Kathleen McGarry and Jonathan Skinner

The Importance of Private and Public Safety Nets:

A Comparison of Approved and Denied SSDI/SSI Applicants

Kathleen McGarry and

Jonathan Skinner

Presentation prepared for the 14th annual Retirement Research ConsortiumAugust 2-3, 2012, Washington DC

Well-Being of Disabled at Older Ages

•SSDI Eligibility▫You are not working, or working very little▫Your disability is severe, cannot do basic work

activities such as walking, standing, or remembering

▫Your disability has lasted or is expected to last at least a year or result in death

▫You cannot do the work you did before▫Your disability prevents you from doing other

work•SSDI does not give benefits if you are

partially disabled, or if your disability is short-term.

Determination Process•In many cases determination is subjective

▫Difficult to assess degree of disability (partial/total)

▫Difficult to assess permanence of disability•Research has demonstrated variation:

▫Over time in application and acceptance rates (Autor and Duggan)

▫Across examiners (Maestas, Mullen, Strand)

Determination Process•Expect errors to be made in both directions•Those who are denied after appeals have

significant time out of the labor force▫Can be debilitating even to those who try to

return to work▫Both accepted and denied applicants likely to

suffer economic losses

We ask: •How do two groups of disabled fare at 65?

▫Relative to each other ▫Relative to non-disabled

•What other resources do disabled individuals have?

•How do those denied benefits compensate for lack of SSDI/SSI income?▫Earnings▫Spousal income▫Family support▫Other public support

Why age 65?

•Won’t apply / appeal at later date▫Disability record fixed

•Unlikely to return to the labor market•Income stream likely stable for rest of their

lives▫Social Security, Pensions

•Near peak of assets in life cycle model ▫Spend down over remainder of life

•“Stock” of health at old age▫Health needs affect how quickly resources

are used▫Longevity affects time over which individual

must fund consumption

What do we expect for recipients?•Lower lifetime income

▫Benefits replace ~42% earnings▫Less savings / quicker spend down of assets

•Lower Social Security benefits with short work life

•Lost or reduced pension from employer•Eligible for Medicare but worse health

▫Greater health service use▫Greater ADLs and other uncovered ltc care

needs▫Loss of retiree health insurance Greater OOPME, loss of assets and current expense

What do we expect for those denied?

•Could be incorrectly denied benefits:▫Truly disabled but no assistance

•Could be correctly denied but work limited:▫Still face partial disability that restricts labor

market activities•Could be correctly denied but scarred by

process: ▫Disability resolves itself over time▫Never truly disabled

Time out of labor market reduces labor market opportunities

What do we expect for those denied?

•Lower lifetime income▫Less savings / quicker spend down of assetsNo SSDI to replace portion of earnings

•Lower Social Security benefits with short work life

•Lost or reduced pension No Medicare and No employment related

health insurance but worse health▫Greater health service use▫Greater ADLs and other uncovered care needs▫Loss of retiree / employee health insurance Greater OOPME, loss of assets, current

expenses

Outcomes Examined

•Examine financial / health status for each group: ▫Successful applicants (69 % successful)▫Unsuccessful applicants (after all appeals)▫Never applied

•Examine at age 65▫Know application / appeals process

complete▫Labor force participation likely complete▫Health / disability unlikely to improve

•Go back in time to examine at application▫Where they started

Outcomes •Income

▫Total household income ▫Individual income components broken

down by: Own income Spousal income Family income

•Assets▫With and without value of home

Outcomes •Health status

▫Self-reported health status ▫Depression▫Service use (doctor visits, hospital stays)▫Mortality

•Family assistance▫Time▫Financial

Health and Retirement Study

•Nationally representative survey of the older pop▫Use observations for all cohorts▫Select those individuals observed at age 66 /

67 to measure income at age 65 •Detailed information on income, assets,

health, medical spending / service use•Information on family transfers Importantly information on SSDI / SSI

applications, awards, benefits

Means of Variables by Disability Status at Age 66 / 67

Never Applied(8,824)

Denied Benefits(556)

Received Benefits(1,181)

Demographic Characteristics:

Age 66.7 66.5 66.6

Nonwhite 0.16 0.31 0.31

Coupled 0.76 0.58 0.59

Schooling 12.49 10.57 10.54


Never Applied Denied Benefits Received Benefits

Health information:

Ex / vg 0.46 0.14 0.10

Good 0.33 0.26 0.23

Fair 0.16 0.35 0.37

Poor 0.04 0.25 0.29

Depression 0.15 0.39 0.44

Died during survey 0.13 0.22 0.24

Age at Death (if obs) 73 71 71



Health information:

# Doctor visits 8.6 17.6 17.1

# Hospital nights 1.7 5.5 5.8

Note all should have Medicare coverage, SSI recipient have Medicaid as well



Financial information:

Total Income 70,378 30,478 32,662

Total Assets 602,432 175,532 210,040

Non-housing Assets 407,736 87,054 128,621

Percent Poor * 5.7 21 25

*Poverty based on own / spousal income and needs, income includes food stamps per RAND file.

Means of Variables by Disability Status at 66 /67


Own income components:

Percent any work 34.2 12.6 7.2

Own earnings 10,971 2,000 941

SSDI/SSI 65 484 3,110

SS retirement 10,276 8,806 8,019

Pension 7,140 3,243 2,810

WC/UI/Other govt 828 986 863

Means of Variables by Disability Status at 66 / 67


Spousal Income: (conditional on being married)

Total income 26,556 18,283 18,591

Household income components:

HH asset inc 16,741 2,726 3,807

HH other 5,821 1,888 2,256

Differences at Application

•Compare groups at (first) SSDI/SSI application▫What differences existed when they applied

before deleterious effects of SSDI/SSI? Time out of labor force (“decay”) and depressed

lfp Health conditions and oopme Spend down of assets

•If never applied use first observation

•If applied before first interviewed: ▫Use first observation▫Use only those who applied after survey

began





Demographic Characteristics:

Age 56 57.6 57.5

Nonwhite 0.16 0.31 0.31

Coupled 0.76 0.58 0.59

Schooling 12.49 10.57 10.54

Means of Variables by Disability Status at First Obs




Health:

Ex / vg 0.60 0.11 0.08

Good 0.29 0.24 0.19

Fair 0.12 0.34 0.37

Poor 0.09 0.31 0.37

Depressed 0.17 0.49 0.48

# Doc visits 3.4 12.7 15.5

# hospital nights 0.4 4.3 6.2

SSDI / SSI recipients should have Medicare / Medicaid benefits

Means of Variables by Disability Status at Application(those who applied after survey began)



Received Benefits

(509)

Health:

Ex / vg 0.60 0.10 0.11

Good 0.29 0.24 0.21

Fair 0.12 0.36 0.39

Poor 0.09 0.31 0.29

Depressed 0.17 0.49 0.47

# Doc visits 3.4 16.0 20.0

# hospital nights 0.4 5.7 8.6

Recipients should have Medicare benefits

Means of Variables by Disability Status at First Observation




Financial:

Total Income 85,458 36,106 37,532

Total Assets 416,094 149,628 157,180


Percent poor 5.6 32.0 31.6

Means of Variables by Disability Status at Application(Those who apply at or after first interview)



Received Benefits

(509)

Financial:

Total Income 85,458 35,640 44,168

Total Assets 416,094 144,682 182,786


Percent poor 5.6 33.9 25.3



Income components:

Own earnings 36,196 7,999 6,189

Working 0.75 0.22 0.12

SSDI/SSI 35 571 4,937

SS retirement 349 1,044 414

Pension 1,917 1,677 1,456

WC/UI/Other govt 887 1,807 1,977



Spousal income:

Total income 36,020 24,236 21,060

Household income:

HH asset inc 12,338 4,558 3,936

HH other 3,768 2,229 4,509

Familial Support

•Some financial support from children may be limited due to:▫SES of children correlated with parent’s

SES▫Age of children (35-40)▫Reporting biases (receipt under reported)

•Time help more common among lower income families▫Time help with caregiving, ADLS as well as

chores


Never Applied

Denied Benefits

Received Benefits

Received any cash from kids 2.9 5.9 4.3

Amount if > 0 6,898 3,853 4,184


Never Applied

Denied Benefits

Received Benefits


Amount if > 0 6,898 3,853 4,184

Received help with personal care 1.7 12.9 15.5

Hours/month if > 0 65.4 95.3 91.5


Never Applied

Denied Benefits

Received Benefits


Amount if > 0 6,898 3,853 4,184

Received help with personal care 1.7 12.9 15.5

Hours/month if > 0 65.4 95.3 91.5

Received help with IADLs 1.2 8.8 12.5

Any time help (excl. chores) 1.9 15.1 16.7

Any help with chores alone 24.8 48.0 45.4

Any Familial Support

Regression Analyses

•Do differences by disability status remain after controlling for observable characteristics?▫Age, race/ethnicity, sex, schooling, marital

status, health status •Same results as in simple cross

tabulations: ▫Large and significant differences in income for

those who applied for SSDI and those who did not

▫No significant differences between accepted and rejected

Regression Analysis

Denied Benefits Received Benefits

Income measures:

Income age 65 -14,791*** -11,799***

Income first obs -16,191*** -13,952***

Asset measures:

Assets age 65 -129,008* -80,537

Assets first obs -89,333** -71,200**

Medical Spending:

OOP Age 65 1,412** 378

OOP first obs 1,189 2,987***

Regression Analysis

Denied Benefits Received Ex Health

Income measures:

Income age 65 -14,791*** -11,799*** 28,165***

Income first obs -16,191*** -13,952*** 29,571***

Asset measures:

Assets age 65 -129,008* -80,537 330,898***

Assets first obs -89,333** -71,200** 167,536***

Medical Spending:

OOP Age 65 1,412** 378 -3,564***

OOP first obs 1,189 2,987*** -1,031

Figure 2A: Median Household Income by SSDI/SSI Status & Age

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

55-59 60-65 66-68 69-74 75+

Rejected

Accepted

Never App.

Figure 3A: Median Household Assets by SSDI/SSI Status & Age

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

55-59 60-65 66-68 69-74 75+

Rejected

Accepted

Never App.

Figure 4: Percentage Currently Depressed by SSDI/SSI Status & Age

0

0.1

0.2

0.3

0.4

0.5

0.6

55-59 60-65 66-68 69-74 75+

Rejected

Accepted

Never App.

Findings: •Disability applicants (rejected &

accepted) are significantly worse off than non-disabled in numerous dimensions▫Income, wealth, and health, health service

use•Accepted and denied applicants are quite

similar to each other across all measures ▫Both “before” and “after”

•No single source of income compensates for lack of SSDI/SSI

•Children provide assistance through time help more so than cash

Insights into eligibility process

•Low labor force participation / earnings among those denied benefits could indicate:

▫Errors in SSDI/SSI determination

▫Disabilities / difficulties succeeding in the labor market that are not recognized by SSDI / SSI Partial disability, other types of disability

▫Application process takes sufficiently long that disabilities “improve” but individuals cannot return to labor market without difficulty

Insights into eligibility process?

▫Process has sufficient randomness that ineligible individuals gamble, if they lose they are sufficiently scarred by the process that they have difficulty returning to work

Documents

Kathleen McGarry and Jonathan Skinner