oversight

Social Security: Disability Programs Lag in Promoting Return to Work

Published by the Government Accountability Office on 1997-03-17.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Committees




March 1997
                 SOCIAL SECURITY
                 Disability Programs
                 Lag in Promoting
                 Return to Work




GAO/HEHS-97-46
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division

      B-275774

      March 17, 1997

      The Honorable William V. Roth, Jr.
      Chairman
      The Honorable Daniel Patrick Moynihan
      Ranking Minority Member
      Committee on Finance
      United States Senate

      The Honorable Bill Archer
      Chairman
      The Honorable Charles B. Rangel
      Ranking Minority Member
      Committee on Ways and Means
      House of Representatives

      Each week the Social Security Administration (SSA) pays over $1 billion in
      cash benefits to people with disabilities who are beneficiaries of Disability
      Insurance (DI) and Supplemental Security Income (SSI). The size of the
      working-age beneficiary population has grown rapidly over the past
      decade, increasing by 65 percent. However, not more than 1 in 500 DI
      beneficiaries, and few SSI beneficiaries, have left the rolls to return to
      work. Therefore, although they may provide a measure of income security,
      DI and SSI do little to enhance work capacities and promote economic
      independence.

      Yet societal attitudes, as reflected in the Americans With Disabilities Act
      (ADA), have shifted toward goals of economic self-sufficiency and the right
      of people with disabilities to full participation in society. Moreover,
      medical advances and new technologies provide more opportunities than
      ever for people with disabilities to work. Although at one time the
      common business practice was to encourage someone with a disability to
      leave the workforce, today a growing number of private companies have
      been focusing on enabling people with disabilities to return to work.

      In testimony before the Senate Special Committee on Aging on June 5,
      1996, and in two reports to the committee issued in April and July 1996,1
      we discussed why so few DI and SSI adult beneficiaries with disabilities


      1
       Social Security: Disability Programs Lag in Promoting Return to Work (GAO/T-HEHS-96-147, June 5,
      1996); SSA Disability: Program Redesign Necessary to Encourage Return to Work (GAO/HEHS-96-62,
      Apr. 24, 1996); and SSA Disability: Return-to-Work Strategies From Other Systems May Improve
      Federal Programs (GAO/HEHS-96-133, July 11, 1996).



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                   return to work2 and how strategies from other disability systems could
                   help restructure DI and SSI to improve return-to-work outcomes. This
                   report updates the information in those previous reports that was based
                   on surveys of private sector leaders in developing return-to-work
                   programs; interviews with federal and state agency officials, experts, and
                   advocates and officials in Germany and Sweden; analysis of SSA’s
                   administrative data; and focus groups with beneficiaries.3 Although we did
                   not independently verify the data used in the analysis of this report, the
                   data cited came from either U.S. government data systems or issue area
                   experts. Except for this, our work was performed in accordance with
                   generally accepted government auditing standards in November and
                   December 1996.


                   Design and implementation weaknesses in the DI and SSI programs hinder
Results in Brief   maximizing beneficiary work potential. The application process places a
                   heavy emphasis on work incapacity and presumes that many medical
                   impairments preclude employment. And SSA does little to provide the
                   support and assistance that many people with disabilities need to work.
                   Not surprisingly, these and other program weaknesses yield poor
                   return-to-work outcomes and mean that DI and SSI have not kept pace with
                   societal trends toward the economic self-sufficiency of people with
                   disabilities.

                   Lessons learned from return-to-work strategies and practices now used in
                   the U.S. private sector and in other countries may hold potential for
                   improving federal disability programs by helping people with disabilities
                   return to productive activity and at the same time reduce cash benefits. SSA
                   serves a population with a wide range of disabilities that often may be
                   more severe than the disabilities of the average person served by U.S.
                   private sector programs. Therefore, SSA may face greater difficulty in
                   returning some of its clients to the workplace. The experiences of the
                   social insurance programs of Germany and Sweden, however, show that
                   return-to-work strategies are applicable to government-scale programs
                   serving a broad and diverse population with a wide range of work
                   histories, job skills, and impairment types.

                   Our analysis of practices advocated and implemented by the private sector
                   in the United States and by social insurance programs in Germany and

                   2
                    By return to work, we refer to both the reentry into the labor force of people with work experience
                   and the initial entry of people with no work history.
                   3
                   See GAO/HEHS-96-62 and GAO/HEHS-96-133 for a more detailed discussion of the scope and
                   methodology of these analyses.


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                 Sweden revealed three common strategies in the design of their
                 return-to-work programs:

             •   Intervene as soon as possible after an actual or potentially disabling event
                 to promote and facilitate return to work.
             •   Identify and provide necessary return-to-work assistance and manage
                 cases to achieve return-to-work goals.
             •   Structure cash and health benefits to encourage people with disabilities to
                 return to work.

                 Disability managers emphasize that these return-to-work strategies are
                 interrelated and work most effectively when integrated into a
                 comprehensive return-to-work program. They spend money on
                 return-to-work efforts because they believe these efforts are sound
                 investments that reduce disability-related costs.

                 Although SSA faces constraints in applying these strategies, opportunities
                 for better identifying and providing assistance to enable more of SSA’s
                 clients to engage in work could be created. The portion of DI and SSI
                 beneficiaries that could return to work if given the appropriate supports
                 and services is unknown. But if an additional 1 percent of the 6.6 million
                 working-age SSI and DI beneficiaries were to leave SSA’s disability rolls by
                 returning to work, lifetime cash benefits would be reduced by an
                 estimated $3 billion.4 These reductions, however, would be offset, at least
                 in part, by rehabilitation and other costs that may be necessary to return a
                 person with disabilities to work.


                 Working-age adults with disabilities can obtain benefits in the form of
Background       services and cash assistance from a number of public and private
                 programs. After the onset of a disabling condition, a worker with a
                 temporary work incapacity may receive short-term cash benefits from an
                 employer, a private insurer, one of the few states providing temporary
                 disability insurance, or a workers’ compensation program. Those who do
                 not return to the workplace may seek long-term cash benefits to replace
                 lost wages.

                 A worker covered under Social Security and unable to work because of a
                 severe long-term disability could be eligible for cash benefits from DI—the
                 country’s long-term public disability insurance program. Workers can

                 4
                  Our estimate is based on fiscal year 1995 data provided by SSA’s actuarial staff and represents the
                 discounted present value of the cash benefits that would have been paid over a lifetime if the
                 individual had not left the disability rolls by returning to work.



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supplement DI coverage with cash benefits from private long-term
disability insurance or pensions if their employers provide such plans or if
the workers have purchased supplemental insurance on their own.
Moreover, workers injured on the job can receive cash benefits through
their states’ employer-financed workers’ compensation programs. An
individual can receive workers’ compensation benefits and DI
simultaneously, although the DI cash benefit generally is reduced by
workers’ compensation. But a worker who is ineligible for cash benefits
from either private insurance or workers’ compensation5 and who is
unable to be accommodated in the workplace may discover that DI offers
the only potential for wage replacement.

Long-term cash benefits may also be sought by people with disabilities
who have low income and limited resources, regardless of their work
histories. SSI provides income support at the national level regardless of
work connection for low-income people with disabilities. Similarly, a
veteran with wartime service who has low income and a disability
unrelated to active military duty can be eligible for a veteran’s pension.

DI and SSI are the two largest federal programs providing cash assistance to
people with disabilities. DI, established in 1956, is an insurance program
funded by payroll taxes paid by workers and their employers into a Social
Security trust fund. The program is designed to insure covered workers
against loss of income due to a disabling condition. Workers who have
worked long enough and recently enough become insured for DI coverage.
In addition to cash assistance, Medicare coverage is provided to DI
beneficiaries after they have received cash benefits for 24 months. In 1995,
about 4.2 million working-age people (aged 18 to 64) received DI cash
benefits.6 DI cash benefits in that year totaled about $36.6 billion, with
average monthly cash benefits amounting to $680 per person.7 In 1994, the
Congress reallocated payroll tax receipts, estimated to total almost
$500 billion by the end of 2016, from the Social Security Old Age and
Survivors Insurance Trust Fund to the DI Trust Fund to prevent impending
insolvency.

In contrast, SSI is a means-tested income assistance program for disabled,
blind, or aged individuals regardless of their prior participation in the

5
 Individuals can also receive compensation for injuries sustained during active duty with the armed
services or for non-job-related injuries in which another party is at fault.
6
 Included among the 4.2 million DI beneficiaries are about 694,000 beneficiaries who were dually
eligible for SSI disability benefits because of the low level of their income and resources.
7
 The $36.6 billion includes benefits paid to all DI disabled workers, regardless of age.



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labor force. Established in 1972 for individuals with low income and
limited resources, SSI is financed from general revenues.8 In most states, SSI
entitlement ensures an individual’s eligibility for Medicaid benefits.9 In
1995, about 2.4 million working-age people with disabilities and 917,000
children under 18 received SSI benefits. In the same year, federal SSI cash
benefits paid to SSI beneficiaries with disabilities equaled $20.6 billion, and
average monthly SSI cash benefits amounted to about $365 per
beneficiary.10

The DI and SSI programs use the same statutory definition of disability. To
meet this definition, an adult must be determined to be unable to engage in
any substantial gainful activity because of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last at least 1 year.11 Moreover, the
statutory definition further specifies that, for a person to be determined to
be disabled, the impairment must be of such severity that the person not
only is unable to do his or her previous work, but, considering his or her
age, education, and work experience, is unable to do any other kind of
substantial work that exists in the national economy. (See app. I for a
more complete description of the five-step process used to determine DI
and SSI eligibility.)

Once a person is on the disability rolls, disability benefits continue until
one of three things happens: the beneficiary dies; SSA determines that the
beneficiary is no longer eligible for benefits; or, for DI beneficiaries,
benefits convert to Social Security retirement benefits at age 65. Generally,
a beneficiary loses eligibility for benefits for one of two reasons: the
beneficiary earns more income than allowed or SSA decides that the
beneficiary’s medical condition has improved to the point that he or she is




8
 References to the SSI program throughout this letter refer to blind or disabled, not aged, recipients.
General revenues include taxes, customs duties, and miscellaneous receipts collected by the federal
government but not earmarked by law for a specific purpose.
9
 States can opt to use the financial standards and definitions for disability they had in effect in
January 1972 to determine Medicaid eligibility for their aged, blind, and disabled residents, rather than
making all SSI recipients automatically eligible for Medicaid. Often the Medicaid financial standards
used by states are more restrictive than SSI’s.
10
 The 2.4 million SSI beneficiaries do not include individuals who were dually eligible for SSI and DI
benefits. The $20.6 billion consists of payments to all SSI blind and disabled beneficiaries regardless of
age.
11
 SSA uses a different definition of disability for children than for adults. Generally, the Social Security
Act defines a disabled child as a person under age 18 who suffers from a medically determinable
physical or mental impairment that results in marked and severe functional limitations.
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                      no longer considered disabled. To make this latter determination, SSA
                      periodically performs continuing disability reviews.12


Multiple Factors      DI and SSI grew rapidly between 1985 and 1995. During this period, cash
Contribute to Rapid   benefits to adults and children with disabilities increased from about $23.1
Program Growth        billion to $57.2 billion, with the inflation-adjusted cost of cash benefits
                      growing by 75 percent.13 (See fig. 1.) At the same time, while the number of
                      working-age beneficiaries who received disability benefits increased from
                      4.0 million to 6.6 million, DI and SSI experienced an increase in the
                      proportion of adult beneficiaries with the types of impairments that lead to
                      the longest entitlement periods, signifying lengthy stays on the rolls for
                      some. Individuals with mental impairments accounted for most of this
                      growth. (See app. II for an overview of the reasons for program growth.)




                      12
                        SSA is to conduct a continuing disability review (CDR) at least once every 3 years on DI beneficiaries
                      whose medical improvement is possible or expected. When medical improvement is not expected, SSA
                      is to schedule CDRs at least once every 7 years. SSA is to conduct CDRs on one-third of SSI
                      beneficiaries reaching age 18 and a minimum of 100,000 additional SSI beneficiaries annually in fiscal
                      years 1996 through 1998. SSA is to conduct CDRs (1) at least every 3 years for children under age 18
                      who are likely to improve or, at the option of the Commissioner, unlikely to improve and (2) on
                      low-birth-weight babies within their first year of life. Disability eligibility redeterminations, instead of
                      CDRs, are required for all 18-year-olds beginning on their 18th birthdays, using adult criteria for
                      disability. See Social Security Disability: Improvements Needed to Continuing Disability Review
                      Process (GAO/HEHS-97-1, Oct. 16, 1996) and Social Security Disability: Alternatives Would Boost
                      Cost-Effectiveness of Continuing Disability Reviews (GAO/HEHS-97-2, Oct. 16, 1996).
                      13
                         SSA issued its Report on Rising Cost of Social Security Disability Insurance Benefits to the Congress
                      on Feb. 14, 1996.



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Figure 1: Growth in DI and SSI Cash Benefits, 1985-95

60   Billions of Dollars                                                                            57.2
55                                                                                         52.6

50                                                                               48.5

45                                                                     43.2

40
                                                               36.8
35                                                  32.5
                                           29.6
30                                 27.6
                           25.9
                24.7
25   23.1

20

15

10

 5

 0

       1985       1986      1987    1988    1989        1990    1991     1992     1993      1994      1995
       Calendar Year


                                                   Note: Includes DI benefits to disabled workers and federal-only SSI benefits to all SSI blind and
                                                   disabled beneficiaries regardless of age.

                                                   Source: Annual Statistical Supplement to the Social Security Bulletin (Sept. 1996).




                                                   The number of children receiving SSI has more than tripled since 1990,
                                                   from about 300,000 to more than 900,000 in 1995.14 A number of factors
                                                   have contributed to the growth in children’s awards, including outreach
                                                   efforts by SSA and child advocates, rising numbers of children in poverty,
                                                   and major changes in the criteria for determining whether children are
                                                   disabled. Growth has been especially rapid in awards to children with
                                                   mental impairments. SSA researchers estimate that SSI awardees ages 1 to




                                                   14
                                                    We have issued several products recently on children with disabilities, including Children Receiving
                                                   SSI by State (GAO/HEHS-96-144R, May 15, 1996); SSA Initiatives to Identify Coaching
                                                   (GAO/HEHS-96-96R, Mar. 5, 1996); Social Security: New Functional Assessments for Children Raise
                                                   Eligibility Questions (GAO/HEHS-95-66, Mar. 10, 1995); and Social Security: Rapid Rise in Children on
                                                   SSI Disability Rolls Follows New Regulations (GAO/HEHS-94-225, Sept. 9, 1994).



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                             17 with mental impairments will stay on the rolls nearly 27 years on
                             average.15


Statute Provides for         The Social Security Act states that people applying for disability benefits
Returning Beneficiaries to   should be promptly referred to state vocational rehabilitation (VR)
Work                         agencies for services so that as many applicants as possible can return to
                             productive activity. State Disability Determination Service (DDS) offices,
                             which act for SSA in making disability evaluations, decide whether to refer
                             applicants to the state VR agencies.

                             Furthermore, to reduce the risk a beneficiary faces in trading guaranteed
                             monthly income and subsidized health coverage for the uncertainties of
                             competitive employment, the Congress has established various work
                             incentives intended to safeguard cash and health benefits while a
                             beneficiary tries to return to work. Nevertheless, few beneficiaries leave
                             the rolls to return to work.


Beneficiaries Face           Many DI and SSI beneficiaries will be unable to return to work, while others
Return-to-Work               present challenges to developing effective return-to-work strategies.
Challenges, Yet Some Have    Almost half of the people receiving benefits are not likely to become
                             employed because of their age or because they are expected to die within
Characteristics Associated   several years. For other beneficiaries, the ability to find and maintain
With Work                    employment may be challenging because they need to learn basic skills
                             and work habits and build self-esteem to function in the workplace. Some
                             may lack access to the assistive technologies that could enhance their
                             work potential. Still others might face tight labor market conditions,
                             particularly for low-wage positions, that could constrain employment
                             opportunities. Moreover, the nature of some disabilities may limit full-time
                             work, while others may result in logistical obstacles such as transportation
                             difficulties. And despite antidiscrimination laws, some disabilities may
                             stigmatize individuals, making them appear less attractive to employers
                             and less likely to be hired.

                             While beneficiaries may face many challenges in attempting to return to
                             work, research suggests that successful transitions to work may be more
                             likely for younger people with disabilities and for those who have greater

                             15
                               K. Rupp and C.G. Scott, “Determinants of Duration on the Disability Rolls and Program Trends,” a
                             paper presented at SSA’s conference on Disability Programs: Explanations of Recent Growth and
                             Implications for Disability Policy (Washington, D.C.: July 20, 1995). In an effort to stem the increase in
                             the number of children receiving SSI, the Personal Responsibility and Work Opportunity
                             Reconciliation Act of 1996 (P.L. 104-193) changed initial and continuing eligibility requirements for
                             children with disabilities. The effect of these changes on the size of the rolls is as yet unknown.



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                 motivation to work and more education.16 Studies have shown that a
                 significant number of DI and SSI beneficiaries possess these characteristics.
                 The DI and SSI disability rolls increasingly are composed of a significant
                 number of younger individuals. Among working-age DI and SSI
                 beneficiaries, one out of three is under the age of 40.17 In addition, in 1993,
                 35 percent of the 84,000 DI beneficiaries who responded to an SSA
                 questionnaire in May 1993 expressed an interest in receiving rehabilitation
                 or other services that could help them return to work, an indication of
                 motivation. Moreover, a substantial portion—almost one in two—of a
                 cohort of DI beneficiaries had a high school degree or some years of
                 education beyond high school.18


Changes Create   The percentage of beneficiaries that could return to work if given the
Return-to-Work   appropriate supports and services is unknown, in part, because
Opportunities    employment depends upon a multitude of complex, interrelated factors.
                 The data suggest, however, that a meaningful proportion of beneficiaries
                 could potentially benefit from return-to-work assistance. In addition, many
                 technological and medical advances have created more opportunities for
                 some individuals with disabilities to work. Electronic communications and
                 assistive technologies—such as scanners, synthetic voice systems,
                 standing wheelchairs, and modified automobiles and vans—have given
                 greater independence to people with some disabilities. Advances in the
                 management of disability—like medication to control mental illness or
                 computer-aided prosthetic devices—have helped reduce the functional
                 limitations associated with some disabilities. These advances may have
                 opened new employment opportunities for people with disabilities in the
                 growing service sector of the economy.

                 Social change has also promoted the goals of greater inclusion of and
                 participation by people with disabilities in the mainstream of society,
                 including children in school and adults at work. For instance, over the past
                 2 decades, people with disabilities have sought to remove environmental
                 barriers that impede them from fully participating in their communities.

                 16
                   For example, J.C. Hennessey and L.S. Muller, “The Effect of Vocational Rehabilitation and Work
                 Incentives on Helping the Disabled-Worker Beneficiary Back to Work,” Social Security Bulletin, Vol.
                 58, No. 1 (Spring 1995), pp. 15-28; R.J. Butler, W.G. Johnson, and M.L. Baldwin, “Managing Work
                 Disability: Why First Return to Work Is Not a Measure of Success,” Industrial and Labor Relations
                 Review, Vol. 48, No. 3 (Apr. 1995), pp. 452-67; and R.V. Burkhauser and M.C. Daly, “Employment and
                 Economic Well-Being Following the Onset of a Disability: The Role for Public Policy,” in Jerry L.
                 Mashow, Virginia Reno, Richard V. Burkhauser, and Monroe Berkowitz, eds., Disability, Work, and
                 Cash Benefits (Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, 1996), pp. 59-101.
                 17
                   Annual Statistical Supplement to the Social Security Bulletin (Sept. 1996).
                 18
                  J.C. Hennessey and L.S. Muller, “Work Efforts of Disabled-Worker Beneficiaries: Preliminary
                 Findings From the New Beneficiary Followup Survey,” Social Security Bulletin, Vol. 57, No. 3 (Fall
                 1994), pp. 42-51.
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                    Moreover, the ADA supports the full participation of people with disabilities
                    in society and fosters the expectation that people with disabilities can
                    work and have the right to work. The ADA prohibits employers from
                    discriminating against qualified individuals with disabilities and requires
                    employers to make reasonable workplace accommodations unless it
                    would impose an undue hardship on the business.


                    Despite advances in technology and medicine that have increased the
Current Program     potential for some beneficiaries to work, the DI and SSI disability programs
Structure Impedes   have remained essentially frozen in time. Weaknesses in the design and
Return to Work      implementation of the DI and SSI programs, summarized in table 1, have
                    impeded identifying and encouraging the productive capacities of those
                    who might benefit from reasonable and appropriate rehabilitation and
                    employment assistance. The cumulative effect of these weaknesses is to
                    understate beneficiaries’ work capacity and hinder efforts to improve
                    return-to-work outcomes.




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Table 1: Summary of Program Design and Implementation Weaknesses
Program weakness                             Description of program weakness
Work capacity of DI and SSI beneficiaries may be     Medical conditions alone are generally a poor predictor of work incapacity.
understated.
                                                     While impairment has some influence over capacity to work, other
                                                     factors—vocational, psychological, economic, environmental, motivational—are
                                                     often considered to be more important determinants of work capacity.
Disability determination process may encourage       “All-or-nothing” decision gives incentive to promote inabilities and minimize abilities.
work incapacity.
                                                     Lengthy application process to prove one’s disability can erode motivation and
                                                     ability to return to work.
Benefit structure can provide disincentive to        The prospect of losing cash and health benefits themselves can reduce motivation
low-wage work.                                       to work and receptivity to VR and work incentives, especially when low-wage jobs
                                                     are the likely outcome.

                                                     People with disabilities may be more likely to have less time available for work,
                                                     further influencing a decision to opt for benefits over work.
Work incentives are ineffective in motivating        Work incentives are complex, difficult to understand, and poorly implemented.
people to work.
                                                     Few beneficiaries are aware that work incentives exist.

                                                     Work incentives do not overcome the prospect of a drop in income for those who
                                                     accept low-wage employment.

                                                     Risk of losing health coverage is a major barrier to returning to work.
VR plays limited role in disability programs.        Access to VR services through DDS referrals is limited: restrictive state VR policies
                                                     limit categories of people referred by DDSs; the referral process is not monitored
                                                     (reflecting its low priority and removing incentive to spend time on referrals); and
                                                     the success-based VR reimbursement system is ineffective in motivating VR
                                                     agencies to accept beneficiaries as clients.

                                                     Applicants and beneficiaries are generally uninformed about VR and are not
                                                     encouraged to seek VR, affording little opportunity to opt for rehabilitation and
                                                     employment.

                                                     Studies have questioned the effectiveness of state VR agency services.



Work Capacity of DI and                         The current disability determination process may understate the work
SSI Beneficiaries May Be                        capacity of DI and SSI beneficiaries, thereby lowering expectations for
Understated                                     return-to-work outcomes. The Social Security Act requires that the
                                                assessment of an applicant’s work incapacity be based on the presence of
                                                medically determinable physical and mental impairments. SSA maintains a
                                                Listing of Impairments (usually referred to as “the listings”) for medical
                                                conditions that are presumed to be, according to SSA, ordinarily severe
                                                enough in themselves to prevent an individual from engaging in any gainful
                                                activity. About 70 percent of new awardees are eligible for disability




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benefits because their impairments meet or equal the listings.19 But
findings of studies we reviewed generally agree that medical conditions
are a poor predictor of work incapacity.20

Relevant studies indicate that the scientific link between work incapacity
and medical condition is a weak one. While it is reasonable to expect that
some medical impairments prevent individuals from engaging in work (for
example, people who are quadriplegic with profound mental retardation),
it is less clear that some other impairments that qualify individuals for
disability benefits prevent individuals from engaging in any substantial
gainful activity (for example, people who are missing both feet). Moreover,
while most medical impairments influence the extent to which an
individual is capable of engaging in gainful activity, other
factors—vocational, psychological, economic, environmental, and
motivational—are often considered to be more important determinants of
work capacity.

Concerns about the relationship between medical status and work
incapacity were raised before the DI program was implemented. In
deliberations leading to the establishment of the DI program, the 1948
Advisory Council on Social Security recommended that compensable
disabilities be restricted to those that can be “objectively determined by
medical examination or tests.” Physicians, however, testified before the
Congress that disability determination is inherently subjective and they
could not provide the kind of objective determination that policymakers
desired. According to this view, physicians can attest to the existence of
medical impairments, but they can neither quantify inability to work nor
certify that the impairments render a person unable to work.

Since then, some experts have contended that the scientific community is
unable to reliably predict the work capacity of people with disabilities.
The 1988 Disability Advisory Council to the Department of Health and
Human Services (HHS), citing testimony by medical experts, researchers,
rehabilitation providers, advocacy groups, and beneficiaries, concluded
that


19
  An impairment or combination of impairments is said to “equal the listings” if the medical findings for
the impairment are at least equivalent in severity and duration to the listed impairment. Applicants
whose impairments do not meet or equal the medical listings are further evaluated on the basis of
nonmedical factors, including residual functional capacity, age, education, and vocational skills.
20
 For example, S.O. Okpaku and others, “Disability Determinations for Adults With Mental Disorders:
Social Security Administration vs. Independent Judgments,” American Journal of Public Health, Vol.
84, No. 11 (Nov. 1994), pp. 1791-95; and H.P. Brehm and T.V. Rush, “Disability Analysis of Longitudinal
Health Data: Policy Implications for Social Security Disability Insurance,” Journal of Aging Studies,
Vol. 2, No. 4 (1988), pp. 379-99.


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                            “information about a claimant’s medical condition and vocational background cannot
                            conclusively demonstrate that he or she cannot work. Except in the case of very severe
                            disabilities and relatively minor disabilities, the current state of knowledge and technology
                            does not enable the quantification of disabilities or the definition of categories of disability
                            which reliably correlate an impairment with a particular individual’s capacity to work.”21




Disability Determination    The “all-or-nothing” nature of the disability determination process creates
Process May Encourage       an incentive for applicants to overstate their disabilities and understate
Work Incapacity             their work capacities. Because the result of the decision is either full
                            award or denial of benefits, applicants have a strong incentive to promote
                            their limitations to establish their inability to work and thus qualify for
                            benefits. Conversely, applicants have a disincentive to demonstrate any
                            capacity to work because doing so may disqualify them for benefits.
                            Furthermore, the documentation involved in establishing one’s disability
                            can, many believe, create a “disability mind-set,” which weakens
                            motivation to work. The effects of this process are compounded by the
                            length of time required to determine eligibility—from a minimum of
                            several months to 18 months or longer for individuals who appeal—during
                            which skills, abilities, and habits necessary to work can erode.


Benefit Structure Can       The prospect of losing cash and health benefits themselves is another
Provide a Disincentive to   factor that can reduce beneficiaries’ motivation to work and their
Low-Wage Work               receptivity to work incentives and VR. The average monthly cash and
                            health benefit value in 1994 for DI and SSI beneficiaries was about $1,050
                            and $930, respectively.22 As part of their consideration of whether to
                            undergo rehabilitation, attempt work, or both, beneficiaries may weigh the
                            financial gains of working against the value of their monthly cash and
                            health benefits. On the one hand, rehabilitation and work require
                            significant time commitment and the chance of success is unknown; on
                            the other hand, program benefits are secure and free individuals from
                            having to devote time to obtaining economic stability. Some people may
                            opt to live at a lower income level rather than at a marginally higher
                            income level if the latter requires a major commitment of time and energy.

                            Some people with disabilities commit significant amounts of time to
                            performing daily activities (bathing, dressing, and eating), self-managing
                            their impairments, receiving medical treatment, or meeting their

                            21
                              HHS, Report of the Disability Advisory Council (Washington, D.C.: HHS, SSA, Mar. 11, 1988).
                            22
                             Average monthly health benefit values are based on estimates from the Health Care Financing
                            Administration, Office of the Actuary.



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                            transportation needs. The time required to perform these and other
                            activities can reduce the time available for work and influence an
                            individual’s decision to opt for benefits over work.23 People who have less
                            time available for full-time work may see some value in part-time work. If
                            part-time work pays less than the value of lost benefits, however, then a
                            person would actually be financially better off receiving benefits rather
                            than working.


Work Incentives             Work incentive provisions that are complex, difficult to understand, and
Ineffective in Motivating   poorly implemented further impede return-to-work efforts. Because SSA
People to Work              does not promote them extensively, few beneficiaries are aware that work
                            incentives exist. Despite providing some financial protection for those
                            who want to work, work incentives do not appear to be sufficient to
                            overcome the prospect of a drop in income for those who accept low-wage
                            employment.

                            For example, DI work incentives provide for a trial work period in which a
                            beneficiary may earn any amount for 9 months (which need not be
                            consecutive) within a 60-month period and still receive full cash and
                            health benefits. At the end of the trial work period, if a beneficiary’s
                            countable earnings are more than $500 a month, cash benefits continue for
                            an additional 3-month grace period and then stop, causing a precipitous
                            drop in monthly income from full benefits to no cash benefits.24 SSA
                            researchers have noted that such a drop in income is a considerable
                            disincentive to finishing the trial work period as well as to beginning work.
                            Especially for beneficiaries with low earnings, it may be more financially
                            advantageous to continue to receive disability payments by not working or
                            by limiting earnings than to earn more than $500 a month in countable
                            income.

Beneficiaries Fear Losing   The work incentive provisions also do not allay the fear of losing health
Health Coverage             coverage that beneficiaries who return to work may face. Studies have
                            identified the risk of losing health coverage as a major barrier to




                            23
                              W.Y. Oi, “Disability and a Workfare-Welfare Dilemma,” in C.L. Weaver, ed., Disability and Work:
                            Incentives, Rights, and Opportunities (Washington, D.C.: American Enterprise Institute for Public
                            Policy Research, 1991), pp. 31-45.
                            24
                             For 36 months after the trial work period ends, cash benefits will be reinstated for any month in
                            which the person does not earn more than $500 a month in countable income; this is referred to as the
                            extended period of eligibility.



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                           beneficiaries’ returning to work.25 Beneficiaries who work and continue to
                           earn countable income above certain amounts will eventually lose health
                           coverage even though they have not necessarily improved medically or
                           obtained affordable coverage elsewhere.

                           DIwork incentive provisions provide up to 4 years of Medicare coverage
                           when a person who continues to be medically disabled goes to work and
                           earns more than $500 a month in countable income. When this coverage
                           ends, these individuals may purchase Medicare coverage at the same
                           monthly premium paid by uninsured retired beneficiaries. But the monthly
                           premium—exceeding $300 in 1996—may be a hardship for beneficiaries,
                           especially individuals with low earnings. In a study of DI beneficiaries’
                           work attempts, SSA researchers noted that “the eventual loss of Medicare
                           coverage which, for some beneficiaries, is worth as much as cash benefits,
                           adds to a feeling of future financial insecurity and discourages work.”26

                           Moreover, SSI beneficiaries who lose health coverage because they exceed
                           the earnings limit do not have the option of purchasing Medicaid. Work
                           incentives allow beneficiaries to keep Medicaid coverage until earnings
                           increase to a point—referred to as the threshold amount—that SSA
                           considers high enough to replace SSI cash and Medicaid benefits.27
                           Beneficiaries who lose Medicaid could be uninsurable or face prohibitively
                           high premiums. It may matter little how much a beneficiary can earn by
                           returning to work if he or she cannot buy health insurance because of a
                           disabling condition. Even if a beneficiary is able to obtain health
                           insurance, he or she may still be subject to a waiting period and coverage
                           exclusions for preexisting conditions.


VR Plays Limited Role in   Access to VR services through the DDS referral process is limited, because
Disability Programs        DDSs refer few beneficiaries for VR services and state VR agencies accept




                           25
                             For example, see the President’s Committee on Employment of People With Disabilities 1993
                           teleconference project report, Operation People First: Toward a National Disability Policy
                           (Washington, D.C.: President’s Committee on Employment of People With Disabilities, Mar. 28, 1994).
                           26
                            Hennessey and Muller, “The Effect of Vocational Rehabilitation and Work Incentives on Helping the
                           Disabled-Worker Beneficiary Back to Work.” These findings should be interpreted with caution,
                           because SSA gathered retrospective data on event histories over a 10-year period.
                           27
                             The threshold amount is based on the amount of earnings that would cause cash payments to stop in
                           the person’s state of residence and the annual per capita Medicaid expenditure for that state.



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fewer still as clients.28 DDSs refer for VR services, on average, only about
8 percent of DI and SSI applicants awarded benefits. And, although less is
known about how many DDS referrals are accepted by state VR agencies,
previously we estimated that less than 10 percent of beneficiaries referred
by DDSs were accepted as clients.29 Several factors contribute to limited
access, including restrictive state VR policies that limit categories of people
referred by DDSs, a referral process that is not monitored (reflecting its low
priority and removing the incentive to spend time on referrals), and a
success-based VR reimbursement system that is ineffective in motivating VR
agencies to accept beneficiaries as clients. In addition, applicants and
beneficiaries are generally uninformed about the availability of VR services
and are given little encouragement to seek them.

Even if a beneficiary is referred for VR services and accepted by a VR
agency, the effectiveness of state VR services in securing long-term
financial gains for rehabilitants has been mixed at best. In 1993, we
evaluated the long-term results of state VR services by examining the
employment status of clients (including SSA beneficiaries) over an 8-year
period following receipt of services.30 We found that gains in employment
and earnings of clients who had been successfully rehabilitated—that is,
placed in suitable paid or unpaid employment for at least 60 days—faded
after about 2 years, with earnings for many returning to near or below the
pre-VR program level after 8 years. Clients who had been successfully
rehabilitated had better work and earnings histories than clients who had
dropped out of the VR program. Clients who had not been rehabilitated,
however, but who had received many of the services that rehabilitated
clients had received, did no better in later employment and earnings than
VR dropouts who had received no services after an initial VR evaluation.




28
  Public and private entities, such as educational institutions, welfare agencies, hospitals, and other
health organizations, as well as DDSs, refer beneficiaries to state VR agencies. In discussing access to
VR services, we have limited our analysis to access through the DDS referral system. Our findings,
therefore, cannot be generalized to referrals from other sources.
29
  Social Security: Little Success Achieved in Rehabilitating Disabled Beneficiaries (GAO/HRD-88-11,
Dec. 7, 1987). We reviewed the referral outcomes of DI beneficiaries in 10 states. Approximately
90 percent of the referrals were not considered feasible prospects by the agencies, did not respond to
the agency contact, were uninterested in VR, or were already known to the agencies. These data
should be interpreted with caution because they were collected in 1986, and changes over time in DDS
and VR agency procedures, priorities, and resource levels, and in beneficiary characteristics, could
have altered acceptance patterns.
30
   Vocational Rehabilitation: Evidence for Federal Program’s Effectiveness Is Mixed (GAO/PEMD-93-19,
Aug. 27, 1993). We examined the program’s long-term results by computer-matching a database on
nearly 900,000 VR applicants whose cases were closed in 1980 with SSA wage records on these
individuals from 1972 through 1988—both before and after their VR program experience.


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                        SSA’s efforts to improve return-to-work outcomes are focused in the right
SSA Efforts to          direction but are likely to have limited impact. SSA began an analysis of
Improve                 barriers and disincentives to employment in its disability programs in 1994
Return-to-Work          and has undertaken several related return-to-work efforts. These include
                        publishing regulations permitting SSA to refer beneficiaries to an alternate
Outcomes Likely to      provider when the state VR agency is unable to provide VR services and
Have Only Marginal      publishing a brochure to inform the public about how SSA can help with VR
                        services. Additionally, SSA has signed an agreement with the Department of
Effect                  Education’s Rehabilitation Services Administration to provide training on
                        SSA’s work incentives to state VR professionals and contracted for an
                        evaluation of Project NetWork, an SSA research effort testing different
                        methods to deliver employment and rehabilitation services.

                        Although important, these efforts do not constitute a comprehensive
                        strategy that fundamentally redirects the disability programs’ current
                        focus on an individual’s limitations to a focus on identifying and
                        encouraging the productive capacities of those who might benefit from
                        employment assistance. For example, expanding VR opportunities may not
                        facilitate long-term employment among beneficiaries if people continue to
                        fear that working their way off the rolls will lead to loss of health
                        insurance. Also, educating beneficiaries about work incentives and VR
                        services may have little effect if beneficiaries are better off financially not
                        working than attempting to work.


                        In contrast with SSA’s disability programs, which have retained their core
Return-to-Work          design over the years, some firms in the private sector are developing new
Strategies From Other   approaches to manage their disability caseloads. Collectively known as
Systems Contrast        disability management, these approaches embody a proactive strategy for
                        controlling disability costs by helping employees with disabilities return to
Sharply With Federal    work as soon as possible. Social insurance disability programs in Germany
Disability Programs     and Sweden also invest in return-to-work efforts, and their experiences
                        show that return-to-work strategies can be applied to government-scale
                        programs that serve people with a wide range of work histories, job skills,
                        and disabilities.31

                        Disability managers in the U.S. private sector spend money on
                        return-to-work efforts because they believe such efforts are sound

                        31
                          Although rigorous studies demonstrating the cost-effectiveness of German and Swedish programs
                        generally do not exist, we included these countries in our analysis because their disability programs
                        apply principles—such as early intervention and rehabilitation—that have been identified by the U.S.
                        private sector and other experts as being key to disability management. Application of these principles
                        to DI and SSI would need to be tailored to the U.S. political system and budget realities.



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                                                investments that reduce disability-related costs. Studies have estimated
                                                that the full cost of disability to employers ranges from about 6 to
                                                12 percent of payroll. Such costs include insurance premiums, cash
                                                benefits, rehabilitation benefits, and health benefits paid through workers’
                                                compensation and employer-sponsored disability insurance programs.
                                                Companies may also incur additional expenses for training and using
                                                temporary workers and retraining employees with disabilities when they
                                                return to work. When businesses help workers with disabilities return to
                                                the workplace, they are able to reduce some of these costs.

                                                Our analysis of practices advocated and implemented by the U.S. private
                                                sector and other countries reveals three common strategies in the design
                                                of their return-to-work programs. These strategies, and their underlying
                                                practices, are summarized in table 2.


Table 2: Strategies and Practices in the Design of Return-to-Work Programs of the U.S. Private Sector and Other Countries
Strategy                                          Practices
Intervene as early as possible after an actual or    Address return-to-work goals from the beginning of an emerging disability.
potentially disabling event.
                                                     Provide return-to-work services at the earliest appropriate time.

                                                     Maintain communication with workers who are hospitalized or recovering at home.
Identify and provide necessary return-to-work        Assess each individual’s return-to-work potential and needs.
assistance effectively.
                                                     Use case management techniques when appropriate to help workers with
                                                     disabilities return to work.

                                                     Offer transitional work opportunities that enable workers with disabilities to ease
                                                     back into the workplace.

                                                     Ensure that medical service providers understand the essential job functions of
                                                     workers with disabilities.
Structure cash and health benefits to encourage      Structure cash benefits to encourage workers with disabilities to rejoin the
return to work.                                      workforce.

                                                     Maintain health benefits for workers with disabilities who return to work.

                                                     Include a contractual provision that can require the worker with disabilities to
                                                     cooperate with return-to-work efforts.

                                                Disability managers emphasized that these return-to-work strategies are
                                                not independent of each other and are most effective when merged into a
                                                comprehensive return-to-work program. Return-to-work strategies and
                                                practices may potentially enhance federal disability programs by enabling
                                                beneficiaries to work and by helping to reduce program costs.




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Intervene Early to          Disability managers we surveyed in the private sector stressed the
Facilitate Return-to-Work   importance of early intervention in returning workers with disabilities to
                            the workplace. Advocates of early intervention believe that the longer an
                            individual stays away from work, the less likely return to work will be.
                            Studies show that only half the workers with recently acquired disabilities
                            who are out of work 5 months or more will ever return to work. Disability
                            managers believe that long absences from the workplace can reduce
                            motivation to attempt work.

                            In Germany and Sweden, laws and policies require that an individual’s
                            potential for returning to work be assessed soon after the onset of a
                            disabling condition. Consequently, people with disabilities are generally
                            considered for rehabilitation and return to work at relatively early stages
                            in their contacts with social insurance offices. For example, everyone
                            applying for a disability pension in Germany is considered for
                            rehabilitation and return to work before being determined eligible for
                            permanent benefits.32

                            Setting return-to-work goals soon after the onset of disability and
                            providing timely rehabilitation services are believed to be critical in
                            encouraging workers with disabilities to return to the workplace as soon
                            as possible. Moreover, maintaining communication with a disabled worker
                            is also important. For example, disability managers believe that contacting
                            a hospitalized worker soon after an injury or illness, and then continuing
                            to communicate with the worker recovering at home, helps reassure the
                            worker that there is a job to return to and that the employer is concerned
                            about his or her recovery.


Provide Necessary           In an effort to provide appropriate services, many disability managers
Return-to-Work Services,    strive to identify the individuals who are likely to be able to return to work
Manage Cases                and then identify the specific services they need. This approach involves
                            investing in services tailored to individual circumstances that help achieve
                            return-to-work goals for workers with disabilities while avoiding
                            unnecessary expenditures. As part of this approach, individuals are
                            functionally evaluated to assess their potential for returning to work.
                            When appropriate, the private sector uses case management techniques to
                            coordinate the identification, evaluation, and delivery of disability-related
                            services for individuals deemed to need such services to return to work.



                            32
                             Disability pensions in Germany are not awarded until it has been determined that the person’s
                            earning capacity cannot be restored through rehabilitation.



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                           Transitional work allows employees to ease back into the workplace in
                           jobs that better accommodate their disabilities than their regular jobs.

                           In Germany and Sweden, return-to-work services and assistance are fairly
                           extensive and tailored to meet individual needs. An individual may receive
                           a combination of different benefits and services—such as medical or
                           vocational rehabilitation, employment or social assistance—as well as
                           cash assistance while applying for or participating in rehabilitation. In
                           addition, both countries offer transitional work opportunities to people
                           with disabilities.

                           The private sector also stresses the need to ensure that physicians and
                           other medical service providers understand the essential job functions of
                           workers with disabilities. Without this understanding, an individual’s
                           return to work could be delayed unnecessarily. Also, if an employer is
                           willing to provide transitional work opportunities or other job
                           accommodations, the treating physician must be aware of and understand
                           these accommodations.


Provide Incentives to      Finally, disability managers responding to our survey generally offered
Engage in Return-to-Work   incentives through their programs’ cash and health benefit structure to
Efforts                    encourage individuals with disabilities to return to work. These managers
                           believe that a program’s incentive structure can affect return-to-work
                           decisions. As a result, their companies structure cash benefits to make
                           returning to work more financially attractive than remaining away from
                           work. Disability managers also believe retention of health insurance can
                           be an important work incentive.

                           Although the structure of benefits plays a role in return-to-work decisions,
                           disability managers emphasized that well-structured incentives are not
                           sufficient in themselves for a successful return-to-work program. Rather,
                           incentives must be integrated with other return-to-work practices.


                           Return-to-work strategies used in the U.S. private sector and other
Conclusions                countries reflect the expectation that people with disabilities can and do
                           return to work. But the DI and SSI programs are not placing enough priority
                           on tapping the work potential of beneficiaries. We believe SSA could do this
                           more effectively without jeopardizing the availability of benefits for people
                           who cannot work.




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Compelling reasons exist to try new approaches. In 1994, the Congress
reallocated payroll tax receipts, estimated to total almost $500 billion by
the end of 2016, from the Social Security Old Age and Survivors Insurance
Trust Fund to the DI Trust Fund to prevent impending insolvency. This
financial strain, along with advances in technology and medicine that
could reduce functional limitations posed by certain impairments,
provides ample reason for examining how strategies from other systems
could be applied to improve return-to-work outcomes. If even an
additional 1 percent of the 6.6 million working-age beneficiaries were to
leave SSA’s disability rolls by returning to work, lifetime cash benefits
would be reduced by an estimated $3 billion. These reductions, however,
would be offset at least in part by rehabilitation and other costs that may
be necessary to return a person with disabilities to work.

Developing an integrated, comprehensive return-to-work strategy is likely
to extend beyond SSA to include programs in other federal agencies, such
as the Department of Labor and the Department of Education, the states,
and the private sector. But, as the primary manager of multibillion-dollar
programs and as the entity with fiduciary responsibility for the trust funds,
SSA has a critical role to play as the catalyst in forging the partnerships and
cooperation that will be needed to redesign federal disability programs.
Although SSA faces constraints and challenges in applying the
return-to-work strategies of other programs, opportunities exist for
providing the return-to-work assistance that could enable more of SSA’s
beneficiaries to reduce or eliminate their dependence on cash benefits.

In earlier reports, we recommended that SSA place greater priority on
helping DI and SSI beneficiaries go back to work. We further recommended
that SSA develop a comprehensive return-to-work strategy integrating, as
appropriate, earlier intervention and provision of return-to-work
assistance as well as changes in the structure of cash and health benefits.
Recognizing that new legislation may be required to implement such a
strategy, we also recommended that SSA identify needed legislative
changes to make such a return-to-work focus a reality. SSA agreed that
beneficiaries face a number of barriers and disincentives that impede entry
into the labor force and that many current beneficiaries have the potential
to return to work. SSA expressed an interest in determining whether the
return-to-work practices of other systems could be useful in improving
beneficiary return-to-work rates and emphasized that making program
improvements would involve input from a myriad of relevant federal, state,
and private sector stakeholders.




Page 21                                  GAO/HEHS-97-46 Promoting Return to Work
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                  In commenting on a draft of this report, the Commissioner of Social
Agency Comments   Security shared our concern that beneficiaries face a number of barriers to
                  entering or reentering the workforce and agreed that compelling reasons
                  exist to try new return-to-work approaches. (See app. III for the full text of
                  SSA’s comments.) SSA is seeking statutory authority to create a
                  voucher-type system that beneficiaries could voluntarily use to obtain
                  rehabilitation and employment services from a participating public or
                  private provider of their choice. Additionally, provision of extended
                  medical coverage for beneficiaries who return to work is also being
                  sought. These initiatives, reflected in the President’s 1998 budget, attempt
                  to place greater emphasis on return to work and to providing alternatives
                  to the state VR agency structure. Although not specifically mentioned by
                  SSA in its comments, given this increased priority we would expect to see
                  SSA set explicit performance measures under its Government Performance
                  and Results Act strategic plan regarding its return-to-work efforts.33

                  In its proposed initiatives, SSA recognizes that extending medical coverage
                  can be an important factor in reducing the perceived risks a beneficiary
                  faces in returning to work. But other weaknesses in the DI and SSI
                  programs—including a determination process that concentrates on
                  applicants’ incapacities and work incentives that act as
                  disincentives—remain unchanged, suggesting that the impact of SSA’s
                  initiatives may have a more limited effect than desired. A new VR service
                  delivery system would be likely to have the greatest effect if it were
                  integrated into a comprehensive return-to-work strategy that incorporates
                  earlier intervention, a focus on developing productive capacity, and
                  changes to the structure of benefits. Such a strategy would encourage
                  beneficiaries to take advantage of rehabilitation services and provide
                  incentives for beneficiaries to return to work.

                  In addition, while we firmly advocate the critical importance of evaluation,
                  the proposed 7-year pilot period for the new VR service delivery system
                  apparently focuses on one system to the exclusion of other alternatives. If
                  SSA tests only one type of service delivery system, the agency will forego
                  the opportunity to compare the results of the proposed outcome-based
                  payment system with those of alternative systems, such as combining



                  33
                    The Government Performance and Results Act of 1993 created requirements for agencies to generate
                  the information congressional and executive branch decisionmakers need in considering ways to
                  improve government performance and reduce costs. It requires that agencies consult with the
                  Congress and other stakeholders to clearly define their missions, establish long-term strategic goals
                  and annual goals, measure performance against the goals they have set, and report publicly on how
                  well they are doing.



                  Page 22                                              GAO/HEHS-97-46 Promoting Return to Work
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outcome-based payments with reimbursements to providers based on
milestones reached prior to the beneficiary leaving the rolls.

SSAalso made some technical comments, which we incorporated where
appropriate.


We are sending copies of this report to the Commissioner of the Social
Security Administration and other interested parties. Copies also will be
available to others on request. If you or your staff have any questions
concerning this report, please call me at (202) 512-7215 or Cynthia A.
Bascetta, Assistant Director, at (202) 512-7207. Other major contributors
include Barbara H. Bordelon, Brett S. Fallavollita, Michele Grgich, Susan
Y. Higgins, and Ira B. Spears, Senior Evaluators; Kenneth F. Daniell,
Evaluator; and Carol Dawn Petersen, Senior Economist.




Jane L. Ross
Director, Income Security Issues




Page 23                                GAO/HEHS-97-46 Promoting Return to Work
Contents



Letter                                                                                             1


Appendix I                                                                                        26

Five-Step Sequential
Evaluation Process
for Determining DI
and SSI Eligibility
Appendix II                                                                                       28
                       Eligibility Expansion                                                      28
Reasons for Program    Program Outreach                                                           28
Growth                 Economic Factors                                                           28
                       State Cost-Shifting                                                        29
                       Lack of Affordable Health Insurance                                        29
                       Demographics                                                               29
                       DI Termination Rate Decreased; SSI Rate Remained Stable                    30

Appendix III                                                                                      31

Comments From the
Social Security
Administration
Related GAO Products                                                                              36


Tables                 Table 1: Summary of Program Design and Implementation                      11
                         Weaknesses
                       Table 2: Strategies and Practices in the Design of Return-to-Work          18
                         Programs of the U.S. Private Sector and Other Countries

Figure                 Figure 1: Growth in DI and SSI Cash Benefits, 1985-95                       7




                       Page 24                                GAO/HEHS-97-46 Promoting Return to Work
Contents




Abbreviations

ADA        Americans With Disabilities Act
CDR        continuing disability review
DDS        Disability Determination Service
DI         Disability Insurance
HHS        Department of Health and Human Services
SSA        Social Security Administration
SSI        Supplemental Security Income
VR         vocational rehabilitation


Page 25                             GAO/HEHS-97-46 Promoting Return to Work
Appendix I

Five-Step Sequential Evaluation Process for
Determining DI and SSI Eligibility

               To determine whether an applicant qualifies for DI or SSI disability benefits,
               SSA uses a five-step sequential evaluation process. In the first step, an SSA
               field office determines if an applicant is working at the level of substantial
               gainful activity and whether he or she meets the applicable nonmedical
               eligibility requirements (for example, residency, citizenship, Social
               Security insured status for DI, and income and resources for SSI). An
               applicant who is found to be not working or working but earning less than
               the substantial gainful activity level (minus allowable exclusions), and
               who meets the nonmedical eligibility requirements, has his or her case
               forwarded to a state Disability Determination Service (DDS) office.
               Applicants who do not meet these requirements, regardless of medical
               condition, are denied benefits.

               DDS  offices gather medical, vocational, and other necessary evidence to
               determine if applicants are disabled under the Social Security law. In step
               two, the DDS office determines if the applicant has an impairment or
               combination of impairments that is severe and could be expected to last at
               least 12 months. According to SSA standards, a severe impairment is one
               that significantly limits an applicant’s ability to do “basic work activities,”
               such as standing, walking, speaking, understanding and carrying out
               simple instructions, using judgment, responding appropriately to
               supervision, and dealing with change. The DDS office collects all necessary
               medical evidence, either from those who have treated the applicant or, if
               that information is insufficient, from an examination conducted by an
               independent source. Applicants with severe impairments that are expected
               to last at least 12 months proceed to the third step in the disability
               determination process; applicants without such impairments are denied
               benefits.

               At step three, the DDS office compares the applicant’s condition with the
               Listing of Impairments (the “listings”) developed by SSA. The listings
               contain over 150 categories of medical conditions (examples of conditions
               include the loss of both feet or an IQ score below 60) that, according to
               SSA, are severe enough ordinarily to prevent an individual from engaging in
               substantial gainful activity. An applicant whose impairment is cited in the
               listings or whose impairment is equally as severe or more severe than
               those impairments in the listings, and who is not engaging in substantial
               gainful activity, is found to be disabled and awarded benefits. An applicant
               whose impairment is not cited in the listings or whose impairment is less
               severe than those cited in the listings is evaluated further to determine
               whether he or she has vocational limitations that, when combined with the
               medical impairment(s), prevent work.



               Page 26                                  GAO/HEHS-97-46 Promoting Return to Work
Appendix I
Five-Step Sequential Evaluation Process for
Determining DI and SSI Eligibility




In step four, the DDS office uses its physician’s assessment of the
applicant’s residual functional capacity to determine whether the
applicant can still perform work he or she has done in the past. For
physical impairments, residual functional capacity is expressed in certain
demands of work activity (for example, ability to walk, lift, carry, push,
pull, and so forth); for mental impairments, residual functional capacity is
expressed in psychological terms (for example, whether a person can
follow instructions and handle stress). If the DDS office finds that a
claimant can perform work done in the past, benefits are denied.

In the fifth and last step, the DDS office determines if an applicant who
cannot perform work done in the past can do other work that exists in the
national economy.34 Using SSA guidelines, the DDS considers the applicant’s
age, education, vocational skills, and residual functional capacity to
determine what other work, if any, the applicant can perform. Unless the
DDS office concludes that the applicant can perform work that exists in the
national economy, benefits are allowed.

At any point in the sequential evaluation process, an examiner can deny
benefits for reasons relating to insufficient documentation or lack of
cooperation by the applicant. Such reasons can include an applicant’s
failure to (1) provide medical or vocational evidence deemed necessary
for a determination by the examiner, (2) submit to a consultive
examination that the examiner believes is necessary to provide evidence,
or (3) follow a prescribed treatment for an impairment. Benefits are also
denied if the applicant asks the DDS to discontinue processing the case.




34
 By definition, work in the national economy must be available in a significant amount in the region
where the applicant lives or in several regions of the country. It is inconsequential whether (1) such
work exists in the applicant’s immediate area, (2) job vacancies exist, or (3) the applicant would
actually be hired.



Page 27                                               GAO/HEHS-97-46 Promoting Return to Work
Appendix II

Reasons for Program Growth


                        Although the reasons for growth and their relative effects are not fully
                        understood, multiple factors contributed to the increase in SSA’s disability
                        program growth. The following factors affected program growth by
                        bringing more people into the programs and lowering the rate at which
                        some beneficiaries left the programs.


                        The eligibility standards, especially for mental impairments (which include
Eligibility Expansion   mental retardation and mental illness), were expanded in the mid- to late
                        1980s largely as a result of the effects of legislative, regulatory, and judicial
                        action. For example, additions were made to the listing of medical criteria
                        used by SSA to determine program eligibility, which gave greater weight to
                        evidence gathered from an applicant’s own physician, and more
                        consideration was granted to pain and functional deficits in social
                        relations and in concentration.


                        The purpose of SSA’s outreach efforts has been to reduce the barriers that
Program Outreach        prevented or discouraged potentially eligible individuals from applying for
                        SSI benefits. SSA has conducted several outreach efforts since program
                        authorization in 1972. In the late 1980s, congressional and agency actions
                        were taken to ensure that all segments of the potential SSI population were
                        made aware of their potential eligibility. For instance, a permanent
                        outreach program for disabled and blind children was established by the
                        Omnibus Budget Reconciliation Act of 1989; SSA made SSI outreach an
                        ongoing agency priority in 1989; and, in 1990, the Congress mandated that
                        SSA expand the scope of its SSI outreach efforts.



                        Economic factors play an important role in the decisions of people with
Economic Factors        disabilities to seek disability benefits, particularly DI benefits, according to
                        an SSA-sponsored study on the demographic and economic determinants of
                        growth in SSA disability programs.35 Factors that reduce the rewards of
                        participating in the labor force for people with disabilities, such as
                        downturns in the business cycle, make leaving the labor force and
                        applying for benefits more attractive. But, while economic downturns
                        contribute to program growth, no evidence exists that there has been a
                        concomitant exit from the DI rolls when the economy has improved.


                        35
                         D.C. Stapleton and others, “Demographic and Economic Determinants of Recent Application and
                        Award Growth for SSA’s Disability Programs,” a paper presented at SSA’s conference on Disability
                        Programs: Explanations of Recent Growth and Implications for Disability Policy (Washington, D.C.:
                        July 20-21, 1995).



                        Page 28                                             GAO/HEHS-97-46 Promoting Return to Work
                      Appendix II
                      Reasons for Program Growth




                      Many state and local governments actively encouraged and assisted
State Cost-Shifting   disabled recipients of state-funded general assistance to apply for SSI
                      benefits when general assistance was cut in these jurisdictions. These
                      state and local efforts to shift public assistance recipients with disabilities
                      onto the SSI rolls appeared to increase the number of SSI (and, to a lesser
                      extent, DI) applications and awards, according to the SSA-sponsored study
                      on growth in the disability programs.


                      An increase in the number of people without affordable health insurance
Lack of Affordable    may have affected the size of the DI and SSI program growth. The uninsured
Health Insurance      population under age 65 in the United States grew by 5 million between
                      1988 and 1992.36 In addition, limitations in employment-based health care
                      coverage for chronic conditions may have prompted some individuals to
                      apply for DI or SSI for health care protection.


                      Demographic changes have played a role in program growth. For example,
Demographics          the aging baby boom cohort born between 1946 and 1964 (which increased
                      the number of people in middle age during the late 1980s and early 1990s),
                      greater labor force participation among women (which increased the
                      number of women insured for disability benefits), and declines in marriage
                      rates (which may have limited the income support provided by spouses of
                      people with disabilities) have been associated with increases in program
                      applications and awards.

                      Also, the growing number of immigrants admitted annually for legal
                      residence in the United States may have contributed to SSI growth. In 1993,
                      880,000 immigrants were admitted to the United States, compared with
                      570,000 in 1985. In addition, nearly 3 million formerly illegal immigrants
                      attained legal residence status under the Immigration Reform and Control
                      Act of 1986. This increased immigrant population is likely to have
                      contributed to the rising portion of disabled immigrants on SSI, which
                      increased from less than 2 percent of the SSI disabled population in 1982 to
                      about 6 percent in 1993.37


                      36
                       The Environment of Disability Income Policy: Programs, People, History and Context, National
                      Academy of Social Insurance, Disability Policy Panel Interim Report (Washington, D.C.: 1996), p. 93.
                      37
                       Supplemental Security Income: Recent Growth in the Rolls Raises Fundamental Program Concerns
                      (GAO/T-HEHS-95-67, Jan. 27, 1995). Under the Personal Responsibility and Work Opportunity
                      Reconciliation Act of 1996, the income and resources of an immigrant’s sponsor and an immigrant’s
                      spouse are counted in determining eligibility for SSI benefits. The effect on future growth in the rolls
                      of SSI by provision is unknown.



                      Page 29                                                GAO/HEHS-97-46 Promoting Return to Work
                      Appendix II
                      Reasons for Program Growth




                      As more people were enrolled, the DI termination rate decreased and the
DI Termination Rate   SSI termination rate remained stable, thereby resulting in a net increase in
Decreased; SSI Rate   DI and SSI program size. The DI termination rate decreased from 13 percent

Remained Stable       in 1985 to 10 percent in 1993 (between 1970 and 1984, the DI termination
                      rate fluctuated between 14 and 19 percent). The termination rate for each
                      of the major reasons for exiting DI—conversion to retirement benefits at
                      age 65, death, failure to meet medical criteria, and return to
                      work—decreased during this period (reaching age 65 and dying accounted
                      for the vast majority of instances of termination from 1985 to 1992).
                      Between 1988 and 1993, the SSI termination rate for adults with disabilities
                      remained around 16 percent.

                      A factor contributing to the decrease in DI terminations due to medical
                      recovery—which, at below 0.5 percent, were at an all time low from 1991
                      to 1993—may have been the reduction in the number of continuing
                      disability reviews (CDR) performed by SSA.38 In the early 1990s, because of
                      SSA resource constraints and increasing initial claims workloads, the
                      number of DI CDRs declined dramatically. In fiscal year 1996, about
                      4.3 million DI and SSI beneficiaries were due or overdue for CDRs.39




                      38
                        The Environment of Disability Income Policy: Programs, People, History and Context, p. 65.
                      39
                       Social Security Disability: Improvements Needed to Continuing Disability Review Process
                      (GAO/HEHS-97-1, Oct. 16, 1996).



                      Page 30                                              GAO/HEHS-97-46 Promoting Return to Work
Appendix III

Comments From the Social Security
Administration




               Page 31      GAO/HEHS-97-46 Promoting Return to Work
Appendix III
Comments From the Social Security
Administration




Page 32                             GAO/HEHS-97-46 Promoting Return to Work
Appendix III
Comments From the Social Security
Administration




Page 33                             GAO/HEHS-97-46 Promoting Return to Work
Appendix III
Comments From the Social Security
Administration




Page 34                             GAO/HEHS-97-46 Promoting Return to Work
Appendix III
Comments From the Social Security
Administration




Page 35                             GAO/HEHS-97-46 Promoting Return to Work
Related GAO Products


              Social Security Disability: Improvements Needed to Continuing Disability
              Review Process (GAO/HEHS-97-1, Oct. 16, 1996).

              SSADisability: Return-to-Work Strategies From Other Systems May
              Improve Federal Programs (GAO/HEHS-96-133, July 11, 1996).

              Social Security: Disability Programs Lag in Promoting Return-to-Work
              (GAO/T-HEHS-96-147, June 5, 1996).

              SSADisability: Program Redesign Necessary to Encourage Return to Work
              (GAO/HEHS-96-62, Apr. 24, 1996).

              PASS Program: SSA Work Incentive for Disabled Beneficiaries Poorly
              Managed (GAO/HEHS-96-51, Feb. 28, 1996).

              Social Security Disability: Management Action and Program Redesign
              Needed to Address Long-Standing Problems (GAO/T-HEHS-95-233, Aug. 3,
              1995).

              Disability Insurance: Broader Management Focus Needed to Better
              Control Caseload (GAO/T-HEHS-95-164, May 23, 1995).

              Supplemental Security Income: Recipient Population Has Changed as
              Caseloads Have Burgeoned (GAO/T-HEHS-95-120, Mar. 27, 1995).

              Social Security: New Functional Assessments for Children Raise Eligibility
              Questions (GAO/HEHS-95-66, Mar. 10, 1995).

              Social Security: Federal Disability Programs Face Major Issues
              (GAO/T-HEHS-95-97, Mar. 2, 1995).

              Supplemental Security Income: Recent Growth in the Rolls Raises
              Fundamental Program Concerns (GAO/T-HEHS-95-67, Jan. 27, 1995).

              Social Security: Rapid Rise in Children on SSI Disability Rolls Follows New
              Regulations (GAO/HEHS-94-225, Sept. 9, 1994).

              Social Security: Disability Rolls Keep Growing, While Explanations
              Remain Elusive (GAO/HEHS-94-34, Feb. 8, 1994).

              Vocational Rehabilitation: Evidence for Federal Program’s Effectiveness Is
              Mixed (GAO/PEMD-93-19, Aug. 27, 1993).



(106520)      Page 36                                GAO/HEHS-97-46 Promoting Return to Work
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