In August of 2019 Social Security issued a briefing paper regarding the trends in the Social Security disability program (SSDI). The major news coming out of the issue paper from Social Security is that the incidence rate and the number of SSDI claims has been declining over the last few years. This has enabled Social Security to clear-up much of the backlog of cases that has plagued the agency for years. Social Security has substantially reduced the amount of time disability claimants have to wait for a hearing before an Administrative Law Judge (ALJ). Although the issue paper, found below, does not point to specifics of why the disability rate has declined, it does offer key insights and some interesting findings.
Summary Findings
- 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.
