Senator Tom Coburn, a Republican from Oklahoma, hired a man to trim some trees on his property a couple of years ago.
The job was going well — until the time came to pay the man for his services.
“Could you make the check out to my mom? I’m on disability.”
Apparently this unnamed tree trimmer was unaware his client has made uncovering and eliminating government waste and corruption his overriding goal.
The tree trimmer was shamed into canceling his benefits, and Sen. Coburn went on to lead an investigation into disability benefits through the Senate subcommittee he heads.
What he found from an 18-month investigation into 300 disability claims was shocking: More than 25% of cases reviewed contained evidence that the disability claims were “insufficient, contradictory, or incomplete.” A 2011 internal Social Security investigation pinned the figure closer to 22%.
Last year, SSDI applications were accepted 34% of the time. A whole lot of people are trying to sign up for the dole and check out of the job market.
At that 25% rate found by Sen. Coburn, the amount of new people that started receiving taxpayer checks that shouldn’t comes out to 221,000.
Welcome to the welfare state’s twilight zone, also known as the Social Security Disability Insurance program, where 12 million Americans are collecting nearly $140 billion of taxpayer money.
Paved with Good Intentions
Before we get too far into the sordid details of how Social Security’s Disability Insurance program (SSDI) is being perverted, I will say it has done a lot of good and a large majority of recipients are not abusing the system. And I know this through personal experience.
My father suffered through progressively worsening Multiple Sclerosis until he was forced to retire because of the fatigue and pain that put him in a wheelchair. SSDI doesn’t pay much, but it was enough to replace a portion of his previous salary so that our family could get by with my mother working extra hours. It kept a roof over our heads long enough for my brothers and I to get into the workforce and support ourselves.
I’m sure you or someone you know shares a similar story. No one in such a situation would even think twice about giving up their monthly checks and early retirements for a return to good health and the jobs they were forced to give up.
Unfortunately, that isn’t the case for everyone collecting SSDI benefits. The following chart was created by MIT economist David Autor. It is a bit dated, but lines up perfectly with the recession.
Notice the correlation? What we should be seeing is a steady and slightly upward curve that correlates with the age and growth of the U.S. population (after all, conditions and disabilities are tied to these factors).
Clearly, that’s not what’s happening. Following an uptick in unemployment and as unemployment benefits dry up, people are forced off the regular government dole. However, instead of rejoining the workforce, people are seeking a doctor to declare them unfit to work.
Americans are aging and the population is growing, but nowhere near enough for this to make sense.
Mr. Autor of MIT pointed out that Americans over 50 are far healthier than the same age group was in the 1980s. Demographers have found that the percentage of Americans older than 65 suffering from a chronic disability has fallen drastically since then too.
In the end, economists Mark Duggan and Scott Imberman estimate that — at most — the graying of America’s workers explained just 4% of the increase in the rate of disability program participation for women, and 15% for men.
I want to point out that SSDI enrollment also automatically grants eligibility for Medicare benefits, adding around $60 billion to the taxpayer tab.
This situation gets even more crooked. Thanks to a perversion of federalism, many people transferring to SSDI need barely lift a finger to do it.
State governments are paying companies to do everything for them.
Unintended Consequences
During the Clinton years, the overhaul to welfare programs needed some incentive in order for them to be effective, a carrot on the end of a stick, if you will (of course, the federal government designed it so that the carrot was really just not being beaten by the stick — but it was incentive nonetheless).
The Feds achieved this by forcing states to shoulder the vast majority of welfare and unemployment benefit costs. States would then want to implement programs effective at getting people back to work.
Welfare rolls were cut in half in just a few years — at least, that’s how it looked according to unemployment figures, state figures, and official unemployment numbers.
The incentive method might have worked better if Congress didn’t blur the lines needed to get on SSDI years before. The Reagan administration began trying to thin out the program’s rolls during the 80s, but an outraged Congress lowered the bar for benefits in response.
Suddenly, a new host of ailments — including self-reported pain, mental health problems, and mood disorders — earned far more weight under Social Security’s formula. (Back pain, mental illnesses, and mood disorders are the most commonly cited reasons for SSDI benefits; all fall in a gray zone that requires self-reporting for commonly subjective diagnoses.)
It didn’t take long for states to discover an unintended consequence of the federal law revisions. There were other ways to get people off their balance sheets besides finding them jobs.
SSDI is a federal program that states don’t pay a single cent for. People cannot work while collecting benefits, so moving any and everyone out of the potential workforce is a 100% net gain.
But why wait for people to decide to pursue SSDI benefits when there’s money on the table for states if they proactively find people and match them to doctors? And this is where the private sector comes in.
Why set up a costly state-run program when a company is willing to data mine information and guide people through the process for a fee?
This is exactly what companies like the Public Consulting Group do.
PCG has contracts to do this in 23 states. First, PCG pitches its services to a state or local government. If and when it gets a contract, it works to identify anyone that may be able to get SSDI benefits — everything from medical records to a person’s work history are scrutinized.
When the profiling process is complete, PCG starts cold calling people. When people don’t have the right medical documentation to prove a disability, the agents at PCG help them get it. They’ll call doctors’ offices, X-ray centers, get records faxed. If these records don’t exist, they set up doctor’s appointments and call to verify appointments and office addresses.
Once it has justification, PCG submits the applications on behalf of the applicant and the state. And once it successfully moves someone off of state benefits and onto SSDI, the company is paid.
What’s the going rate for this service? PCG’s new contract with Missouri, for example, will earn the company $2,300 per successful conversion. The state of Missouri is expected to save $80 million overall.
Painful Cuts, Higher Taxes
The only people winning in this arrangement are the call center companies with contracts and the states. And as it seems with most things these days, taxpayers are on the hook the whole time.
This is not what welfare or SSDI was ever meant to become.
A mere 10% of people on SSDI lose benefits because they find work or due to noncompliance; 40% die while collecting benefits and 50% move on to Social Security retirement benefits. All this extra stress tightens the belt for legitimate beneficiaries.
SSDI will run dry in 2016 or 2017. At that point, benefits will be dramatically slashed without additional payroll taxes or federal money. No matter what, the hidden twilight zone of permanent welfare is only going to hurt vulnerable citizens.
If you are unfortunate enough to need these benefits in the future, they will not provide enough even for subsistence living. At the same time, the program continues to drain money from the paychecks and savings accounts of able-bodied, hard-working Americans.
Social Security will need a large increase in funding or slashed benefits in about a decade too.
The takeaway from all this is you need to take your own retirement seriously — because in the end, your well-being and financial security will all fall on you.
