Mandatory Spending

Function 650 - Social Security

Require Social Security Disability Insurance Applicants to Have Worked More in Recent Years

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-2021 2017-2026
Change in Outlays 0 -0.6 -1.6 -2.7 -3.8 -4.9 -6.0 -7.2 -8.3 -9.5 -8.6 -44.5

This option would take effect in January 2018.

To be eligible for benefits under Social Security Disability Insurance (DI), disabled workers must generally have worked 5 of the past 10 years. Specifically, workers over age 30 must have earned at least 20 quarters of coverage in the past 10 years (which is the time span used to evaluate that requirement, also known as the look-back period). In calendar year 2016, a worker receives one quarter of coverage for each $1,260 of earnings during the year, up to four quarters; the amount of earnings required for a quarter of coverage generally increases annually with average wages.

This option would raise the share of recent years that disabled workers must have worked while shortening the look-back period by requiring disabled workers older than 30 to have earned 16 quarters in the past 6 years—usually equivalent to working 4 of the past 6 years. That change in policy would apply to people seeking benefits in 2018 and later and would not affect blind applicants, who are exempt from the recency-of-work requirement. This option would reduce the number of workers who received DI benefits by 6 percent in 2026, the Congressional Budget Office estimates, and would lower federal outlays for Social Security by $45 billion from 2018 through 2026. In relation to current law, outlays for Social Security in 2046 would be lower by roughly 1 percent. (Those estimates do not include any effects of this option on spending for other federal programs—such as Medicare, Medicaid, and Supplemental Security Income, or SSI—as well as spending on subsidies for health insurance purchased through the marketplaces established under the Affordable Care Act. Over the 10-year period, those effects would roughly offset. On one hand, disabled workers who no longer qualify for DI under this option would lose their eligibility for Medicare until age 65, thus reducing spending for Medicare. On the other hand, some disabled workers who lose DI and Medicare benefits under this option would become eligible for SSI, Medicaid, or health insurance subsidies, increasing spending for those programs.)

An argument in favor of this option is that it would better target benefits toward people who cannot work because of a recent disability. To qualify for disability benefits, applicants must be judged to be unable to perform “substantial” work because of a disability—but knowing whether applicants would have worked if they were not disabled is impossible. Under current law, even people who have not been in the labor force for five years can qualify for disability benefits. By comparison, this option would allow people who were out of the labor force for only two years or less to qualify for benefits.

A reason to keep the existing work provision is that the option could penalize some people who would have been working were they not disabled. For example, some people might leave the workforce for more than two years to care for children or pursue additional education and then become disabled while out of the workforce or shortly after returning to work. Such people could qualify for disability benefits under current law but would not qualify under this option. Similarly, some people who were in the labor force but unable to find work for over two years before becoming disabled would become ineligible for benefits under the option. To lessen the penalty for those workers, an alternative approach could raise the number of recent years that disabled workers must have worked while lengthening the look-back period by requiring workers to have worked 8 of the past 12 years. That approach would result in similar budgetary savings.