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Social Security Disability Waste

Saturday June 6th, 2015   •   Posted by Craig Eyermann at 6:34am PDT   •  

SocialSecurity When we surveyed the state of Social Security’s Disability Insurance program’s finances earlier this week, we didn’t realize that there would be breaking news regarding a high level of easily preventable waste in the program. Stephen Ohlemacher of the Associated Press reports:

Social Security overpaid disability beneficiaries by nearly $17 billion over the past decade, a government watchdog said Friday, raising alarms about the massive program just as it approaches the brink of insolvency.

Many payments went to people who earned too much money to qualify for benefits, or to those no longer disabled. Payments also went to people who had died or were in prison.

In all, nearly half of the 9 million people receiving disability payments were overpaid, according to the results of a 10-year study by the Social Security Administration’s inspector general.

The 9 million recipients of Social Security is an interesting number in the context of analysis recently provided at Political Calculations, which estimated that a little over 10 percent of that figure actually represents people who were effectively “dumped” into Social Security’s disability program after their long-term unemployment benefits ran out, as the disability insurance program’s eligibility requirements and oversight were apparently relaxed in the period following the December 2007 economic recession.

Ohlemacher goes on to quantify both how much money Social Security paid out in disability benefits in 2014 and also how much those who receive its disability benefits are paid annually:

Social Security paid out $142 billion in disability benefits last year. Unless Congress acts, the trust fund that supports the disability program will run dry sometime during the final three months of 2016, according to projections by the trustees who oversee Social Security. At that point, the program will collect only enough payroll taxes to pay 81 percent of benefits.

That would trigger an automatic 19 percent cut in benefit payments. The average monthly payment for a disabled worker is $1,165, or about $14,000 a year.

Doing some quick math, when Social Security’s Disability Insurance trust fund is fully depleted, as expected sometime in the final three months of 2016, the average monthly payment for a disabled worker would drop to $943.65, putting his or her annual income from the program at about $11,324 per year.

Something very similar will happen in less than 20 years when Social Security’s Old Age and Survivors Insurance Trust Fund is depleted. Only then, the cuts will be larger and will affect every American who receives Social Security benefits. Including people who are receiving Social Security benefits today, who can reasonably expect to live at least another 20 years, whose retirement benefits will then be cut by somewhere between 23 percent and 26 percent.

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June 2015