Having examined the sad state of entitlement programs in the United States for years now, I read a rather disturbing article about Social Security's Disability Insurance (SSDI) program. SSDI provides monthly payments to those who become physically or mentally disabled and are no longer able to work. A portion of workers' payroll taxes is used to fund the program, just as payroll taxes also fund Social Security and Medicare benefits for the elderly. However, this program will soon run out of money without some type of reform, which is unlikely. Thus the the federal government will likely borrow money and add to the national debt in order to keep it afloat. (See Wall Street Journal's, ”Insolvency Looms as States Drain U.S. Disability Fund.)
There is a strange dichotomy going on here: Today's economy is more conducive to workers of all physical abilities than the economy of 50 years ago. The Americans with Disabilities Act requires employers to make reasonable accommodations for those with disabilities who want to work. Furthermore, many of today's jobs do not require the back-breaking work that was characteristic of the Industrial Revolution and the decades that followed. Advances in medicine enable people with chronic conditions to live longer and even work a few more years that was thought possible even 20 years ago.
But the rolls of those filing and receiving disability payments are growing. The WSJ article specifically mentions the high amount of approved first-time claims in Puerto Rico. Coupled with the island's high unemployment rate, doctors say that when people cannot find jobs, they apply for disability. So is disability the new unemployment insurance?
While the article sugge
sts a possibly correlation between high
unemployment rates and high percentages of disability payment recipients, there is a much larger problem with the SSDI program. Nobody has any skin in the game. Sure, a worker pays into the system through payroll taxes, but that money does not go into a personal account to pay disability expenses specifically for that worker. That money cannot be used by the worker to purchase a private disability policy that would best suit his or her needs. Bottom line: A worker has no incentive to look at how payroll taxes are being spent since he or she has no control over them once they are deducted from a paycheck. Because the worker has no control over the money that is paid into the system, the worker has little incentive to exercise caution and good judgment over when and under what conditions to file a disability claim. As a result, doctors have little incentive to assess if a worker is truly disabled and not just gaming the system. The claim goes into the hands of a third party (an administrative law judge) who determines the outcome. No real incentives, no cost controls. To add insult to injury, those who do receive disability are discouraged from working to add to their income since they run the risk of losing their benefits.
Thus, nobody really wins in this sytem, except those who wish to exploit it. Compare this to the Chilean disability system (of which NCPA senior fellow Estelle James has written numerous reports). In Chile, workers contribute to their own personal disability accounts and they can continue working while receiving disability payments. There are also safeguards in place for those who do not have enough money in their balances to receive a lifetime annuity at a specified level.
If Chile can do this, why not the United States?