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Making Work Pay: Eliminating Financial Disincentives to Employment for People with Disabilities

Making Work Pay: Eliminating Financial Disincentives to Employment for People with Disabilities. State of Wisconsin Department of Workforce Development Division of Vocational Rehabilitation.

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Making Work Pay: Eliminating Financial Disincentives to Employment for People with Disabilities

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  1. Making Work Pay:Eliminating Financial Disincentives to Employment for People with Disabilities State of WisconsinDepartment of Workforce DevelopmentDivision of Vocational Rehabilitation

  2. Bruce Borden, a Wisconsin citizen joined forces with several friends who had high cost, high care disabilities and extensive medical and home care needs. In 1996, they designed a cost-share approach across key public benefits so that they could afford to go to work. “Making Work Pay” is based on Bruce’s personal experience with barriers and disincentives to work. Bruce has advocated to policy makers in Wisconsin and DC for more than 10 years for a cost-share “Making Work Pay” option. With Making Work Pay, I can be a taxpayer and pay my fair share towards the cost of my care.”

  3. 3 2 1 4 Making Work Pay: Economic Advancement Making Work Pay: a safety net for persons with disabilities who are seeking to advance economically From earnings, MWP enrolleebuys into benefits continuation on a cost-share basis No Fear! Continued participation in key public benefit programs Full earning and economic potential No income orasset caps

  4. National VR employment realityFFY ’03 outcomes data Receives SSI & SSDI N=3,556 Receives SSDI N=15,456 Receives SSI N=15,733 Receives no SSA benefits N=149,198 CSAVR Response to the Government Accountability Office (GAO) Audit of the Vocational Rehabilitation Program

  5. National VR employment realityFFY ’03 outcomes data Receives SSI & SSDI N=3,556 Receives SSI N=15,733 Receives no SSA benefits N=149,198 Receives SSDI N=15,456 CSAVR Response to the Government Accountability Office (GAO) Audit of the Vocational Rehabilitation Program

  6. MA-Buy in programs (19 states) Distribution of Earnings Buy-In Enrollees, 2002 4th quarter The Effectiveness of Medicaid Buy-in Programs in Promoting the Employment of People with Disabilities Briefing Paper Prepared for the: Ticket to Work and Work Incentives Advisory Panel

  7. Making Work Pay: Wisconsin’s “Next Generation” Answer to Work Incentive Reform for People with Disabilities First Generation The Red Book of SSA Work Incentives Plans for Achieving Self Support (PASS) 1619 A & 1619 B programs to continue Medicaid Eligibility Earned Income exclusion and SSI $2 for $1 Impairment Related Work Expense deductions Second Generation The “Ticket To Work” create a new buy-in for Medicaid benefit; expand Medicare eligibility create and expand national employment support network suspend medical reviews and establish easy return to SSDI benefits SSDI early intervention and SSDI $2 for $1benefit offset demos Next Generation – National Employment Investment Policy “Making Work Pay” create a ‘buy-in’ benefit option across public systems

  8. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ SSI SSDI Waiver Medical benefits SSDI HUD NO Benefit Impact Coordinationor Integrated Reporting Varied impacts for T-18 and T-19 all or nothingimpact (cliff) soft reductionin cash(slope) steep reductionin cash(slope) Current Silo Structure vs. One-Stop Portal Structurefor Public Benefit Support when working $ $ $ $ $ $ MWP SSI/SSDI, HUD, Medicaid/Medicare + cost share percentage Benefit Coordination and Integrated Reporting cost share = no benefit reduction

  9. Mike Median $39,070 in average wages (source: US Bureau of Labor Statistics, May 2005 wage data – Milwaukee PMSA) Will it Pay to Work? Tom Beneficiary 42 years old Lives in Milwaukee, WI Single, No Children 6 years on SSDI - current benefit of $939/mo. 1 bedroom Section 8 voucher of $251/mo. Has Medicare Insurance Potential MA buy-in participant CWIC

  10. 2006 Comparative Work Effort Gains(calculations from WI CHEQ calculator)No Work Effort Above SGA of $860 Average SSDI benefit Wage = $9.15/hour of $939 per month @ 34 hrs./week No earned Income $ 0 SSDI 939 HUD subsidy 251 Tax credits 97 Net Monthly Income $1,287 Annual Income $15,444 Net wage equivalency of $7.43/hour @ 40 hours/week Earned income $1,353 SSDI 0 HUD subsidy 123 Tax payments (194) Net Monthly Income $1,282 Annual Income $15,394 Net wage equivalency of $7.40/hour @ 40 hours/week 0% economic gain over no work effort Net

  11. 2006 Comparative Work Effort Gains(calculations from WI CHEQ calculator )No Work Effort Earn < SGA of $860 Average SSDI benefit Wage = $9.15/hour of $939/month @ 20 hrs./week Earned Income $ 0 SSDI 939 HUD subsidy 251 Tax credits 97 Net Monthly Income $1,287 Annual Income $15,444 Net wage equivalency of $7.43/hour @ 40 hours/week Earned income $796 SSDI 939 HUD subsidy 13 Tax payments (19) Net Monthly Income $1,729 Annual Income $20,748 Net wage equivalency of $9.98/hour @ 40 hours/week 34% economic gain over no work effort

  12. 2006 Comparative Work Effort Gains(calculations from WI CHEQ calculator)No Work Effort SGA plus $1/$2 waiver Average SSDI benefit Wage = $9.15/hourof $939 per month @ 34 hrs./week No earned Income $ 0 SSDI 939 HUD subsidy 251 Tax credits 97 Net Monthly Income $1,287 Annual Income $15,444 Net wage equivalency $7.43/hour @ 40 hours/week Earned income $1,353 SSDI 692 HUD subsidy 0 Tax payments (295) Net Monthly Income $1,750 Annual Income $21,000 Net wage equivalency of $10.10/hour @ 40 hours/week 36% economic gain over no work effort

  13. 2006 Comparative Work Effort Gains(calculations from WI CHEQ calculator) No Work Effort Making Work Pay Cost Share Average SSDI benefit Wage = $9.15/hour of $939 per month @ 34 hrs./week Earned Income $ 0 SSDI 939 HUD subsidy 251 Tax credits 97 Net Monthly Income $1,287 Annual Income $15,444 Net wage equivalency $7.43/hour @ 40 hours/week Earned income $1,353 SSDI 939 HUD subsidy 251 Tax payments (323) 15% Cost Share (203) Net Monthly Income $2,017 Annual Income $24,204 Net wage equivalency $11.64/hour @ 40 hours/week 57% economic gain over no work effort

  14. 2006 Comparative Work Effort Gains(calculations from WI CHEQ calculator) No Work Effort Making Work Pay Cost Share Average SSDI benefit Wage = $18.30/hour of $939 per month @ 34 hrs./week Earned Income $ 0 SSDI 939 HUD subsidy 251 Tax credits 97 Net Monthly Income $1,287 Annual Income $15,444 Net wage equivalency $7.43/hour @ 40 hours/week Earned income $2705 SSDI 939 HUD subsidy 251 Tax payments (871) 15% Cost Share (406) Net Monthly Income $2,618 Annual Income $31,416 Net wage equivalency $15.10/hour @ 40 hours/week 103% economic gain over no work effort

  15. Making Work Pay Cost Share National Employment Investment Policy A New Kind of Public Support • economic incentive to work and earn as much as you are worth in the job market • continued benefit safety net eliminates fear of a work disruption • Ability to contribute a fair share towards the cost of your care and public supports

  16. Wisconsin’s MWP demonstration • SSA, MA and HUD demonstration authority • $8.1 million Wisconsin demonstration • Experimental research design • 400 enrollees and 400 control participants • 7 years of statewide operation and research with 5 full years of data collection

  17. MWP Demonstration partners • Governor Jim Doyle and “Grow Wisconsin” Plan • Department of Workforce Development – lead agency Division of Vocational Rehabilitation Division of Unemployment Insurance • Department of Health and Family Services • University Research Partners • Cornell University - Institute for Policy Research • Univ. of Madison - Institute for Poverty Research

  18. What do we want to learn? Whether a cost share approach to work incentive reform will produce enough work increase among persons with significant disabilities to warrant changing public policy.

  19. Will there be woodwork impacts? • Making Work Pay maintains the current eligibility standards for SSI/DI and does not impact medical review schedules. • the standards are strict/stringent, thereby limiting benefits to only those with the most severe disabilities. … less that 55% of those who apply for disability benefits under the Social Security Act were allowed in FFY 2002. (Jensen & Silverstein, 2005).

  20. Will there be woodwork impacts? • …there is no doubt that all, or at least nearly all, Social Security disability beneficiaries have serious impairments. (Social Security Advisory Board, 2003). • ...In general, provisions intended to promote return to work for disabled workers are somewhat limited in achieving substantial results by the severity of the disabling condition required to qualify for benefits under the current program. Many beneficiaries have little or no prospect for recovery from their disabling condition... ( Stephen C. Goss, SSA Chief Actuary)

  21. Will there be woodwork impacts? • It is difficult to gauge whether a cost share approach would increase the SSI/DI rolls because the programs would be deemed more attractive to eligible disabled individuals who had not previously pursued benefit eligibility. • If there is such a woodwork effect, the costs need to be evaluated against the first dollar cost share offsets and any increases in taxes paid across all MWP participants as compared to those working under current SSI/DI rules. • This is a research question.

  22. What about HUD supports? • Making Work Pay does not require an individual to receive a HUD housing support, but does include the support if it is in place or if the individual is on a wait list at enrollment into the cost share program. • Individuals who receive both an SSI/DI and a HUD benefit may work fewer hours and earn less under a benefit reduction system than under a cost-share system. A research question. • Individual’s who make economic gains through a cost share approach may be less likely to apply for, wait for, or utilize a HUD benefit. A research question.

  23. How will the public react? Congress, federal agencies and the public have a record of supporting policy that encourages beneficiaries of public supports to increase their work effort. This is true even when the work effort of the beneficiary group produces no direct tax savings. • Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings. (http://www.ssa.gov/retire2/whileworking.htm) • The expansions in the entitlement work support system (e.g. child care, EITC, Medicaid and the child tax credit) after 1984 resulted in working families receiving $46 billion more in cash and other benefitsin 1999 than if Congress and a series of presidents had not expanded the work support programs. (Brookings Institution testimony to Committee on Ways and Means, July 2006)

  24. Q: How does the public benefit? A: Economic Returns on Investment • federal taxes contributed by enrollee • state taxes contributed by enrollee • cost share contributed by the enrollee • social security contributed by enrollee and their employer • MA insurance contributions by enrollee and/or their employer • administrative savings generated by a streamlined system • additional workers to address labor shortages • Increase in the Gross National Product from increased work

  25. SSDI/HUD Benefit Safety Net & Economic Impacts

  26. Benefit Buy-In Percentage: How It Is Determined • Easy to understand cost share percentage of 15% of gross earned income based on quarterly wage data. • Only one buy-in assurance payment across all benefit systems • Cost share is adjusted for Medicaid Purchase Plan premiums

  27. MWP Health Care Options Private-Public Health Care Model MAPP SSI/SSDI MA SSI • Employed full-time • Participant cost share • Employer insurance required • No income/asset limits • Federally funded MA- level benefit wrap around MWP SSDI Health Care Option Income at <250 of FPL Assets less than $15,000 Participation premium at 150% FPL Employed Full or Part Time $’s for Employer Subsidized Insurance Income at ~9 0% of FPL Assets less than $2,000 NOT Medicaid Medicaid

  28. Making Work Pay for Taxpayers:Why We Need this System Option $imple:a one-stop portal for cash benefits $treamlined:less bureaucracy, reporting, and government intervention $aves:reduces administrative costs $haredtaxpayer responsibility (FICA, income taxes) $timulating:encourages full employment and consumer saving and spending

  29. Wisconsin is a nationally recognized leader in Work Incentive Reforms with a successful track record • Wisconsin Works (W-2) welfare reform • MA Buy-in State with MAPP Plus option • SSA Work Incentive Demonstration Site • SSA Ticket to Work Implementation State • SSA SSDI $2 for $1 Pilot Demo State • SSA Early Intervention Model building State • A legacy of progressive community integration programs supporting people with disabilities • An active community of persons with disabilities • Resilient economy Why Wisconsin? Our challenges may be great, but so is our ability to meet them. (Governor Jim Doyle Grow Wisconsin)

  30. Taxpayer Return from Making Work Pay 400 MWP Demonstration Project Participants MWP participants 400 x average yearly earnings $17,346 for each participant (30 hrs/wk @ $11.12/hr) $6,938,539 Gross earnings fromMWP participants Taxes paid: $2,350,777 Fed (13%): $ 902,010 FICA(15.5%): $1,075,474 State (5.4%): 373,293 $3,391,558from MWPparticipantsgoes towards annual demo costs, MA and tax responsibility +15% MWP Cost Share: $1,040,781

  31. Taxpayer Return from Making Work Pay 2% of 186,000 SSI/DI beneficiaries in WI (42% of MAPP participants as of 8/30/05) MWP participants 3,720 x average yearly earnings $17,346 for each participant (30 hrs/wk @ $11.12/hr) $64,527,120 Grossearnings fromMWP participants Taxes paid: $21,874,692 Fed (13%) $ 8,388,526 FICA(15.5%)$10,001,703 State (5.4%) $ 3,484,464 $31,553,760from MWPparticipantsgoes towards annual public tax responsibility +15% MWP Cost Share $9,679,068

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