President Obama’s $4 trillion budget blue print for fiscal 2016 has garnered a lot of attention for its proposals for raising caps to bolster spending for defense and domestic programs largely geared to the middle class.
However, tucked away in the massive budget document is a series of proposals for salvaging a program critically important to the middle class – the Social Security Disability Insurance trust fund that experts warn is fast running out of money.
Social Security trustees and other financial experts have been warning for years that lawmakers and the administration must act to prop up the hemorrhaging trust fund, as trustee Charles Blahous noted recently in The Fiscal Times. SSDI supplements the income of physically disabled workers and automatically enrolls them in Medicare after two years. The plan is funded by federal payroll taxes.
With more and more Americans turning to the program--and increasing evidence of billions dollars in fraud--the latest trustees’ report projects that the fund’s reserves will be depleted in late 2016. By law, Social Security can only pay benefits if there is a positive balance in the appropriate funds. Actually, there are two funds: one for old age and survivors’ benefits (OASI) and the other for disability benefits (SSDI).
Absent those reserves, Blahous said, the only funds the government can use to cover disability claims is the incoming tax revenue. Unfortunately, there would only be enough to cover 81 percent of scheduled disability benefits.
Congress is fast running out of time to address the brewing financial crisis. Legislation will be required during this session of Congress or, at the very latest, in a rush of activity early next year, to prevent large sudden benefit cuts. The House of Representatives recently passed a procedural rule to prepare for the coming legislative debate.
If Congress fails to act, however, more than 10 million beneficiaries essentially will face a nearly 20 percent reduction to the scheduled benefits that they rely upon for financial wellbeing. According to the Bipartisan Policy Center, here is a summary of the president’s recommendations
Shore up the SSDI Trust Fund. Currently, employers and their workers each pay a total of 6.2 percent of their wages to the Social Security system: 0.9 percent is allocated to SSDI and 5.3 percent to OASI. Under Obama’s approach, neither the overall tax rate nor the solvency of the combined trust funds would be affected. Instead, it would reallocate a few tenths of a percentage point of payroll tax revenue from the OASI fund to the SSDI fund, so that both trust funds would be sustained until 2033.
Test early intervention strategies to keep people in the workplace. This proposal would experiment with early intervention approaches to help people with a potentially work-limiting disability to remain in the workforce. Those methods would include providing supportive services to those with mental impairments giving employers incentives to retain workers with disabilities, and incentivizing states to better coordinate the services that they provide.
Hire More Administrative Law Judges. There is a huge backlog of more than one million workers waiting to appeal adverse rulings as they seek SSDI coverage. The president’s budget proposes funding to reduce the backlog by increasing the number of administrative law judges and streamlining the appeal process.
Provide a Mandatory Funding Stream for Continuing Disability Reviews
Obama believes that the government can save the SSDI program $32 billion over the coming decade by bolstering a program that reviews cases every three to seven years to determine whether a beneficiary’s medical condition has improved.
Stop “Double Dipping” into Government Coffers Obama proposes to offset an individual’s entitled SSDI benefit in any month that they receive state or federal unemployment insurance benefits, a proposal also featured in last year’s budget. For example, if someone was entitled to $1,000 a month from SSDI and already received $400 from unemployment insurance in a particular month, their SSDI benefit would be reduced to $600 for that month.
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