The uncontrolled growth of disability insurance

Disability Insurance

An update from the Medicare and Social Security trustees has shown that the cost of disability insurance is skyrocketing.

Disability InsuranceThe annual report published by the Social Security and Medicare trustees has shown that yet again, among all of the partisan disagreements, a critically important issue has failed to receive its due attention: the rapidly increasing cost of disability insurance.

This coverage accounts for almost one out of every five dollars that Social Security spends, and the numbers are rising to a point that is simply out of control. Many are already saying that the coverage is removing too many workers from the job market too early. When this occurs, the individual’s lifetime income is reduced and it causes economic growth to stumble.

At the same time, though, despite the problems caused by the disability insurance system, Medicare and Social security do not include it either among their heated arguments or most of their discussions.

The report from the trustees indicated that 10.6 million disabled workers received $128.9 billion.

Last year, the government paid those disabled workers and their family members 25 percent more than the amount that it received through payroll taxes. Furthermore disability benefits worth $33 billion were paid to five million adults from the Supplemental Security Income Program for poor Americans.

There was $90 million spent by Medicare on disabled worker benefits for individuals who are eligible to receive government health insurance following a disability that lasts more than 2 years, no matter what their age. The poor disabled received $110 billion from Medicaid.

Disability insurance is a vital program to assist workers who have been disabled and at a time when they may not have the opportunity to hold another job. Some of the increases in the costs from this program are a reflection of the aging population, as there is a greater risk of injury associated with age. Moreover, as more women have entered the workforce, the costs associated with disabled female workers should also increase.

All told, though, these factors make up only a fraction of the rapidly increasing cost. They do not account for the fact that men of all ages have been accumulating much higher costs despite the fact that Americans are typically healthier than ever before.

The two factors that are likely to blame are the difficult job market for individuals with low skills, and a foundational flaw in the disability insurance program which discourages disabled workers from trying to return to the workforce.

 

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