1 Social Security Disability Insurance Program Why Has Cost Risen So Much, and What Is Next? Steve Goss, Chief Actuary, Social Security Administration.

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Social Security Disability Insurance Program

Why Has Cost Risen So Much, and What Is Next?

Steve Goss, Chief Actuary, Social Security Administration

MAAC September 12, 2013

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How have we done projecting DI Trust Fund solvency? Figure 1: DI Trust Fund Ratio in 1995, 2008, 2012 Trustees Reports

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1990 1995 2000 2005 2010 2015 2020 2025

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2008TR

2012TR"New Economy" irrational exuberance

2008 Recession back to reality

Most of the change since 1980 is due to increased population, population aging, and women working more

consistently

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Is DI out of control, taking over OASDI?(Note 5% increase in DI cost for 2010 due to recession)

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1980 2010 2040

Chart 1: DI Cost as a Percent of Total OASDI Cost

1995 TR

2012 TR

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16.917.9

12.6 12.4

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As usual, it is mostly about aging(Note the progression of the boomers from 1970-2030)

Figure 2: Age Distribution of the Population Age 25+, 1940 to 2100 (2012TR)

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1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

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Boomers become 25-44

Boomers become 45-64

Boomers become 65-84

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Increased work by women raised insured; partially offset by more undocumented

35%

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85%Figure 5: Percent of Population that is Insured for Disability

Male

Female

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Incidence rates for women have risen to male level

Figure 8: New Disabled Workers per 1,000 Exposed (Incidence) Age-Adjusted (2000) - 2012 Trustees Report

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Then Maybe it is Not all Due to Increased Awards Based on

Mental Impairments and “Back Pain”?

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Young females: steady distribution by medical impairment

Figure 12: Female Age 30-39 disabled worker new entitlement distribution by primary diagnosis (awarded through June 2012)

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Young males: steady but for HIV bulge in 1986-2000

Figure 13: Male Age 30-39 disabled worker new entitlement distribution by primary diagnosis (awarded through June 2012)

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Older females: increased musculoskeletal but less circulatory and neoplasms

Figure 14: Female Age 50-59 disabled worker new entitlement distribution by primary diagnosis (awarded through June 2012)

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Older males: increased musculoskeletal impairment; less cardiovascular

Figure 15: Male Age 50-59 disabled worker new entitlement distribution by primary diagnosis (awarded through June 2012)

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One More Thought

• How will ACA affect Disability cost?– Will low-cost or no-cost health insurance

available to fill the gap until Medicare comes in make more able to stop working earlier to apply for disability?

– Or will near universal medical insurance and preventive care reduce the incidence of progressive disabling impairments???

• Which will be the stronger effect?

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So where are we on DI? • Is the sky falling, cost out of control? No.

• Or are we following a path foreseen? Yes.

• Actuarial deficit for DI is 0.32 percent of payroll (0.12 percent of GDP) so we could:

• Increase tax rate or eliminate the tax max for DI• Lower the monthly benefit (PIA level)• Time-limit benefits, increase vocational grid ages,

experience rate employers, and/or adversarial ALJ (these would have some small effects)

• Note that increasing NRA shifts cost to DI