Social Security Disability Insurance is Running Out

The Senate has just released a report on fraud in the Social Security Disability Insurance Fund. The report is titled “How Some Legal, Medical, and Judicial Professionals Abused Social Security Disability Programs for the Country’s Most Vulnerable: A Case Study of the Conn Law Firm”. It describes how a Kentucky-based lawyer named Eric C. Conn allegedly set up a scheme involving administrative law judges and a set of friendly doctors. Conn got 1,800 cases approved between 2006 and 2010. Social security paid Conn’s firm more than $4.5 million in attorney fees.

Disability claims have risen 20% in the past 6 years, and 45% in the past decade. Today around 11 million people collect from the Social Security Disability Fund. Since unemployment spiked and then unemployment benefits ran out, more and more people have been seeking to collect disability. Once on Social Security disability, less than 0.5% of beneficiaries left disability rolls to work again per year. That is compared to employer sponsored disability plans which typically return 20% of their long-term claimants to the workplace each year.

With the Social Security Disability Insurance Fund predicted to run dry in 2016, the problem has become acute. The average disability check is about $1,100 per month. When the fund runs out, people could see a 20%-25% cut in benefits. To put the problem in perspective, the fund has been running a deficit since 2009. In 2012, the Social Security Disability Insurance program spent $140.3 billion, $136.9 billion of which went to benefit payments.  In 2012 the fund took in only $109.1 billion, however, and only $85.6 billion in net payroll tax contributions.

The math simply doesn’t add up. When the fund runs out, continuing income would only be able to pay for 80% of current scheduled benefits. This would be paid for by the Disability insurance payroll tax which totals 1.51% between employer and employee contributions. Either benefits will be cut, this tax will be raised, or both.

Additional Resources

60 Minutes, What Happens When the U.S. Disability Fund Runs Dry? http://www.cbsnews.com/8301-504803_162-57606236-10391709/what-happens-when-the-u.s-disability-fund-runs-dry/

Government Executive, Senate Panel Exposes Fraud in Social Security Disability Program: http://www.govexec.com/management/2013/10/senate-panel-exposes-fraud-social-security-disability-program/71465/

Daily Finance, Social Security Judge Accused of Running Disability Fraud Scheme: http://www.dailyfinance.com/2013/10/07/social-security-judge-accused-of-running-disability-fraud-scheme/

C-Span, Senate Committee Looks at Social Security Disability Fraud: http://www.c-span.org/Events/Senate-Committee-Looks-at-Social-Security-Disability-Fraud/10737441908-1/

Senator Tom Coburn, HSGAC Senators Release Social Security Disability Fraud Report: http://www.coburn.senate.gov/public/index.cfm/pressreleases?ContentRecord_id=e2d6986b-9afe-4ac7-84f5-8a66092e8a04&ContentType_id=d741b7a7-7863-4223-9904-8cb9378aa03a&Group_id=7a55cb96-4639-4dac-8c0c-99a4a227bd3a&MonthDisplay=9&YearDisplay=2012

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