Determining Eligibility for Disability Benefits: Challenges Facing the Social Security Administration

Comments for the Record

United States House of Representatives

Committee on Ways and Means

Social Security Subcommittee

Hearing on Determining Eligibility for Disability Benefits:

Challenges Facing the Social Security Administration

Wednesday, September 6, 2017, 10:00 AM

By Michael G. Bindner

Center for Fiscal Equity

Chairman Johnson and Ranking Member Larson, thank you for the opportunity to submit my comments on this topic. I will leave it to the Administration witnesses to address their experience with eligibility decisions and address how they might be improved with reform. As usual, our comments are based on our four-part tax reform plan, which is as follows:

• ·         A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something.
• ·         Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25% in either 5% or 10% increments.  Heirs would also pay taxes on distributions from estates, but not the assets themselves, with distributions from sales to a qualified ESOP continuing to be exempt.
• ·         Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.
• ·       A VAT-like Net Business Receipts Tax (NBRT), essentially a subtraction VAT with additional tax expenditures for family support,  health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age sixty.

While some beneficiaries become disabled on the job and must stop work immediately, others have lost jobs, possibly because of their disability and possibly because of the Great Recession. Many workers have been hired back, but for others, getting a new job has become impossible through either age or disability, especially those with behavioral disorders.

Long before applying for disability, workers have applied for jobs and have been denied. Hiring managers are, therefore, the first line of examination as to whether an unemployed worker is able to return to work, regardless of any legal protections designed to protect their employment rights. Those same managers are the gatekeepers keeping people on disability, regardless of what government claims examiners and doctors determine. If disability payments are available, it is not even worth the considerable effort to try to get back to work.

Should the disabled remain idle? No. Psychiatric and physical rehabilitation programs could carry a stipend with them rather than or in addition to disability benefits, which for some workers are often too low for an adequate standard of living. Such programs should be made available to Medicare beneficiaries (which is not now the case), instead of just Medicaid recipients. These stipends should be at least the same as the minimum wage (which should be $15 per hour) and the children of beneficiaries, like all children, should get a refundable tax credit of $1000 per month per child rather than a payment based on parental salary history.

Waiting limits can be eliminated entirely, which saves money on legal fees. The initial award can be made in cooperation with the last employer, who would provide at least a portion of disability income as well as rehabilitative training in lieu of a higher disability insurance tax payment. Such a system would bring about faster determinations of disability and less need for appeals.

Even before a disability determination is made, stipend supplemented PRP and physical therapy programs will ease the burden of a long examination process. If someone leaves hospitalization for a disabling condition without a job, such programs should be automatically referred. Indeed, people in partial hospitalization or intensive outpatient therapy who are not employed and probably not employable should start receiving money without any application process. This should also be the case for newly treated substance abuse patients.

Some are mentally disabled due to parental drug use or simply bad educational services. Remedial education should also be paid at the minimum wage with the same stipend. You will find many leaving SSI given such provisions (where they were channeled by state welfare agencies when Messrs.. Clinton and Gingrich ended welfare as we know it). It is time to end TANF and Food Stamps as we know them and start paying people to be able to live up to their full potential.

These programs would be funded by the Net Business Receipts Tax/Subtraction VAT proposed in our tax reform program. Employers could either fund the government or sponsor these services themselves for prior employees or employee family members, including siblings.

If vocational or educational training is required, as it likely should be in some cases, then the training provider will serve as both “case worker” and conduit for additional benefits, including the Child Tax Credit. Participants would be paid the minimum wage for engaging in training, along with any additional stipend provided to program beneficiaries of the benefit level were set higher.

Client health care would be funded by the federal government, but could conceivably be provided through the health care system provided to employees of the training provider. This is also our proposal for providing education to TANF beneficiaries. This care could take the form of health insurance or of staff medical personnel and facilities. In the event health care reform devolves into a public option or single payer system, the question of who pays for health care will be moot.

Program participants, like TANF participants, would not pay OASI employee payroll taxes, nor would program providers pay an employer contribution on their behalf nor distribute any personal retirement account shares to them as an offset to their Net Business receipts taxes.

Unless they have significant outside income from an inheritance, tort judgment or lottery prize, it is doubtful that program participants will be hit with the Income and Inheritance Surtax. In any case, benefits and tax credits received would not be counted in determining adjusted gross income for this tax, although training stipends probably should be.

Program participation should not be means tested based on any judgment, although beneficiaries of significant inheritances should probably be excluded from the program, although that level should be set rather high – likely at the level where such benefits are taxed, currently proposed at $50,000 for individuals and $100,000 for joint filers and qualifying widow(er)s.

Increases in revenue, in this case, the Net Business Receipts Tax may indeed be required periodically under the logic of social insurance.

As stated previously, the logic of social insurance is to spread out benefits and harms from unearned demographic factors. Some people come from large families or rich families who can cushion the blow for a disabled child or sibling will have no problem making up for program short-comings. Those who have no family or whose illnesses have estranged them from their families would experience unearned hardship.

Resorting to increased public funding to adequately fund the program in current years by adjusting the NBRT should happen without controversy – especially given the incentives to minimize costs inherent in allowing employers a role in the determination and rehabilitative process. One could even imagine leaving the setting of the NBRT rate to a formula based on the needs of the various programs it funds and the extent to which employers utilize alternatives. Indeed, a high NBRT rate might lead to zero collections if it spurs employer action to improve services to employees.

Thank you for the opportunity to address the committee.  We are, of course, available for direct testimony or to answer questions by members and staff.