INFORM+INSPIRE The Griffith Insurance Education Foundation Disability in America: The Toll it Takes and Why Taxpayers Should Care Conrad S. Ciccotello Dept. of Risk Management and Insurance Executive Director- Huebner Foundation Georgia State University

Disability Defined  Inability to perform “Own Occupation” - your current job  Inability to perform “Any Occupation for which qualified” - by education and/or experience  Inability to engage in “any substantial gainful activity” The Griffith Insurance Education Foundation

INFORM+INSPIRE The Griffith Insurance Education Foundation

Disability in America  Is exploding in terms of numbers and dollars  Social Security Disability Insurance (SSDI) payments were $92B in 2006 and $140B in  Now 1 disabled worker for every 16 employed workers. In some US counties, the ratio is 1 in 4. The Griffith Insurance Education Foundation

How did we get here? What “WE” mean by disability (for SSDI) 1.Cannot do the work you did before 2.You cannot adjust to other work due to medical conditions, and… 3.Your disability >1 year or result in Death But changes in law (e.g.,1984) and… Growth of private incentives (e.g, law firms, firms paid to get individuals off welfare and on SSDI) have had an impact. The Griffith Insurance Education Foundation

Disability and Unemployment  Over the past three decades, the unemployment rate and the number of disability applications have been positively correlated.  Federal disability rolls grew rapidly after reforms that made states pay more for welfare. The Griffith Insurance Education Foundation

Shocks to Private Disability Market  Private disability market has been bitten before - explosion in claims by doctors during the “managed care” boom in the early 1990s  The combination of “own occupation” and residual coverage meant doctors could earn as much or more by not working as by working.  Firms tightened standards and underwriting. Some also dropped out of market...a private market option The Griffith Insurance Education Foundation

Public Programs  Difficult to tighten disability standards in the political arena.  The marginal case is typically a family who is in a tough situation. Government is faceless, and has no “advocate” in the current ALJ process.  Also consider challenges in fraud detection. The Griffith Insurance Education Foundation

Public Programs and Labor Markets  Estimates are that workforce participation among SSDI recipients would be about percent higher but for SSDI (Autor and Duggan, NBER)  A “growing fraction of discouraged and displaced workers are seeking SSDI benefits.” The Griffith Insurance Education Foundation

Forecasting Employment  Is the increase in discouraged and displaced workers cyclical or permanent?  Destruction/disruption in the labor markets is an elephant in the room…driven by technology and global competition  Is this destruction in the “early innings,” or almost played out? The Griffith Insurance Education Foundation

Insurance Economics  Writers of insurance lose when the volatility of the underlying increases over time but the premiums do not increase…  Changes in labor market are creating more winners and losers..“superstar economics”  “Losers” growingly have an “in the money” put option (disability) on their human capital The Griffith Insurance Education Foundation

Rational Incentives  If I can only make $8 an hour, SSDI plus the Medicare coverage I will get in two years is close to a breakeven proposition.  I do give up the upside on the amount I can make…but it does not look good out there.  Especially if my job requires physical labor and/or standing up, and my back hurts… The Griffith Insurance Education Foundation

State Policy Implications  Disabled people live in states. States face both direct and spillover costs of disability  What to do? Programs and policies…  Vocational Rehabilitation – 1 client at a time  Health Care – disability specific programs  Job environment – pay that moves SSDI option “out of the money” The Griffith Insurance Education Foundation

Summary  Below the numbers, a story behind each disability case  By the numbers, the growth in disability is much faster than the growth of the economy  From a policy perspective, victories earned one case at a time. The Griffith Insurance Education Foundation

Sources, Comments and Questions  I hope this was informative and maybe even provocative.  It would be great to hear your comments and thoughts!  Two particularly interesting source materials: (Chana Joffe-Walt), NBER (Autor and Duggan) The Griffith Insurance Education Foundation