Summary

The Social Security Administration's disability insurance and supplemental security income programs have not kept pace with the trend toward returning disabled people to the work place. Fewer than one percent of disability insurance beneficiaries leave the rolls to return to work each year. Yet, even relatively small improvements in return-to-work outcomes offer the potential for significant savings in program outlays. For example, if an additional one percent of the 6.6 million working-age beneficiaries under the two programs were to leave the disability rolls and return to work, lifetime cash benefits would be reduced by an estimated $3 billion. This testimony discusses the challenges and trade-offs in redesigning the disability programs. GAO strongly encourages testing and evaluating alternatives to determine what strategies can best tap the work potential of beneficiaries without jeopardizing benefits for those who cannot work.

GAO noted that: (1) in a series of reports, GAO has discussed how the Disability Insurance (DI) and Supplemental Security Income (SSI) programs' design and operational weaknesses do not encourage beneficiaries to maximize their work potential; (2) the lengthy disability determination process, which presumes that certain medical impairments preclude employment, requires applicants to emphasize their work incapacities; (3) to address the erosion in motivation to work that could result from applying for benefits, GAO has recommended that SSA develop strategies to intervene earlier in the application process; (4) regarding those people currently on the rolls, GAO has reported that SSA has done little to promote return-to-work measures, such as vocational rehabilitation (VR) and economic incentives to work; (5) in the last couple of years, numerous changes to the work incentives and to the delivery of and payment for VR services have been proposed in legislation and by various interest groups; (6) the work incentive provisions of the two programs differ significantly, providing very different levels of benefit protection for DI and SSI beneficiaries; (7) one significant difference is that a DI beneficiary's cash benefit stops completely after a period of time, if earnings exceed a specified level, while an SSI recipient's cash benefit is gradually reduced to ease the transition back to work; (8) the gradual reduction in SSI cash benefits yields savings to the government, even if recipients work part time; (9) despite providing some financial protection for those who want to work, the DI work incentives do not appear to be sufficient to overcome the prospect of a drop in income for those facing low-wage work; (10) moreover, the work incentives do not allay DI or SSI beneficiaries' fear of losing medical or other benefits, which could accompany return to work; (11) some work incentive changes may help some beneficiaries, or some groups of beneficiaries, more than others; (12) because there are complex interactions between earnings and benefits, changing the work incentives may or may not increase the work effort of current beneficiaries, depending on their behavior in response to the type of change and their capacity for work and earnings; (13) but, even if the changes in the work incentives increase the work effort of the current beneficiaries, a net increase in work effort may not be achieved; and (14) allowing people to keep more of their earnings would make the program more generous and could cause people who are currently not in the program to enter it.