Saving Social Security Disability Insurance

Abstract

The Bipartisan Budget Act of 2015 partially addressed the poor state of the Social Security Disability Insurance (SSDI) Trust Fund, over the short run and the medium run. At the time of the act, the fund was roughly one year from depletion. Over the short run, Congress reallocated some portion of the payroll tax funds from the Old-Age and survivors Insurance (OASI) Trust Fund to the Disability Insurance (DI) Trust Fund to allow the continued payment of full benefits under the current system through fiscal year 2022. According to the most recent report (2017) of the Social Security Board of Trustees, the DI Trust Fund will be depleted in 2028. Looking toward the longer run, Congress took the opportunity to provide a mandate and resources for program redesign. Sections 821–23 of the Bipartisan Budget Act granted expanded authority for the Social Security Administration to engage in demonstration projects aimed at improving the opportunity for disability beneficiaries to remain attached to the labor force or return to work. In this working paper we build on our earlier writing, which proposes reforms to the SSDI program, and consider demonstration project designs that promote the testing of salient aspects of our proposals. We emphasize both a modular design for demonstration projects and the sequence of projects as important for designing effective demonstrations that speak to both administrative and congressional needs for information in the 2018–2028 time frame. We also consider other critical tenets that project designers should consider before fielding projects in the very near future.

Introduction

The Bipartisan Budget Act (BBA) of 2015 acknowledged the poor financial state of the Social Security Disability Insurance (SSDI) Trust Fund, which at the time was roughly one year from being depleted. Congress reallocated some portion of the payroll tax funds from the Old-Age and Survivors Insurance (OASI) Trust Fund to the Disability Insurance (DI) Trust Fund to allow the continued payment of full benefits under the current system through fiscal year 2022, as estimated at the time of the act’s passage. According to the most recent report of the Social Security Board of Trustees, the DI Trust Fund will be depleted later, in 2028, roughly one decade from now. Acknowledging the financial and programmatic challenges of our nation’s current Disability Insurance design for both beneficiaries and taxpayers, Congress took the opportunity to provide a mandate and resources for program redesign. Specifically, sections 821–23 of the BBA granted Congress authority to engage in demonstration projects under “Subtitle B—Promoting Opportunity for Disability Beneficiaries.”

In a series of earlier writings (Fichtner and Seligman 2014, 2015, 2016a, 2016b), the authors of this working paper have detailed tenets for disability insurance reforms that are designed to integrate well with (1) broader US Social Security retirement program reforms—which are themselves necessary ahead of 2035 (the date currently estimated for the depletion of the OASI Trust Fund), (2) other developments in the US social safety net since 1965—specifically the Americans with Disabilities Act of 1990 (ADA) and the Patient Protection and Affordable Care Act of 2009, (3) opportunities for reintegration of disability insurance beneficiaries into the workplace, and (4) lessons from other nations’ disability insurance reform efforts. In this paper we consider tenets for the design of demonstration projects that can test some of these ideas.

Even given the extended timeline recently offered by Social Security Administration actuaries, the short window of time from 2018 to 2028 suggests that the design and implementation of testing cannot be put off. Congress will soon implement broader program reforms as part of the necessary work of restoring the fiscal soundness of the SSDI Trust Fund, and to accomplish this Congress is depending on the data and experiences accumulated through earnest work to evaluate various reform proposals—as it has made clear by the resources it has allocated to program redesign activities.

Proposing program reforms without testing them and exploring the associated nuances of practiced implementation can be a recipe for failure, not only in terms of budget savings, but more importantly in terms of the social benefit the program yields to society. A suboptimal system harms those it fails to serve, be it before or after reform. Those the SSDI system is meant to serve are defined as disabled, and they deserve a program that supports their convalescence as well as their rehabilitation. A better-designed program will do both. Hence, we offer this working paper to contribute to the delivery of more successful executable designs. There will, of course, be many important and detailed aspects of demonstration project design that this piece will not and cannot address, because the context of specific field research conditions is not fully known to us at this time. Rather than dabbling in false precision, we will lay out principles for the design of a suite of demonstration projects. Here is a summary of these principles:

1. Demonstration projects should test things that are uncertain. In other words, testing should be limited to changes or features that have not been demonstrated to succeed or fail in accomplishing their objectives in the past. This will make the best use of lessons learned from past work, and of the time remaining.
2. Demonstrations should limit the number of changes per project whenever possible, and should otherwise be designed so that it is easier to determine the contribution of each change to the program and those it serves.
3. Demonstrations should be run in parallel when possible to make the most of limited time, and they should hold baseline economic conditions as constant as possible for the sake of facilitating more controlled comparisons.
4. When demonstrations cannot be run in parallel, they should be sequenced so that knowledge gained from testing prior features can be built upon. The order of operations is important to consider—sequence has consequence.
5. Demonstrations will necessarily rely on volunteers, as prescribed in the law, which may make their results less generalizable. However, pure experimentation is not a requirement in order for results to be generalizable. Matched randomization of participation among the willing can help inform the debate and provide useful evidence for national program design and rollout. Still, policymakers and administrators must be prudent regarding estimated improvements in service benefits and service costs, especially as reformed aspects of programs initially scale up.

We place these five basic principles for the organization of demonstration projects here, acknowledging that they are relatively straightforward and hoping that they are easy to keep in mind as one goes through the reforms we next describe. In our previous work we emphasized three main proposed program reforms for Disability Insurance:

• First, we emphasized changing the structure of the program to include both temporary and partial disabilities.
• Second, we proposed integrating existing employer-based disability insurance programs into the national disability insurance system, and supporting the expansion of such programs.
• Third, we emphasized integrating other federal social support programs into an overall system designed to support the disabled in various ways, including by promoting their recovery and rehabilitation to meaningful workforce participation. By “meaningful” we mean participation that enhances their own welfare, and that they themselves understand as being to their benefit.

In our work to date we have often pointed out that these three reform channels can work as standalone reforms, or they can be integrated—and our previous research offers a nice context for dividing and conquering the work of testing program reform features over the decade ahead, before the estimated DI Trust Fund depletion date.

The rest of this working paper proceeds as follows: First we provide a brief review of the SSDI program, describe potential reforms, and provide a literature review. We also provide a brief history of previous Disability Insurance–related demonstration projects run by the Social Security Administration (SSA), from which we garner some lessons that help inform our suggestions for future demonstration project designs. Following the literature review, we consider how the five broad principles we introduced above can come into play when designing and fielding projects targeting important aspects of our three proposals for reform, between now and 2028. We then summarize what we have discussed and conclude this working paper by emphasizing again that these suggestions are not meant to be a detailed blueprint, but rather are meant to serve as an outline based on fundamental principles.

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