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The latest reports on the budget deal show some entitlement changes coming to Social Security Disability Insurance (SSDI) and the Social Security Trust Fund. The text of the bill is here.
According to analysis of the deal, spending would be increased “by $80 billion over two years, not including a $32 billion increase included in an emergency war fund. Those increases would be offset by cuts in spending on Medicare and Social Security disability benefits.”
The deal sought some much needed structural changes to the SSDI program, because it was slated to reach insolvency sometime in 2016 — which, of course, would play right into the Presidential election cycle.
Some of the proposed changes include: “a medical exam now required in 30 states before applicants could qualify for benefits would be required in all 50 states. That change was projected to save the government $5 billion.”
Another reform looks to be restructuring work and benefits reviews, “in which some people who receive disability benefits could earn money from working with less fear of triggering a review that can result in benefits being cut off. Instead, people participating in the projects could see their benefits gradually curtailed as their income rises … ”
While these changes are a start, they come at a price that no one in the media is really talking about in depth. The NYTimes casually mentions that there were be a reallocation of “funds among Social Security program trust funds to ensure solvency of the disability insurance program.” That sounds well and good, until you get to the details.
The reallocation of roughly $150 billion over the next three years comes from the Social Security Trust Fund in order to rescue the nearly bankrupt SSDI Trust Fund; in other words, we are borrowing money from one entitlement program to another!
SSDI was slated to receive across-the-board 20% cuts in 2016 as a way to deal with its nearly-depleted funds. But that is a very messy topic for a very messy election year. This deal papers over the SSDI funding problem — infusing it with cash from Social Security over the next three years, and extending the insolvency question for the disability question until around 2022.
“Congress has been kicking the can down the road on disability insurance reform for decades and 2016 should have been the end of the road—time for meaningful reform. Instead, policymakers want to provide a little more roadway for the disability insurance program by whacking off a portion of Social Security’s roadway.
This isn’t the first time the disability insurance program has run out of money and it isn’t the first time Congress has kicked the can down the road. As recently as 1994, the disability insurance program was about to run out of money and Congress increased the disability insurance payroll tax by 50 percent, from 1.2 percent to 1.8 percent. That increase was coupled with a stark warning that the disability insurance program was in dire need of additional reforms to sustain it over the long run.
What has Congress done to reform the disability insurance program since then? Nothing.
Rather than looking to improve the efficiency and integrity of the program, Congress sat idly by as the percent of the working-age population receiving disability insurance benefits increased from 2.8 percent in 1994 to 5.1 percent today.”
This cash infusion — from Social Security of all places! — merely obfuscates the larger question of true entitlement reform. Using Social Security Trust Fund money was a perfect cover for lawmakers because it can be explained as a routine “reallocation of Social Security funds”, without explaining it is essentially robbing Peter to pay Paul. It is a known fact that both programs are slated to run out of money in the future. This deal just extends the life support for one program, while shortening the life of another.
Though lawmakers made a few minor changes to SSDI, it wasn’t enough. There are major systemic problems with SSDI. Just last month, a report by the Government Accountability Office (GAO) found that for 5 years (FY2009-FY2013), disability payments totaling $371.5 million were overpaid to many individuals — all while the program is running out of money. In this instance, “the SSA’s ‘internal controls’ rely on beneficiaries to self-report overpayments.” Why not fix this problem? Start somewhere. But that would be hard. It’s easier to throw new money at the problem (again) instead of actually tackling tough entitlement reform, thereby kicking the can down the road for future lawmakers to deal with (again). All this deal did was hide the problem so that it did not become an issue for any of the Presidential candidates next year.
Last January, I wrote on this topic, reporting a conversation with Charles Blahous, (a Trustee of the Social Security and Medicare Trust Funds,) about the Social Security situation. Blahous described how “the problem is not that disability needs a bigger share of the overall payroll tax than it now has, but that Social Security as a whole faces a financing imbalance that needs to be corrected. The single most irresponsible response to the pending [disability insurance] trust fund depletion would be to do nothing other than paper it over with a reallocation of funds, delaying meaningful corrective action as long as possible.”
Unfortunately,that’s JUST what we did.
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Washington Free Beacon had a sobering article about the lack of fiduciary responsibility in the Social Security Administration. A report by the Government Accountability Office (GAO) found that for 5 years (FY2009-FY2013), disability payments totaling $371.5 million were overpaid to many individuals. “The report examined how concurrent Federal Employees’ Compensation Act (FECA) payments affect Disability Insurance (DI) overpayments.”
The most recent annual Social Security Trustees report showed that the projected date of insolvency for the Social Security Disability Insurance Trust Fund is late 2016, a date that remained unchanged from the prior year. With this crisis looming in the background, the report of overpayments is especially concerning. From the article:
“The GAO found that SSA did not detect concurrent FECA payments for about 1,040 individuals during at least one month from July 1, 2011, through June 30, 2014.
To test SSA’s internal controls, GAO randomly selected 20 beneficiaries for review. In all 20 cases, SSA’s controls failed to detect and prevent overpayments. In seven of the cases, SSA did not detect overpayments for more than a decade, and each of these individuals received $100,000 in overpaid benefits.
One of these seven individuals received FECA benefits in the 1980s and was approved for disability benefits 14 years later in 1994. The GAO found that this individual received $200,000 in overpayments for more than 20 years.
The SSA’s “internal controls” rely on beneficiaries to self-report overpayments.
“SSA officials told us that if beneficiaries do not self-report benefits, there are no system prompts that would alert SSA staff to ask beneficiaries if they are receiving any workers’ compensation benefits, including FECA payments,” states GAO. “SSA officials agreed that relying on beneficiaries to self-report benefits presents a challenge in identifying overpayments related to the concurrent receipt of FECA benefits.'”
Congress is aware of the projected date of insolvency, but has yet to agree on a path forward. What’s more, the date roughly coincides with the 2016 election, so of course no one is willing right now to make any decisions or provide any possible solutions. Without any changes, benefits will be reduced by nearly 20%. Currently the Disability Trust Fund provides more than $100 billion a year to roughly 11 million recipients, making it the largest government assistance program in the country.
by | ARTICLES, BLOG, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, SOCIAL SECURITY, TAXES
Last week, the Washington Examiner did a nice job covering the growing Social Security Disability Insurance (SSDI) crisis, and Congress’s recent response to it. The issue at stake is the 2016 benefit adjustment, which would cut 20% of benefits for more than 10 million SSDI recipients:
“Many Democrats want to sweep the problem under the rug with an accounting gimmick that would merge the disability trust fund with the general Social Security trust fund, which, on paper, isn’t expected to be depleted until 2034. But House Republicans passed a rule [Tuesday] to protect the broader Social Security program from being raided.
In 1994, the payroll tax rate was reallocated between Social Security’s two trust funds to avoid depletion of the disability insurance fund, but another reallocation would ignore Social Security’s long-term funding issues.”
The idea for reallocation came from the bleak 2014 Social Security Trustees report, which described, “Lawmakers may consider responding to the impending [Disability Insurance] Trust Fund reserve depletion, as they did in 1994, solely by reallocating the payroll tax rate between [Old-Age and Survivors Insurance] and DI. Such a response might serve to delay DI reforms and much needed financial corrections for OASDI as a whole. However, enactment of a more permanent solution could include a tax reallocation in the short run.”
The reallocation response would be merely a bandaid, ignoring the overall Social Security funding crisis, which is why the House passed a rule prohibiting reallocation unless it is combined with “benefit cuts or tax increases that improve the solvency of the combined trust funds”. That is to say, there must be some act of long-term reform.
Apparently, the Left was having none of that; responses were swift and sharp. The LA Times headline screamed, “On Day One, the new Congress launches an attack on Social Security”. The paper further described how,
“The rule hampers an otherwise routine reallocation of Social Security payroll tax income from the old-age program to the disability program. Such a reallocation, in either direction, has taken place 11 times since 1968, according to Kathy Ruffing of the Center on Budget and Policy Priorities.
But it’s especially urgent now, because the disability program’s trust fund is expected to run dry as early as next year. At that point, disability benefits for 11 million beneficiaries would have to be cut 20%. Reallocating the income, however, would keep both the old-age and disability programs solvent until at least 2033, giving Congress plenty of time to assess the programs’ needs and work out a long-term fix.”
Clearly, Democrats doesn’t see the irony of having to reallocate 11 times already as an major fiscal problem. I’m betting that every time there was a reallocation, it was to give Congress “plenty of time to assess the programs’ needs and work out a long-term fix.” In other words, kick the can again because the issue is politically unpalatable.
The Washington Examiner spoke to Charles Blahous, a Trustee of the Social Security and Medicare Trust Funds, about the Social Security situation. Blahous described how “the problem is not that disability needs a bigger share of the overall payroll tax than it now has, but that Social Security as a whole faces a financing imbalance that needs to be corrected. The single most irresponsible response to the pending [disability insurance] trust fund depletion would be to do nothing other than paper it over with a reallocation of funds, delaying meaningful corrective action as long as possible.”
You can be sure the Dems will use this issue as a way to stir up the base between now and 2016. Kudos to the new Congress for being willing to discuss and tackle the insolvency problem instead of moving funds around automatically.
