Improving Economy Means Fewer People Seeking Disability Benefits

Applications and approvals for Social Security Disability Insurance (SSDI) were both down in 2012, which could be another small sign that the labor market continues to improve.

There were 2.82 million applications for SSDI last year, a drop of just under 60,000 from 2011. The number of people approved for monthly benefits was 979,973, the fewest since 2008.  Beneficiaries receive payments that average $1,111 per month.

The slight drop mirrors the slight drop in unemployment levels for 2012. The unemployment rate fell about one-half of 1 percentage point – 8.3 percent to 7.8 percent – from January to December.

This is the second year in a row that applications for SSDI declined, which is somewhat of a surprise given the fact the baby boom population has been pushing through the system, increasing the number of people who are prone to disabilities.

“Social Security anticipated an increase in the number of disability applications as the baby boom generation aged,” Patti Patterson, regional communications director for the Social Security Administration, told Debt.org. “But the economy also is a factor, and we saw increases beyond the estimated demographic effects in the late 2000s. Recently, however, the numbers are lessening because of the continuing economic recovery.”

The number of applications and approvals peaked in 2010 when nearly 3 million people applied and just over 1 million were approved for benefits. This coincided with the height of the Great Recession when unemployment numbers reached 9.9 percent.

SSDI was created in 1956 as a safety net for people who could no longer work because of illness or injury. The program originally was restricted to people between the ages of 50 and 65, and was meant to help those with serious illnesses such as cancer or heart disease.

It was soon expanded to include anyone who had worked and paid Social Security taxes for at least five years. The number of people receiving benefits reached 1 million adults in 1966, then nearly tripled to 2.8 million by 1977 and tripled again to 8.8 million by the end of 2012.

Program on Brink of Insolvency

The surge in claims has pushed the program to the brink of insolvency. The Congressional Budget Office expects SSDI to be insolvent as soon as 2016. Since 2009, the program has been paying out more than it takes in. In 2011, $128 billion was paid out, but program revenues were only $94 billion.

Not everyone attributes the long-term surge in numbers to the slow economy.

Oklahoma Sen. Tom Coburn, the top-ranking Republican on the Senate Permanent Subcommittee on Investigations, conducted an investigation in 2012 that determined that benefits were being awarded improperly because the system was being overwhelmed by applications.

Coburn claimed that judges weren’t able to “properly address insufficient, contradictory or incomplete evidence.”

“The administrative law judges are not looking at the cases because the pressure from Social Security is to get the cases out,” Coburn told The Associated Press. “I think you could flip a coin for anybody that came before the Social Security commission for disability and get it right just as often as the (judges) do.”