Kathleen McGarry and Jonathan Skinner

1. 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 Consortium August 2-3, 2012, Washington DC

2. 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.

3. 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)

4. 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

5. 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

6. 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

7. 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

8. 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

9. What do we expect for those denied? • Lower lifetime income • Less savings / quicker spend down of assets • No 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

10. 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

11. Outcomes • Income • Total household income • Individual income components broken down by: • Own income • Spousal income • Family income • Assets • With and without value of home

12. Outcomes • Health status • Self-reported health status • Depression • Service use (doctor visits, hospital stays) • Mortality • Family assistance • Time • Financial

13. 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

21. 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

30. 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

34. Any Familial Support

36. 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

42. 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

43. 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

44. 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