Identifying Work Capacity and Promoting Work: A Strategy for Modernizing the SSDI Program

• Published date: 01 November 2019
• DOI: 10.1177/0002716219882354
• Author: Nicole Maestas
• Date: 01 November 2019
• Subject Matter: Social Insurance

ANNALS, AAPSS, 686, November 2019 93

DOI: 10.1177/0002716219882354

Identifying

Work Capacity

and Promoting

Work:

A Strategy for

Modernizing

the SSDI

Program

By

NICOLE MAESTAS

882354ANN The Annals of The American AcademyIdentifying Work Capacity and Promoting Work

research-article2019

The Social Security Disability Insurance (SSDI) pro-

gram, which provides income support to individuals who

become unable to work because of a disability, has not

been substantially reformed since the 1980s, despite

sweeping changes in health, medical technology, and the

functional requirements of jobs. I review how the SSDI

program works, its history in terms of caseloads and

reforms, and findings from the research evidence that

offer lessons for the future. I then propose two interlock-

ing reforms that would modernize the core functions of

the program. The first is to improve SSDI’s process for

determining whether an applicant has remaining capac-

ity to work by replacing the outdated medical-vocational

“grid” with a new system of individual work capacity

measurement. Second, I propose the introduction of

partial disability benefits, which would make use of the

new system for measuring work capacity and allow ben-

eficiaries to combine benefit receipt with work. Partial

benefits could be paired with a generalized benefit offset

to further encourage work by beneficiaries, and the

Social Security Administration’s complex array of work-

related rules could be eliminated.

Keywords: Social Security Disability Insurance

(SSDI); disability; work capacity; partial

benefits

The U.S. Social Security Disability Insurance

(SSDI) program provides income support

to individuals who become unable to work

because of a disability. SSDI is one of the

largest social insurance programs in the United

Nicole Maestas is an associate professor of health care

policy at Harvard Medical School and a research asso-

ciate of the National Bureau of Economic Research

(NBER), where she directs the NBER’s Retirement and

Disability Research Center. She studies the economics

of aging, health care, and disability insurance. Her cur-

rent work investigates work capacity among older

individuals and people with disabilities, working condi-

tions in the American labor force, the effects of the

Medicaid and Medicare programs on health care utili-

zation and health, and the causes and consequences of

the opioid epidemic.

Correspondence: maestas@hcp.med.harvard.edu

94 THE ANNALS OF THE AMERICAN ACADEMY

States. In 2017, it paid $144.3 billion in benefits to 8.7 million disabled workers

and 3.0 million of their dependent family members (Social Security Administration

[SSA] 2018d). SSDI disabled workers as a group equate to 5.4 percent of the U.S.

labor force (SSA 2018d; U.S. Bureau of Labor Statistics [BLS] 2019b).

The central policy trade-off for the SSDI program is to provide protection

against disability-related earnings losses, but in a way that does not induce labor

force nonparticipation among people who could otherwise work. Balancing

“insurance” against “incentives” is exceptionally difficult, and the political dis-

course surrounding SSDI throughout its history of expansion and retrenchment

has reflected this deep tension. By 2014, the program had expanded in nearly

every year since its birth in 1956 and was inching dangerously close to insolvency.

Some of the caseload growth was predictable, resulting from deliberate expan-

sions of eligibility, rising labor force participation by women (increasing the

number of SSDI-insured workers), or population aging (Reno 2011; Liebman

2015). But much of the growth was due to the eroding labor market prospects of

lower-skilled workers, who, despite significant health problems, might have oth-

erwise worked (Autor and Duggan 2003; Liebman 2015). In 2014, the SSDI

program began transitioning to a smaller steady-state size (Munnell etal. 2015),

due to the natural fading of earlier demographic pressures and administrative

changes at the appellate level. The program now appears solvent until 2052

(Board of Trustees 2019).

With the caseload contracting, the case for SSDI reform is no longer primarily

a fiscal one.1 As emphasized by Liebman (2015), the case for SSDI reform rests

on the need to reoptimize the program to account for change in the composition

of applicants. Originally a program for older men with clear-cut, permanent

impairments (e.g., circulatory diseases), SSDI now serves men and women of all

ages who more often than not have a musculoskeletal or mental impairment and

diminished employment opportunities. Many of these individuals have some

degree of residual work capacity. The case for reform is bolstered by the fact that

the last major reform of the SSDI program was in the 1980s. The core structures

that define who does and does not have work capacity have not been updated to

keep pace with advancements in medicine, technology, or the functional require-

ments of jobs. SSA’s listings of automatically qualifying impairments have been

updated infrequently, despite decades of medical progress (SSA Office of the

Inspector General 2015). Similarly, there have been no updates to the “medical-

vocational grid” used by disability adjudicators to determine whether an appli-

cant can do any other job in the national economy, despite broad structural

change in the nature and skill demands of jobs.

Decades of research highlight five high-level takeaways that should guide

reform. First, SSDI participation is not just a reflection of individuals’ underlying

NOTE: I thank Jason Fichtner, Jason Seligman, and the editors and attendees of The

ANNALS of the American Academy of Political and Social Science authors’ conference for

helpful feedback. Michael Jetsupphasuk provided outstanding research assistance. The reform

ideas proposed here were made possible in part by research support from the National

Institute on Aging (R01AG056238, R01AG056239).