Nearly a million filed for disability during the recession who otherwise wouldn’t have, study finds

Via Marketwatch

William H. Macy portrays a character falsely claiming disability on “Shameless.”

Nearly 1 million people filed for disability benefits they ordinarily wouldn’t have due to the recession, a new study finds.

Another 400,000 filed earlier for disability than trends would have suggested, the study finds.

The study puts into numbers what economists had long suspected, that during the Great Recession the ranks of those who claimed disability were artificially high.

Of those that filed that otherwise would not have, some 41.8% were awarded benefits, or more than 400,000 new beneficiaries to the Social Security Disability Insurance program.

These “induced applicants” had less severe impairments than the average applicant, and also were more likely to appeal an initial denial, the study found.

The study finds a $2.9 billion processing cost increase between 2008 and 2012 as a result of upturn, and a total Social Security and Medicare cost of over $97 billion. (Those who get SSDI are entitled to extra Medicare benefits.)

There are less direct costs as well: because working after program entry is rare, this corresponds to a near-permanent decline in productive capacity.

By the recession’s peak, the system was receiving 16.5% more applications than usual, the study finds. The trend in disability has reversed as the economy has improved, as well as due to a 2011 Social Security Administration initiative that started focused reviews and new training initiatives on allowance hearings.

Disability benefits last year were paid to 715,921 workers, who received an average monthly payment of $1,196.87, the government says. There was a 2010 peak of 1.03 million workers on disability.

The study, circulated by the National Bureau of Economic Research, was conducted by Nicole Maestas of Harvard Medial School, Kathleen Mullen of the Rand Corp. and Alexander Strand of the Social Security Administration. As a working paper, it has yet to be peer reviewed.

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