SSD Trust Fund Projected to Run Out Of Cash By 2016

Edited by Dan Frey

The disabled become victims of a failing economy

I am summarizing a report written by Brian Faler for The Washington Post May 30, 2012. The Social Security disability program’s trust fund is projected to run out of cash far sooner than the better-known Social Security retirement plan or Medicare. That will trigger a 21 percent cut in benefits.

Part of the reason for the rapidly increasing costs is that the 77 million baby boomers projected to swamp federal retirement plans will reach the disability program first. That’s because almost all baby boomers are at least 50 years old, the age at which someone is most likely to become disabled.

The growing costs are also a result of the failing economy. When people can’t find work and run through their other benefits, many turn to disability benefits for assistance.

Applications to the disability program have risen more than 30 percent since 2007 and the number of Americans receiving disability benefits is up 23 percent.

The disability program pays benefits averaging $1,111 a month, with the money coming from the Social Security payroll tax. The program cost $132 billion last year, more than the combined annual budgets of the departments of Agriculture, Homeland Security, Commerce, Labor, Interior and Justice. That doesn’t include an additional $80 billion spent because disability beneficiaries become eligible for Medicare, regardless of their age, after a two-year waiting period.

The disability program is projected to exhaust its trust fund in 2016, according to a Social Security trustees report released last month. Once it runs through its reserve, incoming payroll-tax revenue will cover only 79 percent of benefits, according to the trustees. Because the plan is barred from running a deficit, aid would have to be cut to match revenue.

People whose benefit applications are rejected can appeal to administrative-law judges, and statistics show some judges are far more likely to approve benefits than others. One reason is that the program, which once focused largely on people who suffered from strokes, cancer and heart attacks, increasingly supports those with depression, back pain, chronic fatigue syndrome and other comparatively subjective conditions.

Statistics show that once people enter the program they are unlikely to leave, with fewer than 1 percent rejoining the workforce. Many worked “menial” jobs that didn’t offer health insurance, and the program gives them an opportunity to join Medicare long before they might otherwise qualify.

The agency faces a backlog of 1.4 million reviews it’s supposed to periodically conduct to ensure beneficiaries are entitled to stay on the rolls. The agency has said it doesn’t have the money to do the reviews.

Some government officials are more optimistic than others about adequately funding the disability program and avoiding this catastrophe.