Ways to keep disability honest

Source: Bankrate

Disability is a relatively small but important piece of Social Security.

In 2014, Social Security paid out about $707 billion in retirement and survivor benefits and only $142 billion in disability benefits. But it is a program that makes a tremendous difference in the lives of those who receive it. Disability benefits constituted 75 percent or more of income for 61 percent of recipients age 40 and older. With benefits, 19 percent were still living in poverty, but without them, 51 percent would have been.

Social Security Trustees announced last week that Social Security Disability Insurance is in serious financial trouble because its trust fund is due to run out at the end of 2016. Running out of trust fund money would trigger an automatic 19 percent cut in benefits. Since the average monthly benefit is only $1,165, that would be a serious problem for many recipients.

Some libertarian solutions       

The Social Security Disability trust fund has run out of money several times before, and Congress has solved it by moving money from the much larger retirement/survivor trust fund. Some people don’t think that is a good idea because it does nothing to slow the demand for disability benefits in a world where health care is improving. Pam Villarreal, senior fellow at the National Center for Policy Analysis, a free market think tank, has several ideas that she believes would keep more people on the job, despite their ailments.

Allow partial benefits. Now you are either fully disabled and entitled to full benefits or you aren’t disabled and you get no benefits. Real life doesn’t work like that, Villarreal says. The Veterans Administration allows partial benefits on a sliding scale from 10 percent to 100 percent. “If Social Security Disability worked similarly, people would have more incentive to get treatment and to recover.”

Require that decision makers have medical training. The decisions about whether a recipient does or doesn’t get Social Security Disability aren’t consistent, Villarreal says. Standards vary by judge and area of the country. She believes that using better educated decision-makers would make a difference, especially if they had the flexibility to award partial disability payments.

Get rid of disincentives to work. Recipients of Social Security disability are now severely limited in the amount of money they can earn. Villarreal would eliminate all caps on earnings. She points to private disability plans as an example of how this could work. Many private plans pay when a disabled worker can’t work at their “own occupation.” In other words, they are entitled to some benefits if they can’t do the work they were trained to do, even if they can work at some other kind of job. For instance, if a surgeon got carpal tunnel syndrome and couldn’t work as a surgeon but could work as a consultant, his disability payment would amount to the difference between what he could have earned versus what he was actually earning. But if his consulting business took off, he would stand to lose the disability altogether. “The way we do it now, we encourage people not to work at all,” Villarreal says.

Take a hard look at mental, emotional and muscular/skeletal disorders. These conditions are hard to prove conclusively. If you say you have back trouble or are depressed, Social Security is likely to take your word for it. “These conditions are very treatable. There shouldn’t be many reasons why someone should receive disability payments for these conditions with no likelihood of them ever getting off benefits,” Villarreal says.

Here’s a primer on claiming Social Security disability.

How would you fix Social Security disability?