Last week, we spent some time discussing a recent “This American Life” segment on the extraordinary growth of federal disability insurance, which now costs $260 billion per year. There are now roughly 8.8 million Americans receiving disability benefits, a number that has doubled since 1995.
So what explains this rise? The radio segment offered up several theories....
But there might be a much, much simpler explanation: demographics. Kathy Ruffing of the Center on Budget and Policy Priorities has argued that more than half of the rise in disability since 1990 can be explained by the very boring fact that Americans are getting older:
Three big demographic factors are at work here. First, as the U.S. population ages, people are more likely to become physically disabled, especially if they’re working in manual labor. Second, Congress has hiked the retirement age for Social Security over the years — in fact, about 5 percent of current disability recipients would simply be on ordinary Social Security had Congress not changed the rules.
Third, many more women have been qualifying for disability insurance since the 1980s because there are many more women in the workforce, period.
If one controls for those three demographic factors, the rise looks somewhat more gradual, with the percentage of workers on disability going from 3.5 percent in 1995 to 4.6 percent in 2012[.]
And these three factors won’t continue forever: Ruffing writes that the disability program is currently at “its peak demographic stress,” with the rolls expected to shrink in the coming years as many current beneficiaries age into Social Security and Medicare....
Interestingly, however, Ruffing is skeptical that the current recession created a surge of beneficiaries. “[E]conomists generally find that while a sour economy significantly boosts applications to the program, it has a much smaller effect on awards,” she notes. ”The implication is that economic downturns tend to attract more marginal, partially disabled applicants, but their applications are more likely to be denied.”
Now, that still leaves a pressing policy issue here. The disability insurance program is underfunded and is expected to exhaust its trust fund by 2016. At that point, benefits will drop significantly unless Congress figures out how to fix it. But, says Ruffing, lawmakers have known about this problem for more than a decade “and should not be considered evidence that the program is out of control.”
