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The Importance of Private and Public Safety Nets: A Comparison of Approved and Denied SSDI/SSI Applicants Kathleen McGarry and Jonathan Skinner Presentation.

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Presentation on theme: "The Importance of Private and Public Safety Nets: A Comparison of Approved and Denied SSDI/SSI Applicants Kathleen McGarry and Jonathan Skinner Presentation."— Presentation transcript:

1 The Importance of Private and Public Safety Nets: A Comparison of Approved and Denied SSDI/SSI Applicants Kathleen McGarry and Jonathan Skinner Presentation prepared for the 14 th annual Retirement Research Consortium August 2-3, 2012, Washington DC

2 Well-Being of Disabled at Older Ages SSDI Eligibility You are not working, or working very little Your disability is severe, cannot do basic work activities such as walking, standing, or remembering Your disability has lasted or is expected to last at least a year or result in death You cannot do the work you did before Your disability prevents you from doing other work SSDI does not give benefits if you are partially disabled, or if your disability is short-term.

3 Determination Process In many cases determination is subjective Difficult to assess degree of disability (partial/total) Difficult to assess permanence of disability Research has demonstrated variation: Over time in application and acceptance rates (Autor and Duggan) Across examiners (Maestas, Mullen, Strand)

4 Determination Process Expect errors to be made in both directions Those who are denied after appeals have significant time out of the labor force Can be debilitating even to those who try to return to work Both accepted and denied applicants likely to suffer economic losses

5 We ask: How do two groups of disabled fare at 65? Relative to each other Relative to non-disabled What other resources do disabled individuals have? How do those denied benefits compensate for lack of SSDI/SSI income? Earnings Spousal income Family support Other public support

6 Why age 65? Wont apply / appeal at later date Disability record fixed Unlikely to return to the labor market Income stream likely stable for rest of their lives Social Security, Pensions Near peak of assets in life cycle model Spend down over remainder of life Stock of health at old age Health needs affect how quickly resources are used Longevity affects time over which individual must fund consumption

7 What do we expect for recipients? Lower lifetime income Benefits replace ~42% earnings Less savings / quicker spend down of assets Lower Social Security benefits with short work life Lost or reduced pension from employer Eligible for Medicare but worse health Greater health service use Greater ADLs and other uncovered ltc care needs Loss of retiree health insurance Greater OOPME, loss of assets and current expense

8 What do we expect for those denied? Could be incorrectly denied benefits: Truly disabled but no assistance Could be correctly denied but work limited: Still face partial disability that restricts labor market activities Could be correctly denied but scarred by process: Disability resolves itself over time Never truly disabled Time out of labor market reduces labor market opportunities

9 What do we expect for those denied? Lower lifetime income Less savings / quicker spend down of assets No SSDI to replace portion of earnings Lower Social Security benefits with short work life Lost or reduced pension No Medicare and No employment related health insurance but worse health Greater health service use Greater ADLs and other uncovered care needs Loss of retiree / employee health insurance Greater OOPME, loss of assets, current expenses

10 Outcomes Examined Examine financial / health status for each group: Successful applicants (69 % successful) Unsuccessful applicants (after all appeals) Never applied Examine at age 65 Know application / appeals process complete Labor force participation likely complete Health / disability unlikely to improve Go back in time to examine at application Where they started

11 Outcomes Income Total household income Individual income components broken down by: Own income Spousal income Family income Assets With and without value of home

12 Outcomes Health status Self-reported health status Depression Service use (doctor visits, hospital stays) Mortality Family assistance Time Financial

13 Health and Retirement Study Nationally representative survey of the older pop Use observations for all cohorts Select those individuals observed at age 66 / 67 to measure income at age 65 Detailed information on income, assets, health, medical spending / service use Information on family transfers Importantly information on SSDI / SSI applications, awards, benefits

14 Means of Variables by Disability Status at Age 66 / 67 Never Applied (8,824) Denied Benefits (556) Received Benefits (1,181) Demographic Characteristics: Age66.766.566.6 Nonwhite0.160.31 Coupled0.760.580.59 Schooling12.4910.5710.54

15 Means of Variables by Disability Status at Age 66 / 67 Never AppliedDenied BenefitsReceived Benefits Health information: Ex / vg0.460.140.10 Good0.330.260.23 Fair0.160.350.37 Poor0.040.250.29 Depression0.150.390.44 Died during survey0.130.220.24 Age at Death (if obs)7371

16 Means of Variables by Disability Status at Age 66 / 67 Never AppliedDenied BenefitsReceived Benefits Health information: # Doctor visits8.617.617.1 # Hospital nights1.75.55.8 Note all should have Medicare coverage, SSI recipient have Medicaid as well

17 Means of Variables by Disability Status at Age 66 / 67 Never AppliedDenied BenefitsReceived Benefits Financial information: Total Income70,37830,47832,662 Total Assets602,432175,532210,040 Non-housing Assets407,73687,054128,621 Percent Poor *5.72125 *Poverty based on own / spousal income and needs, income includes food stamps per RAND file.

18 Means of Variables by Disability Status at 66 /67 Never AppliedDenied BenefitsReceived Benefits Own income components: Percent any work34.212.67.2 Own earnings10,9712,000941 SSDI/SSI654843,110 SS retirement10,2768,8068,019 Pension7,1403,2432,810 WC/UI/Other govt828986863

19 Means of Variables by Disability Status at 66 / 67 Never AppliedDenied BenefitsReceived Benefits Spousal Income: (conditional on being married) Total income26,55618,28318,591 Household income components: HH asset inc16,7412,7263,807 HH other5,8211,8882,256

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21 Differences at Application Compare groups at (first) SSDI/SSI application What differences existed when they applied before deleterious effects of SSDI/SSI? Time out of labor force (decay) and depressed lfp Health conditions and oopme Spend down of assets If never applied use first observation If applied before first interviewed: Use first observation Use only those who applied after survey began

22 Means of Variables by Disability Status at Age 66 / 67 Never Applied (8,824) Denied Benefits (556) Received Benefits (1,181) Demographic Characteristics: Age5657.657.5 Nonwhite0.160.31 Coupled0.760.580.59 Schooling12.4910.5710.54

23 Means of Variables by Disability Status at First Obs Never Applied (7,652) Denied Benefits (493) Received Benefits (1,082) Health: Ex / vg0.600.110.08 Good0.290.240.19 Fair0.120.340.37 Poor0.090.310.37 Depressed0.170.490.48 # Doc visits3.412.715.5 # hospital nights0.44.36.2 SSDI / SSI recipients should have Medicare / Medicaid benefits

24 Means of Variables by Disability Status at Application (those who applied after survey began) Never Applied (7,652) Denied Benefits (269) Received Benefits (509) Health: Ex / vg0.600.100.11 Good0.290.240.21 Fair0.120.360.39 Poor0.090.310.29 Depressed0.170.490.47 # Doc visits3.416.020.0 # hospital nights0.45.78.6 Recipients should have Medicare benefits

25 Means of Variables by Disability Status at First Observation Never Applied (7,652) Denied Benefits (493) Received Benefits (1,087) Financial: Total Income85,45836,10637,532 Total Assets416,094149,628157,180 Non-housing Assets282,65883,75591,840 Percent poor5.632.031.6

26 Means of Variables by Disability Status at Application (Those who apply at or after first interview) Never Applied (7,652) Denied Benefits (269) Received Benefits (509) Financial: Total Income85,45835,64044,168 Total Assets416,094144,682182,786 Non-housing Assets282,65878,307113,568 Percent poor5.633.925.3

27 Means of Variables by Disability Status at First Observation Never AppliedDenied BenefitsReceived Benefits Income components: Own earnings36,1967,9996,189 Working0.750.220.12 SSDI/SSI355714,937 SS retirement3491,044414 Pension1,9171,6771,456 WC/UI/Other govt8871,8071,977

28 Means of Variables by Disability Status at First Observation Never AppliedDenied BenefitsReceived Benefits Spousal income: Total income36,02024,23621,060 Household income: HH asset inc12,3384,5583,936 HH other3,7682,2294,509

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30 Familial Support Some financial support from children may be limited due to: SES of children correlated with parents SES Age of children (35-40) Reporting biases (receipt under reported) Time help more common among lower income families Time help with caregiving, ADLS as well as chores

31 Means of Variables by Disability Status at 66 / 67 Never Applied Denied Benefits Received Benefits Received any cash from kids2.95.94.3 Amount if > 06,8983,8534,184

32 Means of Variables by Disability Status at 66 / 67 Never Applied Denied Benefits Received Benefits Received any cash from kids2.95.94.3 Amount if > 06,8983,8534,184 Received help with personal care1.712.915.5 Hours/month if > 065.495.391.5

33 Means of Variables by Disability Status at 66 / 67 Never Applied Denied Benefits Received Benefits Received any cash from kids2.95.94.3 Amount if > 06,8983,8534,184 Received help with personal care1.712.915.5 Hours/month if > 065.495.391.5 Received help with IADLs1.28.812.5 Any time help (excl. chores)1.915.116.7 Any help with chores alone24.848.045.4

34 Any Familial Support

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36 Regression Analyses Do differences by disability status remain after controlling for observable characteristics? Age, race/ethnicity, sex, schooling, marital status, health status Same results as in simple cross tabulations: Large and significant differences in income for those who applied for SSDI and those who did not No significant differences between accepted and rejected

37 Regression Analysis Denied BenefitsReceived Benefits Income measures: Income age 65-14,791***-11,799*** Income first obs-16,191***-13,952*** Asset measures: Assets age 65-129,008*-80,537 Assets first obs-89,333**-71,200** Medical Spending: OOP Age 651,412**378 OOP first obs1,1892,987***

38 Regression Analysis Denied BenefitsReceivedEx Health Income measures: Income age 65-14,791***-11,799***28,165*** Income first obs-16,191***-13,952***29,571*** Asset measures: Assets age 65-129,008*-80,537330,898*** Assets first obs-89,333**-71,200**167,536*** Medical Spending: OOP Age 651,412**378-3,564*** OOP first obs1,1892,987***-1,031

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42 Findings: Disability applicants (rejected & accepted) are significantly worse off than non-disabled in numerous dimensions Income, wealth, and health, health service use Accepted and denied applicants are quite similar to each other across all measures Both before and after No single source of income compensates for lack of SSDI/SSI Children provide assistance through time help more so than cash

43 Insights into eligibility process Low labor force participation / earnings among those denied benefits could indicate: Errors in SSDI/SSI determination Disabilities / difficulties succeeding in the labor market that are not recognized by SSDI / SSI Partial disability, other types of disability Application process takes sufficiently long that disabilities improve but individuals cannot return to labor market without difficulty

44 Insights into eligibility process? Process has sufficient randomness that ineligible individuals gamble, if they lose they are sufficiently scarred by the process that they have difficulty returning to work

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