CBO Testifies on the Social Security Disability Insurance Program

Posted by Joyce Manchester on
March 14, 2013

This morning I testified on the Social Security Disability Insurance (DI) Program before the Subcommittee on Social Security of the House Committee on Ways and Means. My testimony—which updates a CBO report from 2012 on the same topic—examines the reasons that the DI program has experienced rapid growth in its costs and number of beneficiaries and presents a variety of options for changing the program. To give the Members of the Committee a quick overview of the program, I shared the following basic facts about DI with them:

Beneficiaries

  • 8.8 million disabled workers (in January 2013)
  • 1.9 million children of disabled workers
  • 0.2 million spouses of disabled workers
  • 50 percent of DI beneficiaries had household income below the federal poverty threshold in 2006 (the most recent year for which data are available)

Trends in Participation

  • Number of disabled worker beneficiaries: 1.5 million in 1970 to 8.8 million in 2012
  • All disabled worker beneficiaries as a share of working-age adults (people ages 20 to 64): 1.3 percent in 1970 to 4.6 percent in 2012
  • Female disabled worker beneficiaries as a share of working-age adults: 0.4 percent in 1970 to 2.1 percent in 2012

Spending on DI Benefits and Medicare

  • DI benefits in fiscal year 2012: $135 billion
  • Spending on Medicare benefits for DI beneficiaries (generally after a 24-month waiting period) in 2012: $80 billion
  • Average monthly DI benefit for a disabled worker: $1,130 (in January 2013)
  • DI benefits as a share of gross domestic product: 0.3 percent in 1970 to 0.9 percent in 2012
  • DI benefits as a share of total Social Security benefits: 10 percent in 1970 to 18 percent in 2012

Revenues for the DI Program

  • DI tax revenues in 2012: $102 billion
  • Mostly from the 1.8 percent payroll tax on earnings up to the taxable maximum ($113,700 in 2013)

Projected Exhaustion Date of the DI Trust Fund: 2016

  • The Social Security Administration has no legal authority to pay full benefits on time after exhaustion occurs
  • In the past, legislation redirected some revenues from the Old-Age and Survivors Insurance fund to the DI fund

Reasons for Growth in the DI Program

  • Demographics: an aging population with more workers with disabilities
  • More women in the workforce who are potentially eligible for DI
  • Changes in federal policy
    • Legislation in 1984 led to a larger number of DI beneficiaries with musculoskeletal or mental impairments, many entering the rolls at younger ages and staying in the program longer than the average beneficiary
    • Rise in the full retirement age for Social Security
  • Changes in opportunities for employment and compensation
    • Poor employment opportunities for less skilled workers, especially during economic downturns
    • Rising income inequality combined with the DI benefit formula, which indexes benefits to the national average wage

Joyce Manchester is Chief of the Long-Term Analysis Unit in CBO’s Health, Retirement, and Long-Term Analysis Division.