure on the disability prevalence rate, but recently that pressure has been more than offset by the declining disability incidence rate.
- A number of external studies have found that the disability incidence rate is tied to economic trends. Our own, still preliminary, research finds that fluctuations in the disability incidence rate are only partly explainable by economic cycles, however. For example, the 3.9 percent unemployment rate in 2018—below the 5.5 percent steady-state rate assumed in the OASDI Trustees Report (Board of Trustees 2019)—explains a bit more than a third of the difference between the observed disability incidence rate and the long-run rate consistent with steady-state unemployment. It is not clear yet how much the economic recovery explains the decline in the disability incidence rate since 2010.
- Specifically, in terms of recessions and unemployment, the recent empirical economics literature addresses the relationship between the business cycle and DI awards focusing on the unemployment rate. In more recent years, research has usually found significant effects of the unemployment rate on both applications and awards.
- The availability of health insurance may have played a significant role, with earlier studies finding a clear indication of a cross-sectional correlation between the costs that Medicare might cover and the probability of application for disability benefits. With more options for health insurance that are not tied to employment available now, however, this may have changed. Early results on the effect of recently expanded health insurance coverage on disability claiming do not find large effects.
- There is some evidence that a shift in industrial composition toward jobs requiring less physical labor may contribute to the decrease in the disability incidence rate.
- By contrast, increasing earnings inequality and health inequality and rises in the full retirement age (FRA) might increase disability claims and awards.
- Changes in the processing of claims, including more training for administrative law judges (ALJs) and improved case assignment and monitoring, may be contributing to the reduction in the number of appellate allowances and the number of outlier ALJs—judges with allowance or denial rates far from the average.
- Recent research on the presence or lack of program information for insured workers finds evidence of effects on disability claiming.
