1 Topic A: Disability Insurance Program Growth in the Past and the Future: Why. Is Fundamental Reform Needed? Presentation by Stephen C. Goss, Chief Actuary, Social Security Administration AEI-Brookings Symposium On Disability Reform B-318 Rayburn House Office Building April 12, 2013
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1
Topic A: Disability Insurance Program
Growth in the Past and the Future: Why.
Is Fundamental Reform Needed?
Presentation by Stephen C. Goss, Chief Actuary,
Social Security Administration
AEI-Brookings Symposium On Disability Reform
B-318 Rayburn House Office Building April 12, 2013
2
Hypothesis put forth to the panel
1) The current federal disability growth trajectory cannot be
sustained
– Obviously not. All factors increasing growth have peaked.
– Future growth will slow and flatten naturally.
– This has been understood and projected for decades.
2) Fundamental restructuring of the eligibility and disability
service system is required to avoid fund exhaustion,
increased tax burdens and unacceptable reductions in the
active labor force.
– Obviously not. Tax rate is simply set too low for the cost.
– Could increase payroll tax by about 0.4% in 2016, or
– Could reduce benefits by 20% for 2016 and later, or
– Some combination of the two!
3
How Have We Done Projecting DI Trust Fund Solvency? Figure 1: DI Trust Fund Ratio in 1995, 2008, 2012 Trustees Reports
0
50
100
150
200
250
1990 1995 2000 2005 2010 2015 2020 2025
Reserv
es a
s %
of
An
nu
al
Co
st
1995TR
2008TR
2012TR
"New Economy" irrational exuberance
2008
Recession back to reality
4
Is DI Out of Control, Taking Over OASDI OASDI? (Note 7% increase in DI Cost for 2010 Due to Recession)
Chart 1: DI Cost as a Percent of Total OASDI Cost
0
2
4
6
8
10
12
14
16
18
20
1980 2010 2040
1995 TR
2012TR
12.8
16.917.9
12.6 12.4
5
As usual, it is mostly about “Aging” Figure 2: Age Distribution of the Population Age 25+, 1940 to 2100
(2012TR)
0
10
20
30
40
50
60
70
80
90
100
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Perc
en
t o
f P
op
ula
tio
n a
t A
ges
25
+
25-44
25-44
45-64
65-84
85+
Boomers
become
25-44
Boomers
become
45-64
Boomers
become
65-84
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Shift down in tax-paying workers per DI
beneficiary is now complete
0
5
10
15
20
25
30
35
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
20
15
20
20
20
25
20
30
20
35
20
40
20
45
20
50
20
55
20
60
20
65
20
70
20
75
20
80
20
85
20
90
Figure 3: Workers per Disability Insurance Beneficiary
Baby Boomers reach ages 45-64
in 2010
Baby Boomers reach ages 25-44
in 1990
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Thus, DI cost as percent of GDP has
peaked, but scheduled income is too low
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Figure 4: DI Cost and Income as Percent of GDP 1975-20902012 Trustees Report Intermediate Assumptions
Baby Boomers reach ages 45-64
in 2010
Baby Boomers reach ages 25-44
in 1990
DI Cost
DI Income
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Drivers of increased DI cost between 1980 and 2010
Disabled worker beneficiaries up by 187%
I. A 41% increase in population age 20-64
II. “Aging” added 38% -- Boomers now 45-64
III. An 8% increase in insured (net of undocumented
population increase) Insured alone much more
IV. A 42% increase in age-adjusted prevalence:
female incidence, younger incidence,
lower death rates
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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 0.37 percent of Payroll
So we could--- – Increase tax rate or eliminate the Tax Max for DI
– Or lower the benefit (PIA level)
• Time limit Benefits, increase vocational grid ages,
These would have some small effects
• Note, Increasing NRA shifts cost to DI
10
• 2) ADDITIONAL
MATERIAL FOR
DISCUSSION
11
2) Increased work by women raised insured;
partially offset by more undocumented
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%Figure 5: Percent of Population that is Insured for Disability
Male
Female
12
3) Recessions matter: applications jumped in
recent recession
Figure 7: OASDI DDS Applications: Disabled workers, children and
widows (thousands)
0
500
1,000
1,500
2,000
2,500
1990 1995 2000 2005 2010 2015 2020
Fiscal year
Actual 2008TR 2012TR
13
3) 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
2
3
4
5
6
7
8
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
New
Aw
ards
per
1,0
00 E
xpos
ed
Male
Female
14
3) Economic cycles and policy changes fluctuate
0
1
2
3
4
5
6
7
8
9
10
11
12
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Un
emp
loym
ent
rate
an
d D
isab
led
wo
rker
inci
den
ce p
er t
ho
usa
nd
exp
ose
d
Calendar year
Age-sex-adjusted disabled worker incidence rate
Civilian unemployment rate
Historical Estimated
Recession and SSI
1974
Recession
Recession
Recession
1980 Amendments: PER, CDRs, EPE,
Lowered Family Max
1984 Amendments: Multiple Impairments Medical Improvement
Mental Listings
1996 Amendments: Drug Addiction & Alcohol
CDR Plan 1996-2002
SSI Outreach
1970-74 Large Benefit
Increases
Recession
Figure 9: Effects of Economic Cycles and Policy Changes on DI Incidence Rates
15
3) Death rates dropping: recovery rates steady
since 1985 (half medical, half work)
Figure 10: Disabled Worker Termination Rates; age-sex adjusted
0
10
20
30
40
50
60
70
80
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
20
15
20
20
20
25
20
30
20
35
20
40
20
45
20
50
20
55
20
60
20
65
20
70
20
75
20
80
20
85
Term
inati
on
s p
er
tho
usan
d b
en
efi
cia
ries
Death
Recovery
16
4) 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)
16
17
4) 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)
17
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4) Older females: increased musculoskeletal
impairment Figure 14: Female Age 50-59 disabled worker new entitlement distribution by primary diagnosis (awarded through June 2012)
18
19
4) 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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