COMMITTEE ON WAYS AND MEANS BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois E. CLAY SHAW, JR., Florida NANCY L. JOHNSON, Connecticut AMO HOUGHTON, New York WALLY HERGER, California JIM MCCRERY, Louisiana DAVE CAMP, Michigan JIM RAMSTAD, Minnesota JIM NUSSLE, Iowa SAM JOHNSON, Texas JENNIFER DUNN, Washington MAC COLLINS, Georgia ROB PORTMAN, Ohio PHIL ENGLISH, Pennsylvania WES WATKINS, Oklahoma J. D. HAYWORTH, Arizona JERRY WELLER, Illinois KENNY C. HULSHOF, Missouri SCOTT MCINNIS, Colorado RON LEWIS, Kentucky MARK FOLEY, Florida KEVIN BRADY, Texas PAUL RYAN, Wisconsin	CHARLES B. RANGEL, New York FORTNEY PETE STARK, California ROBERT T. MATSUI, California WILLIAM J. COYNE, Pennsylvania SANDER M. LEVIN, Michigan BENJAMIN L. CARDIN, Maryland JIM MCDERMOTT, Washington GERALD D. KLECZKA, Wisconsin JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts MICHAEL R. MCNULTY, New York WILLIAM J. JEFFERSON, Louisiana JOHN S. TANNER, Tennessee XAVIER BECERRA, California KAREN L. THURMAN, Florida LLOYD DOGGETT, Texas EARL POMEROY, North Dakota
Allison Giles, Chief of Staff Janice Mays, Minority Chief Counsel  SUBCOMMITTEE ON SOCIAL SECURITY E. CLAY SHAW, JR., Florida, Chairman
SAM JOHNSON, Texas MAC COLLINS, Georgia J.D. HAYWORTH, Arizona KENNY C. HULSHOF, Missouri RON LEWIS, Kentucky KEVIN BRADY, Texas PAUL RYAN, Wisconsin	ROBERT T. MATSUI, California LLOYD DOGGETT, Texas BENJAMIN L. CARDIN, Maryland EARL POMEROY, North Dakota XAVIER BECERRA, California
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.

Advisory of July 3, 2002, announcing the hearing

THIRD IN A SERIES ON SOCIAL SECURITY DISABILITY PROGRAMS' CHALLENGES AND OPPORTUNITIES

Thursday, July 11, 2002

House of Representatives,
Committee on Ways and Means,
Subcommittee on Social Security,
Washington, DC.

The Subcommittee met, pursuant to notice, at 10:16 a.m., in room B -318 Rayburn House Office Building, Hon. E. Clay Shaw, Jr. [Chairman of the Subcommittee] presiding.

[The advisory announcing the hearing follows:]

Chairman SHAW. Good morning. I apologize for being 15 minutes late in starting. Today, the Subcommittee continues our examination of the challenges and opportunities faced by Social Security's two disability programs -- Disability Insurance (DI) and Supplemental Security Income (SSI) -- by focusing on the definition of disability.

According to law, an individual is considered disabled when they are unable to "engage in substantial gainful activity (SGA) by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months."

While that definition would seem to outline the parameters of disability, in fact there are 270 pages of Federal regulations that discuss how to implement that law. Included is a complex list of impairments, how to consider age, education, and vocational factors, and how to evaluate pain, other subjective complaints, and activities of daily living.

Although the regulations are intended to produce objective determinations of disability, each person's circumstance is unique, and disability determinations are inherently the result of both objective review of the evidence and subjective judgment. Thus, different decision-makers may reasonably come to different conclusions even in similar circumstances. No wonder ensuring fair and consistent treatment for all claimants remains a key challenge for the Agency as it administers this complex program.

Compounding the difficulty of implementing a fair and accurate definition of disability is the evolving nature of work. Employment opportunities for individuals with disabilities have expanded over the past several decades. The intent of the disability program has been to provide a safety net for individuals who cannot work because of long-term disability. However, new employment possibilities and the changes in and interaction between vocational, environmental, medical, and other factors have led many to question whether the definition of disability accurately reflects the intent of the program and the needs of individuals with disabilities today.

Helping us sort through all of these issues today is Martin Gerry, the Deputy Commissioner for Disability and Income Security programs at the Social Security Administration (SSA); Robert Robertson, at the U.S. General Accounting Office (GAO); Sarah Mitchell, Chair at the Ticket to Work Advisory Panel, who is making her first appearance before this Subcommittee; and various consumer, academic, and private sector experts.

President Franklin Delano Roosevelt, who signed Social Security into law and was himself an individual with a disability, turned the concept of disability on its head and we have been trying to catch up ever since. Evolutions in the workplace, society, and medicine have outpaced our progress in reviewing the program's definition of disability. Though ensuring that the definition of disability meets the needs of Americans is a difficult and complex task, it must be a priority of this Committee. American workers and their families who rely on the vital safety net Social Security disability benefits provide deserve no less.

[The opening statement of Mr. Shaw follows:]

Chairman SHAW. Mr. Matsui.

Mr. MATSUI. Thank you, Mr. Chairman. No, I have no comments. I look forward to hearing from the witnesses. Many of us will have to move in and out from time to time, and I hope that the witnesses and people will understand that, and we apologize in advance for that. Thank you.

Chairman SHAW. Thank you. Well, I have already introduced you, Mr. Gerry. We appreciate your being here. Welcome. We look forward to your testimony. We have the full text of your testimony which will be made a part of the record, so you may summarize as you see fit.

STATEMENT OF MARTIN GERRY, DEPUTY COMMISSIONER, DISABILITY AND INCOME SECURITY PROGRAMS, SOCIAL SECURITY ADMINISTRATION

Mr. GERRY. Thank you, Mr. Chairman, and Members of the Subcommittee. Thank you for inviting me today to discuss the definition of disability used by the Social Security Administration in evaluating applicants for Social Security and Supplemental Security Income disability benefits.

The Social Security Act broadly defines disability for adults as the inability to engage in any substantial gainful activity. I see that as the first key, element. Then, secondly, that inability to engage is due to a physical or mental impairment. So, that is the second key element. Third, that that physical or mental impairment has lasted or is expected to last at least 1 year or to result in death.

So, the statutory definition seems to me to contain three basic ingredients. Based on this definition, Social Security Administration regulations set out a five-step sequential evaluation process to determine disability, and I would like to briefly describe the steps.

The first step is to determine whether an individual is engaging in substantial gainful activity. In other words, not only whether they are working, but whether they are earning an income over a certain level. Under current regulations, an individual will generally be considered to be engaging in substantial gainful activity -- if he is or she is earning more than $780 a month; and, in the instance of individuals who are blind, that amount is $1,300 a month.

If it is determined that the individual is engaging in substantial gainful activity, a decision is made at the first step that that individual is not disabled and medical factors are not really considered at that point. So, at step one, you either move on to discuss the disability and medical factors, or you make the decision that the individual is already engaged in substantial gainful activity, and at that point they are ineligible regardless of the severity of the disability. That is key, because there are people who are very severely disabled who are very definitely earning above the limit, and the first test that I think is clearly here is the question of whether someone is in fact not earning at that level.

The second step, if you conclude that there are not earnings above substantial gainful activity, is to determine whether or not an impairment exists and the severity and duration of a person's impairment. That is the exploration of the impairment in step two. At this step and throughout the remainder of the process, the Agency would consider all of the person's physical and mental impairments, both singly but also in combination -- and Congress has been very clear about the need to look at this process in terms of the combination of factors.

If the individual does not have a medical impairment, or if the impairment or combination of impairments is determined to be "not severe" -- and I will explain that in a second -- then the individual would be found not disabled at the second step. The basic meaning of "not severe" is that the individual does not have an impairment that significantly limits the individual's capacity to perform basic work activities.

So, at step two, there is a question of, first, is there a medical impairment; and, secondly, is it severe? The severity test at this step is pretty much, does it really interfere with the ability to perform basic work activities?

If there is a medical impairment and it is severe, then we would proceed to the third step of the sequential process. At that step, a determination is made as to whether the impairment meets or equals the criteria of one of the medical listings that is published by the Agency in regulations. The listing of impairments that we publish describes impairments that are considered severe enough to prevent a person from doing any gainful activity. So, I want to distinguish that from substantial gainful activity. So, there is a presumption, a conclusive presumption in the listings, that if you in fact meet these requirements, then we will conclude at that point that you are, in fact, eligible.

Listings are not required by the statute, but the Agency has been using them in one form or another since it really first started evaluating disability claims to screen the most obviously disabled applicants.

So, at this third step, the presence of an impairment that meets the criteria of the listings is usually sufficient to establish that an individual who is not working is disabled, without the need to go further, and that would involve the consideration of the individual's age, education, and work experience.

On the other hand, it is important to note that the absence of a listing level impairment, that is, the decision that someone doesn't meet a listing, does not mean that the individual is not disabled. In fact, the Agency determines and finds people disabled at subsequent steps. The purpose of step three is to get those people who are most obviously disabled identified as early as possible in the process.

If a severe impairment does not meet or equal a listing, the Agency then assesses the individual's residual functional capacity, which roughly translates as what an individual can still do, taking into account his or her impairment, and uses that assessment in the final steps of the process, step four and step five.

At step four, we consider whether the individual has the residual functional capacity to meet the physical and mental demands of his or her past relevant work. So, we look at the actual work history of the applicant. The question is, is there evidence that this individual could do the same kind of work?

If the impairment does not appear to prevent the individual from meeting the demands of past relevant work, then the person would be found to be not disabled and the process would stop at this point.

On the other hand, if that is not the case, we would move on to step five, and that is the final step in the process, which asks the question: If the impairment prevents the individual from performing past relevant work, it must be determined at the fifth and final step whether the impairment prevents the person making an adjustment to other work. We wouldn't be looking at the kind of work the individual did in the past, but would be looking at a much broader sense of what work is. As the statutory definition states, the individual must be not only unable to do his previous work, but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy. I'm quoting the language of the statute.

It is worthwhile to emphasize here that the work we are talking about does not actually have to exist in the immediate area where the claimant lives. So, we are not talking about job opportunities that may be actually available to the individual at the place where the individual lives. We are talking about the overall economy, and whether in general this person could work in the overall economy. So, those are the five basic steps of the sequential evaluation process.

Mr. Chairman, Mr. Matsui, and other Members of the Subcommittee, I want to thank you again for beginning the public process of exploring the definition of disability for Social Security benefits, which I think is a very important activity of this Committee. I stand with the Commissioner and her pledge to work with the Administration, with Congress, and with the dedicated and experienced employees of the Social Security Administration to make improvements in the service that the SSA provides applicants for disability and in meeting the other challenges facing the Agency. I look forward to working with you all to improve Social Security's disability programs, and welcome any questions that you might have.

[The prepared statement of Mr. Gerry follows:]

Chairman SHAW. Mr. Gerry, in that spirit, I have several questions which might be a little bit combative, but I would appreciate your responding to them as best as you can.

First, that the General Accounting Office found that DI and SSI disability criteria have not kept pace with the advances and changes in the nature of work, social change, medical achievement, and assistive technologies. One, do you agree? Why has this happened, and what is SSA trying to do to fix it? Is there something we should do to effect the statute in order to fix it?

Mr. GERRY. I think that was four questions, Mr. Chairman. Let me see if I can keep them in order. Without talking about every single listing, I think that the observation that the GAO report makes is generally a fair one; that is, the listings -- and I am talking now not about the statutory language or even the regulations in general, but the medical listings and vocational listings which the Agency has  -- have not been revised frequently. There have been significant periods of time without changes.

Chairman SHAW. We are speaking of regulations now.

Mr. GERRY. They are regulations, but they are not the basic operating regulations of the program; they are specific rules that we have established at step three of the process and the eligibility system that are usually described differently, even though they are technically regulations. The medical listings are an attempt, as I said earlier, to provide a route for people to fairly quickly establish that they are disabled, without having to go through the process, which as described in my prior testimony and the Commissioner's testimony, can be a very long process.

So, the big advantage of the listings in practical terms is that if you can meet the listing or equal the listing, then you should have an allowance early in the process, and obviously a lot of days are saved at the beginning of the process. Those listings do attempt to provide specific guidance as to how to make a determination of disability, and therefore are quite sensitive to changes in the medical and rehabilitation insights. It is fair, and I think accurate, to say that over significant periods of time, a lot has changed with respect to not just the employment opportunities and supports, but also the medical and rehabilitation realities of people with disabilities. So, I think in that sense they haven't kept pace.

We are involved right now in a process to try to keep pace. When the Commissioner took office, we together spent quite a bit of time very early in the process looking at what we have been doing, and we want to pursue this vigorously. I think it is very important to do this quickly but also to do it thoroughly, so that when we do issue new listings, they really reflect and solve the practical problems that we have had in actually applying the listings.

Let me explain for a minute. There has been a tendency in writing listings and revising listings to look at them from a technical, accuracy standpoint, kind of an academic standpoint. I think it is important to be sure that we are technically accurate, but what we want to change and expand on particularly is their actual usability. We are engaged in a new process in our policy-making activity, of going out and talking to consumers and claimants, to advocates, to professionals who are giving opinions, and then to the people who actually apply our listings at the State level in the hearings, and even in the Federal courts, to try to identify where the listings are practically creating problems.

We have a lot of hearings, close to 600,000 a year; when I came in, I asked questions about what listings, if any, are the subjects of those hearings? Are there particular listings that seem to be posing more difficulty in terms of adjudication? We haven't routinely kept that information and we haven't routinely asked the people who actually have to apply our rules where they are having difficulties.

So, what we want is to do two things at the same time: We want to keep current with the research and be sure that we have a technically and scientifically accurate description, but we also really want to do a fairly careful effort to see whether what we are writing is actually useful, or if it is creating problems for the courts, for the hearings officers, and the disability examiners. So, we have put a new process in place to do that. That reflects, I think, an agreement with the proposition that, yes, we ought to update and we ought to keep current, but that we ought to do more than just the scientific side of that. Now, I know you asked me four questions. I think I answered two or three; I may have missed one in that.

Chairman SHAW. Well, you answered one that I hadn't asked yet.

Mr. GERRY. Okay.

Chairman SHAW. So, I will go to the third one. Many of our witnesses today have suggested the definition of disability is too stringent, and that it should be modified to include short-term disabilities or partial disabilities to account for the change in work, medicine, and technology, and the expectations of individuals with disabilities. What research are you undertaking relative to these issues, and when will you be able to advise the Congress as to your particular finding?

Mr. GERRY. The Commissioner has asked me to look at the large question of how our disability program -- which would include the definition as it operates -- fits into the larger structure of Federal programs in terms of providing support to people with disabilities, and particularly in advancing the President's New Freedom goals, and the goals, obviously, that were reflected in the Americans With Disabilities Act (ADA).

What makes the question a little difficult to answer is that the charge to me -- and I am hoping to have completed this initial work so I can discuss it with her by the end of next year -- isn't just to look at our program or the definitions in the Social Security Act, but really to ask the question of how what we are doing ought to fit into a larger integrated whole.

The question of short-term disability benefits or how we deal with people with permanent partial disability, which I think is very important -- we want to look beyond just the Social Security Administration. It may be that the best way to do that would be to look at some of the other agencies or programs, or even at the tax system, to look at as a whole how we are providing support to people with disabilities, to advance this general goal of employment and economic self-sufficiency and maximize it.

So, within that context, yes, I think we are going to be looking at those topics. I don't want to suggest that we think at Social Security Administration that we are the only player in this. Congress has made several important legislative changes in the last few years, the Workforce Investment Act, the Individuals With Disability Education Act Amendments of 1997, and, of course, the Ticket to Work legislation, all of which are part of what I hope will be ultimately an integrated approach at the Federal level. Whether we talk about benefit payments or whether we look at other ways to provide support, we are very much interested in this larger population of people.

Obviously, there is a part of that population that could become permanent and totally disabled people if we don't act early enough to provide supports, and we know that there is a lot of work to do. For example, we are talking to the U.S. Department of Labor (DOL), the U.S. Department of Education, and the U.S. Department of Health and Human Services (HHS), about how we can work together to effectively serve this population you are describing. I know that is a long answer, but I don't want to leave the impression that we are just thinking about benefits.

Chairman SHAW. Do you have a schedule that you can give us some reasonable expectation as to when you may be completing something that you can bring back to us?

Mr. GERRY. I can certainly try to provide that for the record. I know that my understanding with the Commissioner is that I would be completing that process by the end of next year. We are already talking about this and we are already beginning to do some things, but I will see if I can provide something more precise.

[The information follows:]

We are beginning to look at long-term changes in the definition of disability.  We are planning to have some options developed by the end of next year.  In the meantime, we have several projects underway that will provide useful information on definitional issues.  For example, we are developing a new approach to updating the medical listing of impairments used to make disability determinations.  SSA will ask members of the public, disability advocates, and disability adjudicators for their advice on the medical listings before publishing proposed rules.  SSA’s strategy is to update the listings to reflect advances in medicine and disability evaluation as well as to consider the opinions of those who are affected by the listings and those who implement the listings.  In addition, we are currently developing several demonstration projects that will yield relevant information on our disability definition.

Mr. GERRY. On the listings, we are working right now, actively, on a revised schedule for when those listings will be completed and I hope to have that available by late this summer.

Chairman SHAW. You are going to have a negative cash flow; at least we have been told that this is going to come in 2008. What are you doing to get ready for that?

Mr. GERRY. Well, that is part of the larger questions that we are looking at. Obviously, the overall solvency of the trust fund is an important issue for the Agency; the Commissioner has focused on that, and we will be reporting back on that. Part of that, of course, has to do with the configuration of the program. The projections on the trust fund have to do with the program as it is now structured. To the extent that Congress makes changes in the program, that would affect those projections. We are looking very much at that right now. I know the Administration in general is looking at the larger issues of solvency of the trust fund. It is not a topic that I have been focused on much during my first 6 months.

Chairman SHAW. Well, is that something that we would do outside of a general review of the whole Social Security Trust Fund, or is it something that -- are you going to come back with some recommendation as to just the DI portion?

Mr. GERRY. I don't know of any intention for us to come back with a specific recommendation only on the DI portion, but I could look into this more and provide a better answer to you on the record.

Chairman SHAW. If you would.

[The information follows:]

We will naturally keep the solvency of the trust funds in mind as we proceed with any proposed changes in the DI program.  Once we develop proposals that we think will improve the program, however, we will not be deterred from bringing them forward if decisions on the reform of the entire Social Security program have not been completed.

Chairman SHAW. Mr. Matsui.

Mr. MATSUI. Thank you, Chairman. I appreciate Mr. Gerry's testimony. Given the fact that you raise the issue of 2008, I think it is a very serious issue. Six years away, we are going to have a cash flow problem; 2008 or so, we are going to have an actual real problem in the system. We have to cut benefits maybe down to 72 percent. It would be my sense that we should really begin the discussion of this at this time. I mean, he raised it, and we probably ought to debate this issue now in Subcommittee, on the Floor of the House, and take a vote on perhaps the President's three proposals that he came up with about 8 months ago now, the proposal that you offered, Mr. Shaw, and certainly the proposal that Mr. Armey has offered. I think we should vote on all five of those proposals at this time so that the American public will have an opportunity to find out how we intend to solve this 2008/2037 problem.

Now, I think this hearing is very important, but the larger issue of how we deal with the unfunded part of the Social Security issue really has to be addressed before we can even talk about issues like a reevaluation of the definition of disability. Because right now the disability program itself accounts for 17 percent of all Social Security benefits being paid out. It is a very large sum.

Now, if you privatize Social Security, that then could adversely affect that 17 percent. An additional 15 percent, as everyone knows, is for survivors benefits. So, about 32 percent of all Social Security benefits are in the form of disability and survivors benefits. You privatize Social Security, there is no question we are going to have to reduce those benefits, because Social Security is a pay-as-you-go system. So, you take 16 percent of payroll and allow a person to privatize -- which is 2 percent of the payroll tax -- that means there will be less money available for the current beneficiaries. So, the issue is how we are going to deal with this issue. This is a very critical issue, but it should come after the bigger issue of how we solve the problem.

You mentioned 2008, and this is an opportunity for us to really debate this. It is my hope that you would at least sign the discharge petition so we can take these bills on the Floor of the House to vote on them. If not that -- I mean, if you won't do that, then perhaps what you would do is at least have a hearing on your bill, take it to the full Committee so we can vote on it, and then take it to the Floor of the House so we can vote on it, so the American public will have an opportunity to really debate this issue before we actually do it, because the President says he wants to do this in 2003, the spring of 2003. Unless the American public knows where each individual Member of the House and Senate intends to be on this issue, we could go into this thing blindly, and which is really unfair to the current 60,000 people that are receiving Social Security disability, survivors benefits, and obviously retirement benefits. It is just beyond my comprehension, I just don't understand this, how we could not discuss this, particularly in view of WorldCom, Enron, and what is going on with the stock market today. We can't talk about privatizing Social Security and at the same time be unwilling to discuss it in a fully discussed way before November, given the state of the stock market. I mean, if we had a privatized system today, imagine what some of these people would be going through.

They are going to close the WorldCom office in my district, in my congressional district. We have been getting e-mails from 80-90 people in the last couple of days, saying that they are going to lose their health insurance benefits, even though Bernard Ebbers is going to have life-time health insurance benefits along with his jet that he gets free, $1½ million a year. These people will have no 401(k) plans, they have no insurance. One fellow wrote me his wife is disabled, he doesn't know what he is going to do. They have no savings. So, we are talking about privatizing Social Security, and at the same time we are trying to pretend like we are trying to deal with the disability issue. I don't understand what is really going on.

Now, I wasn't going to raise this, but since you raised the fact that in 2008 we are going to have a problem, I think we should talk about it. This is a very serious issue, and you raised a very serious issue and I think we need to deal with it.

Now, let me ask Mr. Gerry some questions, if I may.

Chairman SHAW. You have 26 seconds.

Mr. MATSUI. I would be happy to discuss this with you. You know, you can't just show a little leg and not --

Chairman SHAW. Well -- show a little leg, what a sexist remark. I will give you an extra 30 seconds for that.

Mr. MATSUI. I wish you would take this problem a little more seriously. It seems to me that you have got a lot of folks out there --

Chairman SHAW. I didn't say anything about legs, you did.

Mr. MATSUI. There are a lot of people out there today in the  --

Chairman SHAW. Mr. Matsui, I would --

Mr. MATSUI. If I may make --

Chairman SHAW. Okay.

Mr. MATSUI. If I may complete my comments. Is that appropriate? There are a lot of folks out there that think the President wants to privatize Social Security. They are wondering what is going to happen. I think we need to discuss this issue. This is an issue that should be brought up now, particularly in view of what is happening in New York in the stock market. I mean, it is incomprehensible that we are not trying to relate these issues. It is a very serious matter right now. For you to not want to bring this up so we can debate it and go for it on the Floor so you know where Members are standing --

Chairman SHAW. Would the gentleman yield? I mean, you are getting -- I think you are -- I don't mind extending your time for your discussion with Mr. Gerry for the purpose of this particular hearing. If you are going to use it to mischaracterize what is out there -- you have seen my plan, and you know right well that I don't divert one dime of Federal Insurance Contributions Act taxes.

Mr. MATSUI. Not in the --

Chairman SHAW. No, I don't.

Mr. MATSUI. In the last years you do.

Chairman SHAW. No, I don't.

Mr. MATSUI. It's a --

Chairman SHAW. No, I do not.

Mr. MATSUI. It is a claw-back. Your bill is a claw-back bill. It takes money out of the system to pay for the private accounts. I mean, it --

Chairman SHAW. Mr. Matsui, I will be glad to give you an additional couple minutes if you care to question Mr. Gerry.

Mr. MATSUI. I do have questions. Mr. Gerry, you are not actually working to change the definition of disability at this time. What you are doing is you are trying to expand on it; is that correct? I am just trying to understand.

Mr. GERRY. I am not working with the purpose of changing the definition. I think what the Commissioner has asked me to do is to look at the larger question of what we are doing in the context of all the other Federal programs and that would include looking at the definition. I think it is important for this Committee to look at the definition. It is not that I have a plan to change the definition.

Mr. MATSUI. I think what you are driving at is a very critical issue, but it probably should be done in conjunction -- and I know you have mentioned Labor, you are talking to HHS -- but it has to be done in conjunction with Labor and HHS because obviously the issue of funding, if you try to provide adopted technology, for example, if you try to provide health care benefits, if you try to provide for short-term disability funds, obviously that can't come out of the Social Security Trust Fund, unless we have some solution to it in terms of the unfunded liability, because what you could be doing is jeopardizing the entire program by expanding the definition.

So, the money will have to come from some other source, and I just wouldn't want anyone to be misled into thinking that there is a pot of money out there and you can expand the definition, take care of short-term problems and, obviously, health care benefits for many of these people, and at the same time not have to deal with the funding shortfall.

Mr. GERRY. Well, I think that is right, Mr. Matsui. We have, by the way, formed a partnership as part of the President's New Freedom Initiative with HHS, Education, and Labor. So, that has been going on now for several month.

There are some things -- I mean, not that I think you are wrong about --

Mr. MATSUI. No, I agree.

Mr. GERRY. Certain short-term benefits. There are some things we can do right now with existing appropriations to integrate resources that are not being effectively used. I am very interested, for example, in the Workforce Investment Act and the resources under that law which ought to be going to help virtually the same beneficiaries who would be affected by the Ticket to Work.

If you look at the definition in the Ticket to Work legislation and the definition in the Workforce Investment Act, they are pretty compatible. These are people in need of intensive training.

So, what we have been talking to the Labor Department about is a way to better use our resources together. The same thing with the rehabilitation program. The same thing with youth transition. We have a school-to-work transition mandate in the Individuals With Disabilities Education Act. We have a couple of million beneficiaries who could be directly affected positively in their lives if that were a successful program. How can we work together?

So, I do agree with you that to set up a new benefit program would certainly require new funding, but that one of the things we can do is, working with the existing funding, I think, integrate things in a much more effective way than we have. We are working on joint demonstrations among the agencies, using existing resources to try to see how we can do that.

Mr. MATSUI. I think we are moving in the right direction, as long as we do think about where the money is going to come from if we expand the program substantially. Thank you.

Mr. RYAN. I wanted to talk about privatizing Social Security. Just kidding.

I really have no questions at this time. I know we have a long list of witnesses, and I want to get to them. When I looked at my schedule and came down to this hearing, I thought it was a third in the series on Social Security Disability Programs: Challenges, and Opportunities. I didn't think that we were talking about other topics. So, I would like to see if we could just stick to the topic at hand, and I yield.

Chairman SHAW. Mr. Cardin.

Mr. CARDIN. Thank you very much, Mr. Chairman. I would dare say that disability issues could rank as the number one issue that people in my office try to respond to constituent inquiries on. It is complicated. I listened to your explanation, and I have gone through a lot of the disability cases that are in our office to try to understand better what people in my district go through in trying to deal with the Social Security Administration, and it is tough. It is not easy to figure out.

So, I would hope that as we try to look at disability definitions that meet the current times -- because these procedures were put into place a long time ago, and times have changed, technologies have changed, needs have changed. I would hope that we would just take a look at this, and come forward with suggestions so that we can at least put out ways in which we could perhaps make the system less complicated to our constituents and more contemporary to the current needs, because I do think we can do a better job than we are doing currently in the process that is used by SSA in reaching these decisions.

I also might say, and we haven't talked about this, is that there is a tremendous amount of administrative resources that are currently being used to try to implement these definitions. We all would like to streamline the administrative process so more money can be available for the checks that actually go out to the people who needs this income.

So, I would just hope that we would look at it from that point of view. Instead of trying to look at something that is -- make sure we don't lose a dollar to anyone who shouldn't get it, et cetera, that we try to look at a system that is more understandable and more contemporary to the needs that are out there.

Mr. GERRY. I couldn't agree with you more, and I know the Commissioner agrees with that. I think that it is a very good summary of much of what she has said about what she wants to accomplish. I think it is a question of service and quality.

I think the only thing I would add, because I think it was an excellent summary, would be that there is a direct relationship there between some of our rules and policies. I am not talking about the statutory definition, but a lot of our listings and the process itself. We have tended to separate these two things as though the steps in the process are really not related to what we require to be proven, but, of course, they are totally related. The time that it takes in that chart that the Commissioner presented is influenced very much by many of the rules that we write about what particular information has to be gathered and analyzed.

So, we want to look at those connections for the first time, or at least with a much greater emphasis, and be sure that when we require some of the evidentiary requirements that we have, that we understand how much time is involved and how much work that generates, and be sure that we really need that information. Because I think the goal you are talking about, which is really the core of client services, is foremost for us.

Mr. CARDIN. I appreciate that response. Mr. Chairman, I would just make a suggestion that it might be useful for some of the staff of this Committee to talk to some of the staff that we have in our district offices to find out the type of problems that we are confronting from constituents around the country. It differs somewhat in different regions of the country, but there is a consistent theme of frustration about the difficulty of working through the disability system. Thank you, Mr. Chairman.

Chairman SHAW. You brought up a very interesting idea. Perhaps at some point we should have a hearing, and each of us will bring up one case worker to testify before the Committee. That would be a very interesting idea. Mr. Becerra.

Mr. BECERRA. Mr. Chairman, thank you very much for holding this third of three hearings. Mr. Gerry, thank you very much for being here. I think the questions that I might wanted to have asked have to some degree been posed, and I appreciate the testimony you provided. Like Mr. Ryan, I think there are some other witnesses. I will withhold any further questions. Again, thank you. I appreciate the work that you are doing.

Chairman SHAW. Mr. Hulshof.

Mr. HULSHOF. No questions, Mr. Chairman.

Chairman SHAW. Mr. Pomeroy.

Mr. POMEROY. Briefly, Mr. Chairman. I also want to thank you for holding this series of hearings. I have found them most instructive.

The overriding concern I pull from them is it involves basically our internal administrative capacity to efficiently or minimally competently run a national disability program. I have heard a statistic, and perhaps, Mr. Gerry, you can speak to whether it is accurate or not, that three out of four workers have only the Social Security disability program as a disability protection in the event they become incapacitated and unable to work. Is that correct?

Mr. GERRY. I don't know. I would be happy to provide the answer for the record. However, based on what I do know, that seems like a reasonable estimate. I don't actually know the facts.

[The information follows:]

In the context of long-term protection for the workforce as a whole, such as is offered by Social Security Disability Insurance, it is accurate to say that three out of four workers have no disability protection other than Social Security.  According to the Bureau of Labor Statistics National Compensation Survey (1999), 25 percent of American workers have employer-provided long-term disability insurance, while 36 percent have short-term disability insurance.  Professional and technical employees and those working in large firms are much more likely than other workers to have both kinds of disability insurance. 

Mr. POMEROY. What is the average disability payment? Do you have that?

Mr. GERRY. Yes. The average monthly payment for a disabled worker is about $814 a month. For a disabled worker with spouse and children, the amount would go up to $1,360 a month. That is last year's average, but it is going to be close this year.

Mr. POMEROY. Social insurance as a concept is one that I think has enormous value, and the protection that was extended to American families during the six decades of Social Security has been extraordinarily important. As people talk about alternative ways to design the system, the focus on maximum optimal hoped-for investment return seems to me to totally leave off the table notions of the social insurance functions of the disability program.

I think that when we construct a social insurance program, or I mean as we evaluate the effectiveness of the Social insurance program, it is important to make certain that we are having a benefit level that meets people's needs minimally but does not present the moral hazard of almost inducing trying to obtain disability status rather than employment. At this benefit structure, it seems to me that we are about there. We meet minimum needs, but we do not incent people not to work to try and obtain disability status. Do you have an opinion on that?

Mr. GERRY. Well, I would say that if you just looked at the average monthly benefit it would be misleading, because you also have the other things added. Health insurance, for example, is an enormous factor that influences people's decisions. There are people, for example, who would lose eligibility for health insurance if they worked, because they might well take a job that doesn't have health benefits. I don't mean to suggest that everybody sits and calculates to the last penny before they make these decisions, because I think there are many people who work even though it is a disadvantage.

The health insurance part is an important part of that. I have been a lawyer for significant numbers of disabled people who have tried to wrestle with these questions and families that have tried to wrestle with them, and the health benefit issue is a very important one. That often is more important than the cash payments. So, that is the one big thing I would add to that, to the question of how the incentives work.

Then secondly, we have not looked, I think, comprehensively at the question of how there are different populations of people within the disability community. The problem is disabled people are not all alike at all. So, there are some groups of people that need certain kinds of supports. I think this is where the New Freedom Initiative and the Americans With Disabilities Act may be crucial, and the availability of transportation and housing. If they are not available, which they sometimes are not, that may be even more of a disincentive than cash. So, I don't mean to argue with your premise, because I think you are right about the dollar amount, but I think it is complicated with respect to what leads people.

I think our process right now, which takes a very long time, contributes to some of this. I am very concerned about not only the length of time of the process but the backlogs that we are encountering. I think the truth is that when people have to argue and go on for 4 or 5 years, trying to make the case that they are disabled, when we then talk about the Ticket to Work or we talk about other initiatives to try to get them to work, psychologically we have spent an awful long time having them prove to us that they can't work.

So, I think the process, the length of time of the process, the complexity of the process, doesn't help in terms of people deciding to work or not work.

Mr. POMEROY. I found those answers to be very interesting. Thank you.

Chairman SHAW. I would like to follow up on Mr. Pomeroy's question with just one question, and then we will go on to the next panel. By how much or how far did the Ticket to Work legislation go towards helping those folks out that wouldn't go to work because they were losing their insurance, their health insurance?

Mr. GERRY. I think it made a significant positive contribution to that.

Chairman SHAW. Did it go far enough?

Mr. GERRY. Well, not all of the States have obviously implemented all of the options that are presented. I don't think we know yet. I mean, to be quite honest, we are finishing the rollout of the first phase.

Chairman SHAW. It would be helpful if you could give us an analysis of that, together with a look at each one of the States, because I think that was a very forward-looking piece.

Mr. GERRY. Chairman, all of the States, or the ones that are in the --

Chairman SHAW. Well, the ones that you think haven't gone far enough. Perhaps we can correspond with them and see what their problem is.

Mr. GERRY. I will provide that for the record.

[The information follows:]

The Ticket to Work and Work Incentive Improvement Act of 1999 provided several enhancements to health care for working individuals.  The Department of Health and Human Services, through the Centers for Medicare and Medicaid Services (CMS), administers these health care provisions.  SSA actively works with CMS in support of these enhancements.  It is too early to say whether the legislation will be successful in preventing disabled individuals from losing their health insurance when they return to work and too early to judge how the individual States are faring in this regard.  We can, however, describe the health care enhancements and the actions taken by the States to implement them.  Two enhancements (section 112 Expedited Reinstatement and section 202 Expanded Medicare Coverage) are not State-based.

Expedited Reinstatement (Section 112)

• If an individual returns to work, has benefits terminated, and then finds that he/she can no longer work because of the previous (or a related) impairment, cash benefits and Medicare and/or Medicaid can be quickly reinstated. The work stoppage and application must occur within five years of the prior benefit termination.

Expanding State Options under the Medicaid Program for Workers with Disabilities (Section 201)

• This is an expansion of the Balanced Budget Act (BBA) of 1997.
  • The BBA gave States the option to provide Medicaid coverage to individuals with disabilities whose earnings were too high to qualify under existing rules.
  • Net earnings had to be below 250% of the poverty level.
• Section 201 removed the 250% poverty limit on earnings, so now States have the option to provide Medicaid coverage to even more working people with disabilities.
• States can set their own income and resources limits to allow working individuals with disabilities who are at least 16 but less than 65 years old to buy into Medicaid.
• States have the option to provide opportunity for employed individuals with a medical improved disability to buy in Medicaid.
• States may require such individuals to pay premiums or other cost-sharing charges.
• 21 States have CMS approved plans in place.
• 2 more have a plan pending approval from CMS.
• The following identifies the status of States’ implementation of this option of the BBA:
  • State Plans with CMS approval: Alaska, Arkansas, California, Connecticut, Iowa, Kansas, Maine, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, New Mexico, Oregon, Pennsylvania, South Carolina, Utah, Vermont, Washington, and Wisconsin.  Massachusetts has an 1115 waiver plan, which is similar to the Medicaid buy-in option (21 total).
  • State plans pending CMS approval: Missouri and Wyoming (2 total).

Extension of Medicare Coverage (Section 202)

• Effective October 1, 2000, Medicare coverage was extended an additional 4½ years for working individuals with disabilities.
• Medicare coverage continues at least 93 months after the TWP for most beneficiaries compared to the previous 39 months.
• SSA identified approximately 42,200 beneficiaries who were eligible for this extension on October 1, 2000 and mailed "Good News" notices in March 2000 to these individuals--SSDI beneficiaries who were closest to termination of their Medicare.
• SSA made system changes, modified notice language, provided training, and released operational procedures on or before the effective date.
• Approximately 52,000SSDI beneficiaries either have or had Extended Medicare coverage under TWWIIA (records selected from the effective date October 1, 2000 and later). As of July 2002, the estimated number of potential Extended Medicare coverage cases is approximately 115,000.
• Most SSDI recipients can return to work without fear of losing free Hospital Insurance for many years but still have to pay monthly SMI premium unless paid for by a third party).

Grants to Develop and Establish State Infrastructures (Section 203)

• States can be awarded grants to support infrastructures that provide services to working individuals with disabilities.
• The goal is for States to support people with disabilities in sustaining employment by modifying their health care systems to meet the needs of those individuals.
  • Examples of State activities: implement Medicaid buy-in program; improve personal care assistance services and programs; educate providers and consumers; create links to employment services.
• 38 States have been awarded infrastructure grants so far.
• CMS recently solicited proposals from States to develop infrastructure grants for 2003.  The application cut off date was June 1, 2002.  Applications are pending approval.

Demonstration of Coverage under the Medicaid Program (Section 204)

• This allows a State to apply for approval of a demonstration project under which specific individuals who are workers with a potentially severe disability are provided medical assistance.
• These projects are called the “Demonstration to Maintain Independence and Employment.”
• This will also allow a State to target a specific population to provide services for a specified number of individuals to manage the progression of their conditions and remain employed.
• Four States are participating in this project: Both Washington D.C. and Mississippi for 500 individuals with HIV/AIDS, Rhode Island for 100 individuals with Multiple Sclerosis, and Texas for 500 individuals with bipolar/schizophrenia.
• CMS recently solicited proposals from States to develop demonstration projects for 2003. The application cut off date was June 1, 2002. Applications are pending CMS approval.

Chairman SHAW. Thank you very much, sir.

Mr. GERRY. Thank you.

Chairman SHAW. I appreciate your testimony, and I am glad you brought that up. The next witnesses -- Mr. Gerry, you may want to stay around to listen to Mr. Robertson. Well, you may not, too; I don't know. You are invited to stay around.

Mr. GERRY. Thank you.

Chairman SHAW. Robert Robertson is Director of Education, Workforce, and Income Security Issues at the General Accounting Office; and Sarah Mitchell, who is the Chair of the Ticket to Work and Work Incentive Advisory Boards, whom we have already given very good info to, I think, with the last questions that Mr. Pomeroy opened up. Welcome to both of you. We have your full testimony which will be made a part of record, and you may proceed as you see fit. Mr. Robertson, you are on.

STATEMENT OF ROBERT E. ROBERTSON, DIRECTOR, EDUCATION, WORKFORCE, AND INCOME SECURITY ISSUES, U.S. GENERAL ACCOUNTING OFFICE

Mr. ROBERTSON. Mr. Chairman, Members of the Subcommittee, thank you for inviting me to chat a little bit about the Social Security Administration's definition of disability. I do have a live mike here, I hope.

I just want to make three points this morning. The first point is, and I will admit right off the bat that this is stating the obvious, but sometimes that is a good thing to do. My first point is that the world has changed since the DI and SSI programs were first initiated back in the 1950s and 1970s respectively. Over the years, scientific advances, changes in the nature of work, and social changes have generally enhanced the potential of people with disabilities to work. More specifically, medical advancements such as organ transplantations, assistive technologies such as advances in wheelchair designs, have given more independence to some individuals; and, at the same time, the move from a manufacturing-based economy to a service- and knowledge-based type of economy has opened new opportunities for people with disabilities.

Finally, social changes have altered the expectations for people with disabilities. The Americans With Disabilities Act, for example, has fostered the expectation that people with disabilities can work and have the right to work.

The potential implication of all of these changes to the Nation's disability programs really cut to the very heart of the questions that are the focus of this Committee's meeting this morning. In other words, to what extent do the current disability programs and, in particular, the criteria that govern the disability decisions within those programs, reflect these rather significant medical, economic, and social changes?

Now, that leads to my second major point, which is simply that, as has been referred to earlier in this hearing, in our view, the DI and SSI disability criteria have not kept pace with these advances and changes. As you are aware, depending on a claimant's impairment, decisions about an individual's eligibility for disability benefits can be based on both medical and labor market criteria. SSA is in the midst of an effort that began in the early 1990s to update the medical portion of its criteria; however, progress has been slow. The SSA doesn't expect to complete developing proposed changes until the end of 2003. Furthermore, even if the criteria were fully updated, the program as currently designed by statute and regulation does not require SSA employees to consider possible effects that new treatments or assistive technologies could have on the claimant's ability to work, unless a physician has already prescribed the treatment. As a result, treatments that could help restore function in some people with certain impairments may not be factored into the disability decision. Now, with respect to the labor market portion of the disability criteria, SSA is currently using outdated information about the types and demands of jobs in the economy. It currently relies upon a database of occupational listings that haven't been updated since 1991.

Now I am to my third and final point - - actually this is a series of points. They all fall under the general category of where do we go from here? How do we incorporate the medical advances, the labor market, and societal changes that I have been talking about into the program's disability criteria? The short answer is that some steps can be taken within the existing program design, while others would require more fundamental changes. Within the context of the current statutory and regulatory framework, SSA will need to continue to update the medical portion of the disability criteria and then vigorously expand its efforts to examine labor market changes.

However, in addition, policymakers and Agency officials should look beyond the traditional concepts that underlie the DI and SSI programs to reexamine the very core of Federal disability programs, including looking at the eligibility standards, benefit structures, and the return to work assistance. This would be done with a focus on taking advantage of the medical, economic, and social changes that we have been talking about. This would include maximizing opportunities to work in today's environment, while providing financial support when and where it is needed.

However, before these fundamental changes can be considered, policymakers need critical information on various policy options, including what works, what needs to be fundamentally reoriented, and the cost of such changes. These hearings provide a means to explore possible program design changes and to identify the information and research that is necessary to evaluate the potential impact of these changes.

Mr. Chairman, that concludes my prepared statement. I will be happy to answer questions at the appropriate time.

[The prepared statement of Mr. Robertson follows:]

Chairman SHAW. Ms. Mitchell, welcome.

STATEMENT OF SARAH WIGGINS MITCHELL, CHAIR, TICKET TO WORK AND WORK INCENTIVES ADVISORY PANEL, SOCIAL SECURITY ADMINISTRATION

Ms. MITCHELL. Thank you. Mr. Chairman and Members of the Subcommittee, good morning. My name is Sarah Wiggins Mitchell, and I am the Chair of the Ticket to Work and Work Incentives Advisory Panel. On behalf of the panel, I want to thank the Subcommittee for this opportunity to testify on the definition of disability underlying the disability programs administered by the Social Security Administration. I am here to represent the panel's interest and opinions on the topic in question. The definition is a key factor in determining how our country establishes not only eligibility for cash benefits, but also for health care, employment support, and many other services and supports for millions of people with disabilities.

Given that the definition is used as a gatekeeper to many public programs, the panel certainly has a keen interest in this topic. Further, the Social Security Administration's application of the definition of disability and its internal disability determination process are central to the implementation of the new Ticket to Work and Work Incentives Improvement Act programs and, as such, are central to the advisory duties of the panel.

Because I represent the Ticket to Work and Work Incentives Advisory Panel, I would like to say a few words about the panel and its responsibilities. The Ticket to Work legislation established the advisory panel within the Social Security Administration to advise the President, the Congress, and the Commissioner of Social Security on issues related to work incentive programs, planning, and assistance for individuals with disabilities and the Ticket to Work and self-sufficiency program established under this Act. The panel has an important role to play in the implementation of this new law, which provides new choices and opportunities for persons with disabilities to enter or reenter the workforce.

The panel is a bipartisan group of 12 citizens, 4 of whom were appointed by the President, 4 by the Senate, and 4 by the House of Representatives. We represent a cross-section of individuals with diverse racial and ethnic backgrounds, and with experience and expert knowledge as recipients, providers, disabled veterans, employers and employees in the field of employment services, vocational rehabilitation, and other disability-related support services. The majority of us are individuals with disabilities, their representatives, or family members. Several panel members have had personal experience as beneficiaries of Social Security as well.

The panel offers the following general suggestions on the disability determination process used by SSA. I will mention these topics just briefly now, but our written testimony provides more detail.

First, early intervention. Employment support services under the Ticket program or other programs should begin as soon as possible, even before the beneficiary quits work and spends several months demonstrating to SSA that he or she cannot work at earnings levels above the SGA threshold.

Second, higher reimbursement rates under the Ticket program. Under the Ticket program, providers of employment services will be reimbursed at a higher rate for persons in hard-to-serve categories. One possibility is that the disability determination process should incorporate a decision on whether the beneficiary qualifies for this higher reimbursement rate.

Next, the medical improvement expected designation. Because the medical improvement expected designation will be used to limit eligibility for the Ticket program, the criteria for the designation should be reviewed as part of the broader review of the disability determination process.

Then there is the question of partial disability benefits. Under the disability insurance program, a beneficiary can face a cash cliff; that is, the total loss of all cash benefits if earnings in a given month exceed a specific threshold. This all-or-nothing DI benefit structure, which is being reevaluated under the Ticket to Work program, should be considered in your review.

Finally, I would like to specifically consider persons with mental disabilities. The disability determination process through which SSA implements the disability definition was originally designed to deal primarily with physical disabilities. A thorough review of the criteria for disability determinations to ensure equitable treatment for persons with mental or other disabilities may be appropriate.

In closing, on behalf of the panel, I would like to offer to solicit formal public comment on the disability definition and the disability determination process. Comment would be taken as part of a public meeting conducted by the panel, by letter or telephone or by e-mail. We could also solicit input from national and international researchers and experts. All of the comments and input would be considered in the panel's public discussions and deliberations. We would then report the panel's major findings and conclusions to the Subcommittee in writing.

Let me once again thank the Subcommittee for this opportunity to testify on a topic that has major implications for our panel's efforts to increase employment among persons with disabilities. On behalf of the entire panel, I want to assure you of our commitment to work in partnership with you, the Administration, and the disability community on this important and far-reaching policy concern. Thank you.

[The prepared statement of Ms. Mitchell follows:]

Chairman SHAW. Thank you. Mr. Matsui.

Mr. MATSUI. Mr. Robertson, I want to ask you some questions about -- you have a rather broad approach to disability, and obviously adopted technology is part of it. I would imagine, you even mentioned somewhat the health insurance aspects of all this, although it is not a large percentage of it for people that are significantly disabled and have a permanent condition. Could you put this under the current Social Security program as it is defined? If so, what would you suggest in terms of Mr. Gerry, who -- the previous speaker, in terms of how we should finance it, and whether it should come out of the current program or it should be financed out of HHS?

Mr. ROBERTSON. Well, I will answer the last part of your question first. I don't have the answer to the question on how you finance it. The first part of your question gives me an opportunity to talk a little bit about some of the concerns we have had with the definition of disability. We have discussed them in the past, and I think it is a good opportunity to talk about them again. I will go a little bit beyond the definition of disability, to some of the processes.

Basically, over the past few years, through testimony and through our reports, we have identified a number of concerns, starting with the definition, which is an either/or type of a definition -- you are either disabled or you are not disabled. That just doesn't reflect the real world. The impact of a disability on a person's ability to work really ranges on a wide continuum. So, that is part of the definition that does indeed concern us.

The other thing that concerns us -- again, this goes a little bit beyond the definition to the process part -- is that the eligibility determinations are all geared to determining a person's incapacity rather than their capacity. So, the only way that you, quote -unquote, win in the system is if you can prove that you are disabled. Basically, right now the process doesn't, at the very beginning, have a lot in the way of an evaluation of, okay, if you have certain services, if you have certain rehabilitation, what is the possibility of getting you back into the workforce.

Mr. MATSUI. Right.

Mr. ROBERTSON. Then the final part of the process that we have had concerns with, and we have expressed this before also, is that the return to work services really don't get involved until after what could be a very lengthy determination process.

Mr. MATSUI. I think you hit it on the nose when you talked about -- well, I don't want to suggest anyone would game the system , but there is an incentive to be permanently disabled to collect these benefits. Now, the problem I am having is -- because I agree that we need to stop this, we need to try to get people back in the workforce if we can possibly do it. Is this the right forum in which to discuss that? I mean, should this be under the Social Security program, or should it be another program sponsored by HHS or the Labor Department? See, because I don't want anyone to be misled in the audience and the American public that all of a sudden, you know, through Social Security we are going to be able to set up a program in which we bring disabled people and rehabilitate them through adopted technology, through drug treatment -- not your issue -- and other ways. Because that is, from my understanding, and I have been on this Subcommittee for quite a few years and going all the way back to 1983, that -- 1982, actually -- that the purpose of disability under the Social Security system is permanent disability for -- and you make it up through lost wages.

We are talking about a whole new set of issues here. I think that is wonderful, because I think we have been lacking in really trying to help people in these areas. Is this a proper function of the Social Security system, given our fundamental shortfalls coming up? Is this a legitimate issue from GAO's perspective?

Mr. ROBERTSON. I am not here to comment where this program -- what Agency this program should be in. Let me just, if I can --

Mr. MATSUI. We have to. I mean, I can read an academic book and say, hey, this is great; but it has still have to fit within certain categories and certain departments. I need help in that respect. I mean, we can't -- and I really appreciate -- and I am not trying to be adversarial with you. We can't have you come up here and say we need to do all these wonderful things, and we say, but Social Security can't handle that. Because I don't want this to be used as a way to kind of wedge in, like we are going to promise all these benefits and it may not be possible, but go ahead.

Mr. ROBERTSON. Well, I was about to agree with one part of what you were saying in terms of what we are talking about here is -- ultimately, having an approach that really cuts across the responsibilities of many agencies --

Mr. MATSUI. That is exactly right.

Mr. ROBERTSON. Right now. What you ultimately would ideally want to end up with would be something that had a very integrated approach. Now, how you get there, I am not prepared today to talk to you about.

Mr. MATSUI. You are absolutely right. That is why we probably should get the Secretary of HHS in, and some others, so that we can discuss how we can really implement some of the suggestions you have in your program. Because I think it is a legitimate issue, and it might even reduce the caseload of those people that are currently receiving disability benefits. Because, again, you may catch some of these people and find some way through rehabilitation, through some other approach.

I mean, I agree with you that the problem we are facing, we have a 1950s definition for 2002; but we can't all do it through the SSA. I mean, Mr. Gerry is under a disability when he tried -- because he can't get involved in rehabilitative services. I mean, he has got a backlog of a half a million people.

So, I guess that is my concern right now. I mean, somehow we need to bring in these other agencies. Am I correct about that?

Mr. ROBERTSON. Yes, but there is the need for integrated services.

Mr. MATSUI. Exactly.

Mr. ROBERTSON. It is not just unique to the disability area.

Mr. MATSUI. Right.

Mr. ROBERTSON. You know, you go into the Labor Department, and they are trying to integrate work placement services among a number of agencies. So, this is just another of the big management challenges that is accompanying modern-day life, I think.

Mr. MATSUI. If I may just ask one more follow-up question, Mr. Chairman. Are you working with -- as you develop your report, are you working with HHS, and Labor as well, in terms of how they might integrate some of your thoughts into their Department? Because I think we ought to pursue this. I think HHS and Labor ought to be involved in what you are suggesting here.

Mr. ROBERTSON. Whenever we do our work, you can count on the fact that we try to take a broad cross-look at all of the issues from a number of different perspectives.

Mr. MATSUI. Great. Thank you.

Chairman SHAW. Mr. Hulshof.

Mr. HULSHOF. Thank you, Mr. Chairman. I want to seize upon the tail end of the testimony where you -- and I am intrigued by the panel's offer to solicit public opinion or comment on this whole disability determination process because, as Mr. Robertson has -- the entirety, the majority of his testimony is related to that conundrum that we face as far as revamping that disability determination. How would the panel undertake such an effort?

Ms. MITCHELL. Well, I don't know whether you are aware or not, but actually over the past 2 years we have had public hearings across the country. We have also had hearings by teleconference and --

Mr. HULSHOF. Not on this specific issue?

Ms. MITCHELL. Not on this specific issue. Basically, it was on the Ticket to Work and on the Notice of Proposed Rulemaking and the regulations for the Ticket to Work. I think many consumers -- and certainly the panel -- see this whole issue of the definition of disability and the Agency's internal disability determination process as very critical to the success of the Ticket program itself. It is certainly one of the very critical elements that needs to be discussed.

Mr. HULSHOF. I promise this is not a loaded question. Just a little bit of background: As you know from the Ticket to Work program, back in 1998 with the former Chairman of this Committee, when we first began to discuss Ticket to Work, which was passed in 1998 but not signed into law until -- Congress took another run in 1999, and then President Clinton signed it in December. That is -- for which the mission that the panel has, of course, is rolling it out. I spoke a couple of months ago to the Missouri State meeting, and they are excited about it.

Can you give us some -- here is the loaded question. Can you give us assurances that if you were to undertake this other mission of disability determination, that you would not -- that this would not take away from your mission that you have been charged with by Congress?

Ms. MITCHELL. Well, let me clarify. I mean, we would be seeking input on that process, but probably wanting to focus it around the Ticket. So that this would not be a separate charge for the advisory panel.

Mr. HULSHOF. I got you.

Ms. MITCHELL. We would be look at it insofar as it impacts and affects people who are using the Ticket.

Mr. HULSHOF. Especially it is an interesting point you raise about early intervention.

Ms. MITCHELL. Yes.

Mr. HULSHOF. Perhaps it is too early to tell, and not that the panel has accumulated a lot of definitive information or data that you would like to publish. Does the panel think that the cost of providing early outreach would provide a significant savings in the long run, with less people coming to the disability rolls; or would they come to the rolls later in time? Does the panel have a sense on that?

Ms. MITCHELL. Well, I know when we have looked at the issue of youth coming onto the Ticket, I think the data show that the earlier people have access to employment supports and services to enter employment, the more likely it is that they are in fact going to be employed and -- if they get onto benefits, the greater likelihood is that they are going to stay on benefits.

In one of our reports I think we tried to address the issue of the cost effectiveness of, for example, bringing youth on at an earlier age. So, I don't have all the data. We would be glad, I would certainly be glad to have the panel provide that to you. That is our underlying theory.

[The information was not received at the time of printing:]

Mr. HULSHOF. Good. Mr. Robertson, the record as it is being taken down, of course, is a verbal transcript of words that we -- questions we ask and answers you give. At the time that you mentioned, I think to Mr. Matsui's question, that you would like to focus, or believe that the program should actually focus on the capacity for work rather than the incapacity to work, the record won't show that probably every Member that is up here was nodding in agreement with you, plus about half the spectators that are here.

Before any changes in that regard could be undertaken, I would think that the Social Security Administration would need to have some pretty good hard data or research. Are they moving forward to obtain such research? If they are, are those efforts adequate in your view?

Mr. ROBERTSON. I am really happy that you asked that question.

Mr. HULSHOF. I have your note here that says, "Ask me this question." No, I am just kidding.

Mr. ROBERTSON. For a number of years, you know, we have been asking Social Security to come up with a comprehensive plan, return-to-work type of strategy. In my view, part of that strategy would have to be an agenda of systematic research to get some of the data that we say we don't have right now.

You have picked up on this earlier, too, Mr. Chairman. Unless we have that agenda of systematic research that gives us the data we need to explore some of the options that we have talked about now and some of the options that we are going to be talking about later on, we are going to be having another hearing next year, and we are going to be asking the same questions next year, and we are going to be getting the same answers.

We don't have the data today to help us make a decision. So, I am just 100 percent behind coming up with a real good research agenda that helps us explore some of the alternatives that we will be talking about today.

Mr. HULSHOF. Thank you, Mr. Chairman.

Chairman SHAW. Mr. Pomeroy.

Mr. POMEROY. Thank you, Mr. Chairman. Very interesting panel. Mr. Robertson you indicate that the definitions need to be modernized. Is it principally along the lines of the preceding question to allow for more -- how would you suggest specifically -- help me understand how they need to be modernized and why they need to be modernized.

Mr. ROBERTSON. It is interesting. Yesterday we brought in some experts in the area of disability, and we were actually trying to get information and get their input and get their insights on what issues we should be concentrating on in terms of targeting our resources. A couple interesting things came up, and they directly relate to your question.

First of all, the definition of disability came up time and time again. In connection with that -- and this gets to the answer to your question -- I think there was uniform agreement that, really, before you start talking about how you change the definition of disability, what you have got to do is back up -- and I will go back up to the microphone now. What you have to do is back up and say, "Well, what do you want the program to do?" Then, once you have done that, then you make your criteria, your definition, fit the purpose of the program.

Mr. POMEROY. All right.

Mr. ROBERTSON. Did that answer the question?

Mr. POMEROY. Well, no. I mean, I am tracking you.

Mr. ROBERTSON. Okay.

Mr. POMEROY. I will go on to say, well, did you then have notions about whether the program -- the thrust of disability benefit ought to be changed, leading them toward backing into the definitional examination?

Mr. ROBERTSON. I guess I would have to -- obviously, our work yesterday didn't go down that road; it went down a different road.

Mr. POMEROY. Right.

Mr. ROBERTSON. I would have to pretty much throw that back to you from the standpoint of saying, it is Congress that is going to determine what they want the program to do type of thing. To my mind, it would then be up to SSA, in cooperation with a number of other different organizations, to orchestrate whatever is necessary to give you the information on the implications of going down the route that you have chosen in terms of what the cost would be if you wanted to do something, what the implications on the people with disabilities would be, that type of thing.

Mr. POMEROY. I am in a quandary on this. I mean, I like the historic role of the disability program, which is long-term income replacement for those completely disabled. For the most part, that is not going to be someone coming off of disability back into the workforce, although we do want to incent that activity and facilitate it. That is where the Ticket to Work enters in.

On the other hand, you moved down that road, and so you have more of an expansive early determination of disability; get them in quicker and then out quicker. You move really from this long-term income replacement model more to almost a workers comp-type short-term rehabilitation model, which is really a different set of goals, not traditionally part of the program. I am not sure we can bring that into the program. Those are issues, they need to be addressed somewhere, but I am not sure relative to this program. Ms. Mitchell, would you reflect on your thoughts relative to these conflicting considerations?

Ms. MITCHELL. I absolutely agree with you. It is certainly an issue that I know we as panel members have grappled with over the past year. We have not specifically taken on this whole issue, but we certainly intend to -- and so I don't really have a more definitive answer.

I think what you are raising is the dilemma, though. I mean, I think it clearly is. I think Mr. Robertson, you do have to decide what the program is to be about, what it is to do, then you can look at at what levels you are going to bring people in. For example, when you say people who are completely or totally disabled, that becomes definitional. Sometimes it is functional -- it is a functional definition.

So, when you say completely disabled, I am not sure what that means. It certainly doesn't necessarily mean that an individual may not be able to work. The individual still may be able to work and be completely disabled. I see you looking very puzzled.

Mr. POMEROY. Yeah, that is not -- I mean --

Ms. MITCHELL. That is the definitional problem I think that we get into, and why perhaps there needs to be this kind of hearing.

Mr. POMEROY. Right. Definitionally, in my own mind, I would think disabled means you can't work.

Ms. MITCHELL. All right.

Mr. POMEROY. You are right. I mean, there needs some clarity there. I am really struck by something Mr. Gerry said earlier, and it is a -- this doesn't relate to any of the earlier conflicting considerations I have, but it is another concept. That is, by the time you have a multiyear process of an individual trying to prove up their disability, we have psychologically made this person disabled. You know, everything about modern medical literature, about the relationships between mind and health and, you know, you can do it, versus, "Oh, my God, I am totally disabled," I think that is a really compelling point that he makes.

It is a shame that we have a system that rather than empowers and helps, get the Ticket to Work, we give the ticket to permanent mental incapacity -- mental indisability, not incapacity -- through the proof process. Your response on that?

Ms. MITCHELL. Well, I couldn't agree with you more. It certainly poses the dilemma I think for the Ticket program. Certainly as I have gone across the country and listened to consumers, and as I have gone to speak to groups about the Ticket program, they don't understand the definitional issue. They don't understand the formal terminology. I tell you, family and Members and parents come up to me and they say, "How do you figure this? We just spent 2 to 3 years getting through a process defining my son or daughter as disabled, and now you are going to give me a ticket and want me to now turn around and say he is able to go to work and he should go to work." It is very difficult and frustrating for consumers and family members -- and not just them, advocates and professionals -- to understand that dilemma.

Mr. POMEROY. Very interesting. Thank you, Mr. Chairman.

Chairman SHAW. Mr. Robertson, you struck a familiar chord in my head when you were talking about how they concentrate on the disabilities rather than the abilities. Then you spoke of the fact that they hadn't upgraded their definition of jobs since 1991. Have you seen any indication that they are reacting to your report or that they are starting to try to upgrade their definitions?

Mr. ROBERTSON. We are talking about the labor market information here.

Chairman SHAW. Yes, sir.

Mr. ROBERTSON. I do believe they are aware of the fact that they have got a problem. They have got a dictionary of occupational titles that they currently use to help them in that part of the decision-making process that hasn't been updated since 1991, and that is a Labor Department document. The Labor Department is now moving on to a different data set.

Chairman SHAW. The Labor Department is the one that is responsible for doing that?

Mr. ROBERTSON. Yes.

Chairman SHAW. Upgrading that?

Mr. ROBERTSON. Yes. Still, but the new data set, the Labor Department is developing -- a data set called ONET, Occupation Information Network -- won't have the specifics on job demands and so forth that were in the old data set that they were using. So, I know that Social Security knows that they are in kind of a dilemma here on how they go about updating or getting the updated information that they need, and they are trying to work that out now.

Chairman SHAW. Going back to the point of not looking at someone's abilities, rather, looking at their disabilities, reminds me of the committee I used to chair when we did the welfare reform bill, in which we actually turned welfare offices into employment agencies. When someone comes in now, instead of being told that, "You are eligible for this," and going down the menu with them, they first of all want to say, "Well, how can we get you back into the job market?"

Is there any parallel to that in SSI? Do they do anything as far as job search or looking for -- or coordinating with your State or local agencies in finding these people work? Is there anything going on in that regard? Do they simply just come in and say, "Okay, fine. You are disabled," or, "You are not disabled," and that is the end of it?

Mr. ROBERTSON. I believe that is basically kind of a State decision. The way it has worked out, the eligibility determination, as I indicated earlier, really focuses on are you disabled or not disabled; and do you get cash benefits right now? Our point has been and will continue to be that the early intervention with education about the services that are available, vocational, rehabilitation, and so forth, is the way to go.

Chairman SHAW. Well, if you have a laborer that comes into the office that has lost a leg, and he is being evaluated, would he be evaluated for maybe doing an assembly job on a sitting basis? Would he be evaluated saying, "Well, you can't go out and build houses and dig ditches anymore or do farm work," or whatever that was. How is that person evaluated?

Mr. ROBERTSON. Well, basically Mr. Gerry went through the process earlier this morning. They go through that five-step process that ultimately, basically, makes a determination on whether that individual can do the work that he or she did previously, or any work in the Nation. They use the Dictionary of Occupational Titles (DOT) data to help make those last determinations.

Chairman SHAW. Yes. I am not sure exactly how they would have done it. You have a professional person, a lawyer, doctor, teacher, accountant, who maybe have had a mental disorder, and they come in, they can do certain work, but they are no longer qualified to do what they did before.

If they went to work it would be at a greatly reduced salary from what they had before, but it would still be above that $780, or whatever that figure is that Mr. Gerry gave us. Are they considered disabled? There is no -- as I understand it, there is no partial disability here. You are either disabled or you are not. If you can't earn a certain level and go along with those other points that he brought out, are you disabled? How would that person be evaluated? Would that person be required to take a much lesser job than they had in the first place?

Mr. ROBERTSON. Can I defer to you on that?

Ms. MITCHELL. Oh, I am not the Social Security expert.

Chairman SHAW. Well, I will just ask Mr. Gerry to submit correspondence because I think that is something important.

Mr. ROBERTSON. Going through the five-step process.

Chairman SHAW. I have got that written down on my book. It is a very subjective process, which makes it somewhat difficult. Are you not seeing -- I am going to go back just a minute, and I will end with this. Are you seeing any indication that these people are hooked up to finding employment for people rather than finding reasons to give them disability?

Mr. ROBERTSON. Not at the beginning of the process, no.

Chairman SHAW. We are not doing that?

Mr. ROBERTSON. No.

Chairman SHAW. That is probably the missing piece here. Ms. Mitchell, we are delighted to have you. You can look forward to coming back and seeing us again because in September we are going to have a hearing devoted to the work that you do, and I can tell you this Committee is very proud of the work that it performed in creating the need for you and giving people the opportunity to work without fear of losing their benefits or having to go back through the process --

Ms. MITCHELL. We will look forward to that.

Chairman SHAW. Of reapplying. Thank you very much. Excuse me. Mr. Becerra, did you have something?

Mr. BECERRA. Mr. Chairman, I suspect most of the good questions or comments were made. I would just probably add not having heard all of the testimony, and I apologize for having to slip out for a moment, that what I think the GAO has pointed out is that we have actually, I think as a people, as a society, as a government failed to truly address the needs of our disabled Americans. Whether we have a definition which talks about providing benefits to those who are disabled and can't work or whether we try to help Americans, given our new technologies, get back to work, even with a disability, the fact remains we have a whole bunch of Americans out there who aren't getting any services from us, who could go back to work or who couldn't. At the end of the day we are going to have to talk money if we want to really resolve this, whether it is to get some Americans back to work and not just on disability insurance or if we want to maintain the system and yet help the private sector address the needs of those who can go back to work.

So, I am not sure if the questions were asked or not. The only thing, I would request that you perhaps provide comment if it hasn't already been addressed and if it has I will accept that as an answer, is if we do try to redefine disability so that we can help those who might have the potential to go back to work with some assistance or some retraining or some therapy, are we saying that the government would absorb the cost of providing that assistance or are we leaving it to the wherewithal of the individual that is disabled or classified as disabled to secure that assistance in order to be able to return to work, in which case it seems to be you are jeopardizing the ability of that person to receive that government assistance as a disabled individual under SSI. Would you care to comment?

Mr. ROBERTSON. Yes I will talk to that a little bit. What you are doing is bringing up one of many, many, many questions that would be involved with any fundamental change of the system. It is one that we don't have answers to yet. We talked earlier that this is one of the reasons that SSA's research agenda has to be systematic. It has to be geared to examining some of the alternatives that we have and will be talking about today to give some of the answers to the questions that you are talking about now.

Mr. BECERRA. It is great that you are examining the definition, but it is also very scary because I think you are going to find it is all about money and who is going to carry the load, because you can't talk about people going back to work. They have got a disability and they need some assistance and for the most part we are talking about people who can't afford to secure this assistance; that is, if they don't want to go back to work and they are just trying to be on the dole. So, I think it is most promising if we begin to accept our responsibilities as a society or as a government. It is also, I think, dangerous if we are not willing to accept the next part of the answer, which is to provide the resources to make it possible for these individuals to partake in the type of programs that help them get back to work if they so can. Thank you for your testimony. Mr. Chairman, thank you for the time.

Chairman SHAW. Don't get up. I have another couple of questions.

Mr. ROBERTSON. With the five-step process.

Chairman SHAW. Did your findings show that the error is on -- obviously the data that they are using to evaluate people is causing errors, otherwise you wouldn't even bring it up. Is it erring on the side of giving disability benefits to people who shouldn't have them or not giving disability benefits to people that should?

Mr. ROBERTSON. Well, if we are talking, number one, about the medical listing and the need to update the medical listing, it could go -- that could go either way. I mean, if you --

Chairman SHAW. Okay. How about the job data?

Mr. ROBERTSON. That I can't comment on. I mean what we do know is that the DOT that they are currently using is really, according to the some of the labor people, based in the manufacturing era of our labor market. So it is old, and I don't know how that would play out in terms of whether that would err in providing more benefits or taking away benefits.

Chairman SHAW. How about re-evaluation of people? I know all of our congressional offices have received calls from a neighbor of somebody that says, oh, he is out there doing the yard and he is collecting disability or he has got a job and he is collecting disability. I mean, we all hear those, and quite frankly, when I get one of those I turn it over to the SSA people, and I don't think they ever even look at them frankly. Is there any follow-up when someone has disability? Are they reevaluated every year or every few years?

Mr. ROBERTSON. They have a continuing disability review that they go out and reevaluate folks. I believe the Inspector General, beyond that, has, in essence, special strike teams that do just exactly what you are asking. They go out and look for people that say they are on disability and they are out working in the yard or whatever.

Chairman SHAW. Thank you. Thank you both. Our final panel, we have Paul J. Seifert, who is the Co-Chair for the Social Security Taskforce, Consortium for Citizens With Disabilities, and we have Gooloo Wunderlich, who is a Ph.D., Study Director, Committee to Review the Social Security Administration's Disability Decision Process; Robert Anfield, M.D., Vice President and Chief Medical Officer of the Customer Care Center, UnumProvident Corporation. We have Patricia Owens, who is a Board Member With the National Academy of Social Insurance; Bruce Growick, Ph.D., Associate Professor of Rehabilitation, Ohio State University in Columbus, Ohio; and Peter Blanck, Ph.D., Charles M. and Marion Kierscht --

Mr. BLANCK. Kierscht.

Chairman SHAW. Okay. Professor of Law, and Director, Law, Health, Policy and Disability Center University of Iowa College of Law. What is this, a married team? What do you have here? I have Charles M. and Marion --

Mr. BLANCK. Husband and wife.

Chairman SHAW. Husband and wife. Yes. Okay, fine. Who are they?

Mr. BLANCK. They are the people that gave the money to endow my Chair.

Chairman SHAW. Oh, I am sorry. Why did you put that on there? Well, you got them looking like they are sitting at the table with you. Give me a break.

Mr. BLANCK. He is the former head of Kemper Insurance.

Chairman SHAW. All right. That is fine, and if they were here, we would invite them up to the table, I am sure. However, they are not. We have each of your testimony, which is made a part of the record, and each of you may go forward as you see fit, and we will start with Mr. Seifert.

Mr. SEIFERT. Thank you, Mr. Chairman, Members of the Subcommittee, for the opportunity to testify in this third in a series of hearings on the challenges facing the Social Security disability programs, and in this hearing in particular on the definition of disability.

It is widely held that the definition of disability for Social Security Disability Insurance (SSDI) or Title II and SSI is one of the strictest standards in the Western industrialized world, one that requires the combination of a high level of severity of disability combined with a very low level of functioning, particularly around work, in order for a person to become eligible and in the case of Title II remain on benefits. Consequently, we believe that there are several issues that should be addressed regarding the current definition.

First, when considering any changes in the definition of disability or eligibility criteria, whether the statutory definition, the five-step disability determination process or the listings, Congress and SSA should not assume that mitigating supports are available. Medical and technological advances are making it increasingly possible for some individuals to work despite severe disabilities. However, we should be cautious when contemplating changes to the disability criteria because those advances are not uniformly and widely available to all people with disabilities who need them.

Congress recognized, however, that some people do have access to those technologies and medical assistance in the passage of the Ticket to Work and Work Incentives Improvement Act of 1991, and we thank you, Chairman Shaw and Mr. Hulshof, for your contributions in the passage of that landmark legislation.

Obviously, it is impossible at this time to ensure that all the technology medications and support services necessary are available to all people with every type of disability, so we would again caution against making changes in the disability determination process that would assume those services and technologies that are available.

The second issue we want to bring up is the definition of substantial gainful activity. Granted the SGA level is now indexed for inflation through the regulatory process; however, the level today is $780 per month and we at Consortium for Citizens With Disabilities believe that this is neither substantial nor gainful, and that is something that needs to be addressed particularly in light of the fact that there is for the non-blind disabled individual an SGA level of $780 but for blind individuals a level of more than $1,300. That is a discrepancy that we think should be abolished, and we support raising the SGA for non-blind disabled individuals to the same level as the blind.

Third and finally, the disability programs were created with the notion that people would be unable to work for the rest of their lives, total and permanent disability. This static view of disability meant that little thought was given to what might happen if people returned to work after they became eligible for benefits.

Consequently, in the Title II disabilities program the same requirements must be met to stay on the program as it took to qualify. This has the perverse effect of forcing people who are on the SSDI benefit rolls to diminish their work attempts. Under Title II a person can earn only $780 a month. Earning even $1 above that amount means that you lose every dollar of your DI check.

For example, a person could have a monthly Title II check of $700 and a monthly paycheck of $771. If they receive a $2.50 a week raise, 50 extra cents a day or $10 a month, they would lose all of their $700 SSDI check. Clearly that is not a very attractive economic trade-off, and I don't think we would have to bring Milton Friedman in here to prove it. This policy is known in the disability community as the cash cliff.

A far more reasonable approach to earnings is found in the SSI program where a person loses $1 in benefits against every $2 they earn. Between 1987 and 2001 the number of SSI working beneficiaries has doubled. Ironically, one-fifth of the working SSI beneficiaries in March of 2002 earned above the SGA level compared to hardly anyone in the DI program; or approximately 80,000 working SSI beneficiaries are working above SGA.

This fact is made all the more stark by the fact that SSI beneficiaries typically are less well educated, have a less successful interaction with work or a weaker work history and are generally far poorer than their SSDI counterparts. Yet under the SSI rules where work is rewarded the accumulation of even a small amount of savings is penalized.

The SSI asset and resource limitations ensure that people on SSI will remain in the economic under class. We have long advocated for a sliding scale in SSDI and a modification of the asset and resource limits under SSI so that people can both work and save. Again, on behalf of the Consortium for Citizens With Disabilities Social Security Taskforce, I thank you for the opportunity to testify and look forward to any questions you may have.

[The prepared statement of Mr. Seifert follows:]

Chairman SHAW. Dr. Wunderlich.

Dr. WUNDERLICH. Good morning. I am senior program officer at the Institute of Medicine of the National Academies, and I serve as Study Director to the Committee to Review the Social Security Administration's Disability Decision Process. I am pleased to appear before you today on behalf of the committee.

This study is sponsored by the Social Security Administration. The committee issued its final report earlier this month and your staff has copies of it, and I have also provided copies of the executive summary.

The committee analyzed and made recommendations on key areas, such as improving the disability determination process, developing and implementing an ongoing disability monitoring system, and building SSA's capacity for conducting the needed research for reforming the disability programs. Today I will limit myself to just some of the issues defining disability and determining eligibility as covered in our report.

The Social Security Act defines disability for both SSDI and SSI and, as you know, the standards for evaluating disability claims are specified in SSA's implementing regulations. Determination of eligibility for disability benefits is an inherently difficult task, in the face of millions of claims per year decided by more than 10,000 adjudicators at various levels of the process and high levels of legal challenge and political oversight.

Faced with large workloads increases resulting from program growth without concomitant increases in administrative resources, and concerns about the numerous longstanding problems and complaints relating to accuracy, timeliness and consistency of the disability determinations, SSA leadership decided in the early 1990s to fundamentally redesign the entire claims process, including the disability decision process. At the direction of the then Commissioner, the SSA crafted an ambitious research plan for developing and testing the various assumptions made in the redesign initiative and asked the National Academies to review the research plan and to make recommendations.

The committee conducted the preliminary review of the plan early in the study and found that it lacked the critical elements of a well-designed research plan. The committee made several recommendations for redirection of research priorities and improvements in projects underway.

After reviewing the committee's conclusions and recommendation and undertaking its own internal reevaluation, SSA informed the committee in late 1999 that it had decided to drop the development of a redesigned decision process and instead make incremental improvements in selected components of the existing process. As you all know, at this time SSA is concentrating on updating and improving the listings of impairments.

The current effort for incremental improvements, like the previous redesign effort, call for comparative judgments based on before and after analysis. Such analysis does not appear to have been done by SSA. The committee therefore recommended that SSA should undertake analysis of information from the current decision process based on criteria established at the outset in order to assess the validity and effectiveness of the current process, whether they be individual components like the listings or the whole process, and then the same evaluation criteria should be applied to any revisions developed. Without such a capacity, proposals for "reform" may be proposals for "change," but it is impossible to determine whether they are proposals for "improvement."

The SSA's process for determining disability is not the only model of an adjudicatory system. As you all have heard already, there is a lot of pressure for SSA to redesign the definition and the eligibility criteria. The committee recognizes the administrative difficulties involved in paying more attention in the disability determination process to the physical and social factors in the work environment, and work incentives involves problems. It is not that simple when you consider it has to be applied uniformly and consistently across millions of claimants. Such attention requires major shifts in the orientation of the programs to ways to influence the environment in which the applicant might work and to return-to-work activities. The SSA needs to begin to look into how to go about doing this by undertaking research in this area.

The impact of such changes on the people it serves as well as on the program also needs to be studied. Ticket to work issues have been addressed very adequately by Sarah Mitchell, and I won't repeat them.

In conclusion, the committee's report makes it abundantly clear that SSA has been given a difficult task and dwindling resources to deal with it. The situation will get worse, and not better, in light of the anticipated growth in demands on the program as the baby boom generation reaches the ages of increased likelihood of disabilities. The SSA needs to have some mechanism to systematically give thought to these issues and initiate appropriate research on which to base policy decisions. Its research up until now has not addressed the major fundamental issues. The SSA cannot accomplish, this forward looking agenda, including the recommendations that the committee has included in its report, without appropriate resources in terms of not just dollars, but also recruitment of qualified research staff.

The committee believes that the blueprint for action that it has recommended in its report is worthy of full funding and adequate staffing support, both by the executive and the legislative branches of the committee. Thank you for the opportunity to summarize some of the findings and recommendations of the committee.

[The prepared statement of Dr. Wunderlich follows:]

Chairman SHAW. Dr. Anfield.

STATEMENT OF ROBERT ANFIELD, M.D., VICE PRESIDENT AND CHIEF MEDICAL OFFICER, CUSTOMER CARE CENTERS, UNUMPROVIDENT CORPORATION, CHATTANOOGA, TENNESSEE

Dr. ANFIELD. Thank you, Mr. Chairman. My name is Dr. Robert Anfield, and I am the Chief Medical Officer for the Customer Care Organization of UnumProvident Corporation. I appreciate this opportunity to testify about UnumProvident's best practices as the leading provider of disability income insurance.

Many of our clients include individuals small employers, mid-size companies and Fortune 500 corporations. I would like to begin today by discussing UnumProvident's view of disability.

We know based on our experience that disability is episodic rather than being a fixed or a permanent condition. We also recognize that most claimants eventually recover from a disability and that recovery is usually incremental. In fact, our experience has shown that most claimants have some capacity for work during their recover period, and their motivation to return to the workplace depends on a number of social, vocational and attitudinal factors.

UnumProvident designs insurance contracts that define disability according to our experience and offer benefits based on return to work transitions, and we suggest that Social Security also consider offering this type of incentive for claimants.

UnumProvident has committed significant resources to actively assisting our insureds in their return to work efforts. Our employees include 85 board certified physicians in 14 specialties who train claims consultants, offer medical reviews and consult with claimants' physicians to clarify abilities and customize return to work plans. We also have more than 300 full-time clinical and vocational consultants making about 235,000 early intervention calls and more than 100,000 referrals to rehabilitation each year. In addition, we have over 1,000 field case management and support specialists.

As we consider each claim we evaluate the medical data to determine if the claimant is functionally capable of working. Based on this determination, specialized resources are provided as appropriate to help each individual regain the ability to earn an income and become self-sufficient. In addition, we continually monitor the claimant's condition throughout the disability to assess ongoing medical status and work capacity.

As a result of these services we provide, nearly half of our long term disability claimants are able to return to work within 6 months of receiving benefits. For our long-term disability claimants that are also receiving SSDI benefits, we experience a recovery rate that is more than six times the rate reported by Social Security.

UnumProvident's contracts most often feature multiple levels of benefits based on several different definitions of disability employed during the life of the claim. The Social Security definition of disability sends an unfortunate message to the benefit recipient that they are totally and permanently disabled. It creates a mindset that discourages individuals from trying to return to work with the result that the claimant frequently continues to collect benefits indefinitely.

Today, two factors are making return to work possible for many people who were previously considered permanently disabled. The first is medical advances such as protease inhibitors for AIDS patients, new treatments for coronary artery disease and diabetes. The second is assistive technology, such as computer based technology solutions, hand-held organizers that provide memory assistance for people with brain injuries and voice activated workplace tools and specialized software that allow people to overcome impairments.

Our experience at UnumProvident has taught us that a "one size fits all" approach to case management is usually ineffective. Instead we look at every claimant as an individual, conducting the medical analysis of each case and then developing an appropriate return to work plan tailored for the individual. Such an approach demands the appropriate level of medical expertise specifically designed by the in-house clinical resources maintained by UnumProvident. We recommend that the Subcommittee consider the following key areas based on our experience in the private sector:

Adopt benefits that emphasize return to work. We do appreciate and endorse Social Security's progress in encouraging return to work through the ticket to work and self-sufficiency program.

Now it is important for Social Security to incorporate other return to work features and incentives such as transitional work funding, partial payments and proportional benefits, as well as rehabilitation services to further assist claimants in returning to work and reducing their dependence on cash benefit programs.

Acknowledge that recovery is incremental. Recovering from an impairment is an incremental process and Social Security should require ongoing review and documentation throughout the claim process. It is important to work with the claimants during the recovery period to determine the level of functionality of which they are capable at any given stage and to consider the impact of medical advances.

Offer expanded definitions of disability. The present SSDI definition of disability provides a disincentive for individuals considering returning to work. Adding more flexible definitions that reflect the current thinking about the nature of disability, how individuals recover and the changing needs of today's workers will encourage claimants to focus on becoming self-sufficient once again.

These recommendations can significantly enhance the Social Security program by altering the perception of disability and realigning objectives to help claimants return to work whenever possible. While there will be initial costs incurred, the long-term savings will prove significant. There is a dignity associated with a person's ability to work and great value in the ability to live a full and independent lifestyle.

This philosophy and its focus on abilities is what shapes UnumProvident's approach to disability and the assistance we provide for our insureds. Thank you again for offering me this opportunity to testify. I will be happy to answer questions.

[The prepared statement of Dr. Anfield follows:]

Chairman SHAW. Thank you, doctor. Ms. Owens.

Ms. OWENS. Thank you for the opportunity to appear before you today, both for myself and from the National Academy of Social Insurance (NASI). My testimony is based largely on the work of the NASI Disability Policy Panel, of which I was a member.

At the request of this Subcommittee of the 102nd Congress, the panel examined whether the design of the SSDI-SSI programs encouraged persons with disabilities to emphasize their impairments rather than to get back to work. It also looked at ways to better link beneficiaries with rehabilitation and work without significantly raising the cost of the program.

The panel made numerous recommendations to make it more work friendly. One of those is extending health care coverage. Another was the Ticket to Work. We are very happy that we were able to work with you and that you could use some of that research when you came up with the Ticket to Work and Work Incentives Act, Public Law 106.

The panels report also emphasized the need for administrative resources in the Social Security Administration to carry out the definitions as they currently exist and any changes made in the act. I will come back to that in a minute.

The purpose of SSDI is earnings replacement insurance -- and this is what I want to emphasize. Earnings replacement insurance, public and private, limits the consequences of the inability to work because of disability by providing income support. That is very important, and I think Mr. Pomeroy had indicated it is really one of the features of social insurance.

Any work disability definition, of which the Social Security disability program is one, contains several elements. The elements are: a health condition that prevents work; work itself, and how you define work; offsetting capacities that exist; and the environment in which the person works and lives. It is a very clear cut sort of look at determining disability for the inability to work.

It is necessary that there be income replacement. Income replacement can be used when inability to work is clearly established and that inability to work cannot be removed. Income replacement can also be used temporarily during a transitional period as other remedies are explored and applied.

There are other remedies to work disability, including changing or containing the impairment through health care, modifying work requirements, enhancing the person's capabilities and environment changes, and I think we have heard a lot about that. The point I am making here is that income replacement and determining work disability can be put in place while other things are being considered and taking place for this person with the disability.

The SSDI definition of disability is very strict. It is a very strict definition of disability. It is stringent and replacement rates are frugal. It is also very generic, and I think that is an important thing that we need to focus on. The application of regulations must be systematically updated over time to reflect dynamic social changes, I think we have heard this over and over again.

You can have a definition that is generic and static. The medical conditions, the work, and so forth, change and the administration of the definition must therefore change around those changes. I was very glad to hear Mr. Gerry say that. So, Congress has from time to time actually legislated reforms because of these changes.

The NASI panel concluded that the policy should flow -- and this is the important difference here in this testimony -- the policy should flow from overall goals that are set up. Then each of the various programs underneath those overall goals should have its own definition of disability to fit specific remedies. The panel concluded that the primary goal of a national disability policy should be the integration of people with disabilities into American society, equal opportunity for participation, independent living, all of those pieces. So, it is that organizing principle under which the other programs need to fit. Social Security disability happens to be one of those.

I would like to submit for the record Chapter 4 of NASI's report, which goes into the different definitions that various remedies have to have in order to carry out a national disability policy. So, different definitions are in fact important. The work disability definition for wage replacement is one of those definitions. I would also like to submit Chapter 5, which goes into the panel's evaluation of SSA's methods for assessing disability and the things you have to consider for that.

[The chapters follow]

In chapter 1, the Disability Policy Panel presented a single conceptual definition of disability for purposes of clarifying the nature of work disability. This chapter presents the Panel's review of specialized definitions of disability that are used as eligibility criteria in public laws or private contracts that offer civil rights protection, rehabilitation, other services or income support to persons with impairments or work disabilities. In reviewing these definitions, the Panel concluded that:

• different definitions of disability are appropriate for programs that offer different kinds of services or benefits;
• work disability -- based on loss of ability to earn -- is an appropriate eligibility criteria for earnings-replacement insurance; and
• the Social Security Act definition of work disability is very strict. A less strict test would significantly increase the cost of Social Security disability benefits.

This chapter addresses concerns that these eligibility criteria differ in their definition of disability; reviews the definitions used for specific disability-related programs; and discusses various alternative definitions of disability that have been suggested for the Social Security program. It concludes by exploring whether programs with different, specific purposes and eligibility criteria -- such as vocational rehabilitation and Social Security disability insurance (DI), or the Americans with Disabilities Act of 1990 (ADA) and DI -- are in conflict.

A single, broad definition of disability, as illustrated by the conceptual model of disability adopted by the Panel, is useful in drawing meaningful distinctions among such disability-related concepts as medical condition, impairment, functional limitation and work disability. The conceptual definition of work disability is useful in clarifying its four elements -- impairments, skills and abilities, tasks of work, and the broader environment -- and therefore in considering various possible remedies for work disability.

But a single legal definition of disability for purposes of defining eligibility for benefits and services is neither necessary nor desirable. A one-size-fits-all definition would be ill-suited to the diverse needs of persons with impairments or work disabilities. Rather, eligibility criteria should and do relate directly to the service or benefit being offered:

• A definition of disability based on need for assistance with activities of daily living (ADLs) is appropriate for determining eligibility for publicly-financed services that assist with ADLs.
• A definition of disability based on need for and likely benefit from vocational services is appropriate for determining eligibility for publicly-financed vocational rehabilitation (VR) services.
• A definition of disability that encompasses all who are at risk of discrimination in employment or public access is appropriate for determining who is covered by civil rights protection.
• A definition based on loss of earning capacity is appropriate for determining who is eligible for public or private cash benefits to replace part of lost earnings.

A mismatch between eligibility criteria and benefits that are offered creates inappropriate incentives and gaps in coverage for people seeking to gain access to the services they need. For example:

• Basing eligibility for personal assistance with ADLs on a definition of disability related to work incapacity fails to cover individuals who need such assistance whether or not they are working.
• Basing eligibility for health care on a definition of disability related to work incapacity is appropriate if, and only if, people who work are ensured access to health care through their jobs. If they cannot get health care coverage when they work, then basing eligibility for health care coverage on work disability leaves uncovered those who can and do work.

Consistency in disability policy is found instead in its overarching goals. The Panel believes the primary goal of a national disability policy should be the integration of people with disabilities into American society. That includes equality of opportunity, full participation, independent living and economic self-sufficiency. These goals are pursued through a broad landscape of systems that finance health care and education for the general population and various programs that provide disability-related goods and services, legal protections and earnings replacement benefits, as discussed in chapter 1. Legal definitions of disability that are used as eligibility criteria for these various services, legal protections and cash benefits rightly differ because they target particular remedies to a specific need among the varied needs that people with disabilities have.

The Panel reviewed a number of different definitions of disability that are used in public laws or private contracts. These legal definitions of disability are not meant to be an all-purpose definition of the meaning of disability. Instead, they are used as eligibility criteria to specify who is eligible for particular protections, services, or benefits provided by various public laws or private contracts.

Each of the programs the Panel reviewed offers a different kind of remedy or benefit to people who have impairments, functional limitations or work disabilities. As such, each employs a different legal definition of disability for determining who is eligible for what the program provides, whether that is civil rights protection, rehabilitation, long-term care services or earnings-replacement benefits. The programs are not in conflict with one another because they offer different remedies or because they define eligibility for different remedies in different ways. Rather, taken together, they reflect the extraordinary diversity of both abilities and needs among persons who have some sort of impairment, functional limitation or disability.

The variations among legal definitions and their match with the purposes of particular programs is illustrated by examining four different sets of disability policies: civil rights protection, vocational rehabilitation, long-term care services and earnings-replacement insurance.

Civil Rights Protection

The ADA defines disability for the purpose of providing legal remedies to those at risk of discrimination in employment or public access (figure 4-1). The ADA defines disability broadly for the purpose of identifying who is covered by the civil rights protection of the Act:

• "Disability" means with respect to an individual (1) a physical or mental impairment that substantially limits one or more major life activities of such individual, (2) a record of such an impairment, or (3) being regarded as having such an impairment. ⁽¹⁾

Abbreviations: ADA = Americans with Disabilities Act, ADLs = activities of daily living, VR = vocational rehabilitation.

• "Major life activities" means functions such as caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working. ⁽²⁾

Regarding discrimination in employment, the ADA states that no covered entity shall discriminate against a "qualified individual with a disability" because of disability in regard to job-application procedures; the hiring, advancement or discharge of employees; employee compensation; job training; and other terms and conditions of employment.

• A qualified individual with a disability is an individual with a disability who, "with or without reasonable accommodation, can perform the essential functions of the employment position that such person holds or desires." ⁽³⁾

The broad definition of who is covered by the ADA is appropriate for the purpose of the Act, which is to offer legal remedies to those who face discrimination in employment or public accommodation. For that purpose, it is appropriate to include not only those who have impairments, but also those who are believed to have impairments or in the past have had impairments because they too may be at risk of discrimination.

Vocational Rehabilitation

The federal/state program that provides VR services defines disability in terms of the need for and likely benefit from the rehabilitation services the program offers. The Vocational Rehabilitation Act, as amended in 1992, adopted the ADA definition for setting its research, training and independent-living center goals. The definition used for eligibility for VR services, however, remains related to the need for and likelihood of benefiting from the services the program offers. That is:

An individual who (i) has a physical or mental disability that constitutes or results in a substantial impediment to employment and (ii) can benefit in terms of an employment outcome from vocational rehabilitation services provided. ⁽⁵⁾

The 1992 amendments modified the eligibility criteria by adding:

it shall be presumed that an individual can benefit in terms of an employment outcome from vocational rehabilitation services ... unless the designated state unit can demonstrate by clear and convincing evidence that such individual is incapable of benefiting from vocational rehabilitation services in terms of an employment outcome. ⁽⁶⁾

The change shifts the burden of proof from the applicant to the VR agency in determining whether a person can benefit from VR services. The eligibility criteria, however, remain based on the need for, and prospect of benefiting from, services that VR agencies offer.

Private employers or disability insurers also offer vocational rehabilitation services. The services rarely, however, are an entitlement or contractual obligation to the individual worker from the employer or insurer. Instead, eligibility for insurer-financed rehabilitation services is based on the cost recovery potential to the employer or insurer of paying for those services, so the employee can return to work and leave the private disability insurance rolls.

Long-Term Care Services

Programs that provide long-term care services, while neither widely developed nor uniformly available in the United States, generally define disability in terms of limitations in performing ADLs. They provide institutional or community-based services to assist individuals with ADLs.

The Medicaid program is the main source of public financing to provide individuals with very significant disabilities with long-term care services, such as institutional care in nursing homes for elderly persons or intermediate care facilities for persons with mental retardation (ICFs/MR). To encourage community-based alternatives to institutional care, Medicaid waivers have allowed states to arrange long-term care in the community for individuals who would otherwise meet the state's test of need for institutional care, if the community-based alternative costs no more than institutional care. The Medicaid program has also permitted states to fund user-directed, community-based personal assistance services. ⁽⁷⁾ To qualify for institutional or community-based services, individuals must meet the state's eligibility criteria, which are usually based on need for assistance with ADLs such as bathing, eating, toileting, getting around inside the home and getting in or out of bed or a chair. ⁽⁸⁾

Earnings Replacement Insurance

Cash benefit programs that are designed to replace earnings from prior work all use a definition of disability based on loss of ability to work. In addition, they all have other eligibility rules that require a record of prior work from which contributions toward disability protection were paid (by the employee, the employer or both) and all, in one way or another, relate the amount of the benefit paid to the prior level of covered earnings that have been lost because of work disability. Various definitions used to determine eligibility for benefits to replace lost earnings are summarized in figure 4-2. They differ mainly in the range of jobs that must be considered in determining whether the insured individual is unable to work.

• Private long-term disability insurance (LTDI) contracts usually define disability in terms of inability to perform one's usual occupation, although after a period of time (often two years) the definition shifts to a stricter test of inability to perform the duties of any occupation for which one is qualified by training, education or experience. ⁽⁹⁾
• Private short-term disability insurance contracts usually define disability in terms of inability to perform one's own job, which is a less strict test than the "own occupation" test used for long-term disability insurance. The job-specific test is used for short-term disability benefits because it is generally assumed that the employee will be able to return to his or her job after he or she recovers from temporary illness, injury or maternity.
• The U.S. Civil Service Retirement System definition of long-term disability for eligibility for disability retirement pensions is similar to an occupational test in private LTDI -- inability to perform the employee's current position or another available position in the same agency at comparable pay for which the person is qualified.
• The Railroad Retirement system offers an occupational definition of disability (inability to perform their usual occupation) for workers with 20 years of service and a current connection to the railroad industry. Railroad workers with fewer years of service, or those who have left railroad employment, can receive disability benefits from the railroad retirement system if they meet a definition of disability that is essentially the same as the Social Security definition.
• The Social Security Act definition of long-term disability is clearly the most stringent. It defines disability as:

"the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less that 12 months ... An individual shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy...^{" (10)}

All of these systems have in common the purpose of providing income to replace part of lost earnings while the worker is unable to work as a result of illness, injury or work disability. Their definitions of disability all relate to the demands of work. They differ in terms of the range of jobs or job tasks that are considered in determining work disability. Short-term disability usually considers the worker's current job; insurance or pensions for long-term disability often consider the full range of jobs within the worker's occupational group. Social Security disability insurance has the most demanding standard because it considers the person's ability to do any work that exists in significant numbers in the national economy. (The Social Security Act definition is discussed in greater detail in chapter 5.)

The Panel concludes that work disability is an appropriate legal definition -- or eligibility criterion -- in public laws or private contracts that are designed to pay benefits to replace part of lost earnings from work.

On the other hand, work disability is not necessarily a proper eligibility criterion for allocating publicly-financed services or benefits that people need whether or not they are working, particularly if these services or benefits are not available to people with impairments or chronic health conditions who do work. Examples of services people need whether or not they are working include health care coverage and, in some cases, personal assistance services or other ongoing impairment-related supports.

The Social Security Act definition, while very strict, is consistent with the Panel's conceptual model of work disability. Work disability involves the interaction among a person's medically determinable impairment; the environment in which he or she is expected to work; the tasks that constitute work the person can reasonably be expected to do; and his or her offsetting capacities or compounding limitations in performing those tasks.

Abbreviations: OASDI = Social Security old-age, survivors, and disability insurance, SGA = substantial gainful activity.

Because the Social Security test of disability is very strict, it is often criticized for requiring that applicants be unable to do "any substantial gainful activity" in order to qualify for benefits. That is, of course, true. The Panel considered various less strict tests of work disability for Social Security. The appeal of such alternatives is that they would make Social Security more "work friendly" by paying benefits to more persons who can and do work. The drawback of such proposals is that they would increase the number of people who would qualify for Social Security disability benefits and, therefore, would increase the cost of the DI program.

Occupational Test of Disability

The occupational test of disability -- inability to perform one's own occupation -- that is used in many private long-term disability insurance plans is less strict than the Social Security test. This test would allow benefits to be paid to workers who are no longer able to do their usual occupation, but nonetheless are quite capable of doing other work, including work at relatively high pay.

The Panel reviewed a comprehensive reform proposal that involved an occupational test of disability for DI that would allow benefits if the applicant were unable to do his or her usual occupation. ⁽¹¹⁾ This occupational test was estimated to increase the cost of the DI program by about $20 billion per year (in 1994 dollars) after 10 years, or by roughly 50 percent. ⁽¹²⁾

Partial Disability

Some European social insurance programs pay partial disability benefits. In The Netherlands, for example, if workers have a loss of 15 to 80 percent of their working capacity, they may receive a partial disability pension. If such workers are employed, they are eligible for a fraction of the full disability pension. In Sweden, partial disability pensions may be paid at 25 percent, 50 percent or 75 percent of a full disability pension for either the universal disability pension or the earnings-related pension. ⁽¹³⁾

In the United States, permanent partial disability benefits also are provided by state workers' compensation programs. Compensation for permanent partial disability is one of the most complicated and contentious aspects of workers' compensation. Broadly speaking, three different bases are used for determining compensation for permanent partial disability:

• Impairment-based methods provide compensation based on physical or mental loss of use of bodily function. This method pays a specified amount for such factors as loss of motion, loss of strength or loss of a part of the body.
• Wage-loss methods base the benefit on the actual partial loss of earnings as a result of the permanent partial impairment. The amount of the benefit is based of demonstrated loss of past earning capacity.
• Earnings-capacity-loss methods take into account the impact of the worker's age, education and work experience in combination with the permanent partial impairment to estimate the consequences of the injury for the worker's future stream of earnings.

A recent blue ribbon panel on workers' compensation concluded that each of these methods has certain advantages as well as significant flaws. Impairment-based valuations of loss can be measured with ease, but the benefit is not related to the economic consequences of the loss for the individual worker. Wage-loss systems come the closest to the traditional purpose of workers' compensation, but they provide disincentives for workers to return to full employment if the amount of the benefit is related to the demonstrated partial wage loss. In addition, it is difficult to determine whether the wage loss experienced long after the injury is due to the injury or to other factors, such as economic conditions. Finally, assessment of earnings-capacity loss takes account of both the impairment and its future economic consequences, but the assessment is highly subjective and often involves dispute and litigation about the valuation of future earnings lost due to the injury. ⁽¹⁵⁾

In brief, experience in other countries and with workers' compensation in the United States suggests that partial disability benefits tend to be costly as well as difficult and contentious to implement. The Panel believes that the disabled worker tax credit it is recommending as a wage subsidy for low-income workers with disabilities is a far preferable way to provide partial support to low-income workers whose capacity to earn is reduced, but not eliminated, by a disabling impairment (see chapter 7).

Veterans' Compensation Impairment Test

The veterans' compensation (VC) system in the United States uses a wholly different concept for paying cash compensation. It pays monthly benefits to veterans whose impairments resulted from injury or disease incurred or aggravated while in active military service. The amount of compensation depends solely on the degree of impairment, rated as a percentage of normal function that is lost. One appeal of this approach is that receipt of benefits is not based on work incapacity. Veterans with service-connected impairments receive benefits for life, regardless of their future success in the labor market. Monthly payments range from $89 for an impairment with a 10-percent rating to $2,165 for a 100-percent impairment rating in 1995. Applying this concept to Social Security for all Americans is problematic for at least two reasons:

Cost versus Benefit Adequacy. The VC impairment test for paying compensation is much more expansive that the Social Security test based on "inability to engage in any substantial gainful activity." Of the 1.3 million people under age 65 receiving veterans' compensation, only about 9 percent are classified as "unemployable," a concept similar to the Social Security definition of work disability. About 22 percent have impairment ratings of 50 percent or more. ⁽¹⁶⁾ The rest have lesser impairments. If the distribution of impairments in the general population is comparable to that among veterans receiving compensation, then;

• To compensate all Americans who have an impairment equal to the VC rating scale from 10 to 100 percent would cover about 10 times the number of people who meet the Social Security test of work disability.
• To compensate only those Americans who had an impairment rating of 50 percent or more on the VC scale would cover a population more than twice the size of the Social Security beneficiary population.
• To pay this much larger group would require either a tremendous increase in Social Security benefit outlays, or a significant reduction in the current level of support for those who are found unable to work, or both.

This compensation concept is not based on the veteran's need for income support. Rather, it is based on the government's liability, as employer, to compensate the veteran for the harm sustained while in the government's employ. The amount of compensation is related to the degree of harm as determined by the veteran's impairment rating. It is not directly related to veterans' need for support either because of their lost earnings capacity or because of the cost of particular impairment-related services or supports they have to buy. In fact, the federal government generally pays for those other services for injured veterans -- such as medical care, attendant allowances, prostheses, equipment and rehabilitation -- in addition to cash compensation for their impairments.

In short, the rationale for the federal government to compensate veterans or their survivors for harm sustained or lives lost while on active duty in the armed forces does not apply to income support for all members of society.

On the other hand, the idea of compensating for some of the impediments or financial costs people face because of their impairments is an important element of U.S. disability policy. It is not based on government liability, but rather on the social value of leveling the playing field between people with and without impairments. Examples include: eliminating environmental barriers and providing job accommodations as called for in the ADA, providing publicly-financed rehabilitation services and compensating for some of the added costs that people face because of their impairments. This "leveling of the playing field" concept of compensation underlies the Panel's recommendation for a federal income tax credit for expenditures for personal assistance by working taxpayers with disabilities (see chapter 8).

Such policies that compensate for impairments by leveling the playing field promote employment and full participation for people who have various kinds of impairments. But they are not a substitute for income support to replace earnings while workers are unable to work because of illness or disability.

Some observers are troubled by the multiplicity of program definitions of disability and are concerned that the programs involved have conflicting goals and work at cross-purposes. The Panel, however, finds that programs are not in conflict simply because they are designed to meet different needs of various subsets of the population who have impairments or work disabilities. Nor are they in conflict because they use different definitions of disability to target the different services, legal protections or earnings-replacement benefits that they offer.

Rehabilitation and Social Security

Cash benefits to replace earnings are not in conflict with vocational rehabilitation aimed at improving an individual's skills and abilities to perform the tasks of work. They complement each other: cash benefits can provide income to meet daily living expenses while rehabilitation and a job search take place. At the same time, not everyone who receives cash benefits is a good candidate for vocational rehabilitation. Some who receive Social Security disability benefits are too ill to work. In focus group interviews, many beneficiaries indicated they had exhausted other options for rehabilitation or return to work before they applied for Social Security benefits (see the appendix). DI beneficiaries tend to be older than rehabilitation clients. While about half those who enter the DI rolls are over the age of 50, about half those successfully rehabilitated by state VR agencies are younger than age 35. ⁽¹⁷⁾ Nonetheless, a subset of Social Security beneficiaries may be good candidates for rehabilitation and return-to-work services. Linking beneficiaries with return-to-work services and providing income support while return to work is tried are complementary elements of disability policy. The Panel's proposal for issuing return-to-work tickets to Social Security beneficiaries is designed to improve that linkage and to expand the supply of service providers who can be paid to assist beneficiaries to return to work (see chapter 6).

The Panel also recognizes that VR services can be beneficial to persons who are not Social Security beneficiaries. The large majority of persons that state VR agencies successfully place in competitive employment (85 percent) are not recipients of DI or SSI benefits. ⁽¹⁸⁾

In brief, both Social Security and VR are important elements of disability policy. In many cases they serve different subsets of the population. In other cases, individuals with severe work disabilities receive earnings-replacement benefits from Social Security while they engage in vocational training to return to work.

Social Security and the ADA

The income support provided through the Social Security Act and the civil rights protection of the ADA are both essential pillars of disability policy, but one is not a substitute for the other. Some work disabilities are amenable to the solutions offered by the ADA. Others are not. The ADA provides legal remedies to workers who face discrimination in employment. Social Security provides income support to those who have lost their capacity to work. The two laws typically target different needs of the very diverse population of persons who have impairments or disabilities.

The ADA bans discrimination against workers who have impairments but who are nonetheless able to perform the essential functions of the jobs they seek to hold or retain. It requires employers to make "reasonable accommodations" for those workers. Whether an accommodation is "reasonable" or whether it poses "an undue hardship" on employers is evaluated on a case-by-case basis that depends on the circumstances of the individual, the employer and the employer's ability to bear the cost. Accommodations that are not considered "reasonable" for a particular employer under a particular set of conditions may be "reasonable" for another employer or when circumstances change.

Research has shown that job accommodations, such as those now required by the ADA, have delayed the point at which ill or injured workers leave the work force and turn to Social Security. ⁽¹⁹⁾ The focus group interviews in appendix A indicate that beneficiaries often had received accommodations before they turned to DI benefits. They left their jobs when they could no longer perform them even with accommodations.

In general, Social Security is for workers whose impairments, in conjunction with their other abilities and the demands of work, are not usually amenable to reasonable accommodation by their current employers. It provides benefits that partially replace earnings when people are out of work and it is reasonable to conclude that the severity of their impairment is the cause. It is meant to do so in a way that enables workers to retain their dignity and self-respect while they cope with the human and financial losses associated with lost capacity to earn. Without Social Security, those who receive it often would be destitute or dependent on relatives or public assistance for support. By providing wage-replacement income, Social Security promotes individual empowerment and community integration. By basing entitlement to benefits on prior contributions and scaling benefit amounts to the worker's former purchasing power from earnings while working, Social Security promotes economic self-sufficiency.

While Social Security is paid only to those who meet a very strict test of work disability, it is not necessarily paid for life. Some people medically recover and others may gain new skills and abilities that enable them to return to work and leave the benefit rolls. In some cases, persons who legitimately qualify for DI may, with appropriate accommodations in a new setting, be able to return to work. The extent to which society is willing and able to invest in accommodations, jobs and the human capital of workers with significant impairments will affect the numbers who turn to Social Security and the number who return to work and leave the benefit rolls.

At any given time, different people need the civil rights protections of the ADA or earnings-replacement benefits from Social Security. And any particular individual may need both, though at different stages of his or her life or under different environmental circumstances.

1. 42 U.S.C. 12102(2).

2. U.S. House of Representatives, Americans with Disabilities Act of 1990: Report Together with Minority Views, Rpt. No. 101-485, Part 2 (Washington, DC: U.S. Government Printing Office, 1990), p. 51.

3. 42 U.S.C. 12111.

4. N.L. Jones, "Essential Requirements of the Act: A Short History and Review," The Americans with Disabilities Act: From Policy to Practice, J. West (ed.) (New York, NY: Milbank Memorial Fund, 1991), pp. 36-37.

5. Section 7(8)(A) of the Rehabilitation Act, as amended in 1992.

6. Ibid., Section 102 (a)(4)(A).

7. This is made possible by a regulation (42 CFR 440.170(f)) "that permits personal assistance services to be provided in a person's home by an individual, not a member of the family who is qualified to provide such services, where services are prescribed by a physician in accordance with a plan of treatment and are supervised by a nurse." Because this regulation does not specify the amount of nurse supervision required, it permits states to allow a great deal of consumer direction in the daily management of one's personal assistance needs. G. DeJong and T. Wenker, "Attendant Care as a Prototype Independent Living Service," Caring, November 1982, pp. 26-30.

8. These need-for-service eligibility criteria are in addition to the Medicaid categorical criteria (SSI or AFDC receipt, or over age 65) and the Medicaid income and resource eligibility criteria.

9. M.W. Kita, "Morbidity and Disability," Journal of Insurance Medicine, Winter 1992, p. 272.

10. Section 223(d)(1)(A) and (2)(A) of the Social Security Act.

11. A.I. Batavia and S.B. Parker, "From Disability Rolls to Payrolls: A Proposal for Social Security Program Reform," Journal of Disability Policy Studies, Vol. 6, No. 1, 1995.

12. Social Security Administration, Office of the Actuary, memorandum, "Estimated Increase in OASDI Benefit Payments Under the 'Batavia-Parker' Proposal To Modify the DI Program," September 10, 1993.

13. Social Security Administration, Social Security Programs Throughout the World -- 1995 (Washington, DC: U.S. Government Printing Office, July 1995), pp. 316-17.

14. L.J.M. Aarts and P.R. de Jong, "European Experiences with Disability Policy," Disability, Work and Cash Benefits, J.L. Mashaw, et al., (eds.) (Kalamazoo, MI: W.E. Upjohn Institute for Employment Research, forthcoming).

15. Blue Ribbon Panel on Workers' Compensation, Policy Statement on Permanent Partial Disability (Denver, CO: National Conference of State Legislatures, 1992).

16. Disability Policy Panel, Preliminary Status Report of the Disability Policy Panel (Washington, DC: National Academy of Social Insurance, 1994), table II-4, p. 44.

17. U.S. Department of Education, Rehabilitation Services Administration.

18. See table 6-2.

19. R.V. Burkhauser, et al., "The Importance of Employer Accommodation on the Job Duration of Workers with Disabilities: A Hazard Model Approach," Labor Economics, June 1995, pp. 1-22; and K.K. Charles, "Employer Accommodation and the Early Post-Onset Separation of Disabled Workers," unpublished paper, Cornell University, June 1995.

For any system of benefits or services, applicants must be assessed to determine their eligibility. For disability-related programs, the assessment must include an evaluation of disability. The assessment of work disability is inherently complex because work disability itself is not a simple concept. As discussed in chapter 1, an impairment is an essential element of work disability. But the assessment of work disability must also consider the person's residual functional capacity in relation to the tasks of work in the context of the broader environment.

Moreover, the assessment of work disability made by different programs will differ according to the type of remedy or benefit offered. The first section of this chapter explores how the assessment of work disability for wage-replacement benefits differs from an assessment of disability for the purpose of offering rehabilitation services. That is, the assessment for cash benefits is concerned with the severity of the disability, and whether it constitutes a legitimate basis for paying benefits based on inability to earn. The assessment for rehabilitation focuses on assessing the individual's needs for particular kinds of services.

The balance of the chapter is about the Social Security disability assessment. It begins with a review of the elements of the definition of disability in the Social Security Act. It then describes the sequential process the Social Security Administration (SSA) uses to determine whether an applicant for Social Security disability benefits meets the definition in the Act. The final sections contain the Disability Policy Panel's evaluation of SSA's assessment process and its findings and recommendations on ways to improve that process.

If the purpose of an assessment of disability is to allocate rehabilitation services for persons with impairments, the assessment might pose two questions. First, does the applicant for services have an impairment that interferes with his or her ability to work? If not, the person could be denied services because the scarce resources available for rehabilitation should target only persons with work-limiting impairments, not persons who need other kinds of employment assistance. If the person has a work-limiting impairment, a rehabilitation assessment might then ask the second question: is the person likely to benefit from services the provider can offer? If so, the person would be found eligible for services. When private insurers or workers' compensation programs evaluate whether to pay for rehabilitation, the first question has already been answered in the affirmative because they consider paying for rehabilitation only for persons already found eligible for insurance or compensation payments based on a finding of work disability (see box 5-1).

When the purpose of an assessment of work disability is to allocate earnings replacement insurance benefits, the assessment necessarily focuses on the severity of the work disability. The purpose of the assessment is to determine whether applicants for benefits should receive them because of their inability to work. A review of disability determinations in the social insurance programs of six countries highlights commonality across countries in the complex assessment of work disability for this purpose: ⁽¹⁾

• Eligibility for disability pension benefits is based on a demonstrated incapacity for work due to sickness, injury or disease. The purpose of these programs is to alleviate the financial disruption that the loss of regular earnings causes.
• In all countries, the disability standard is based ultimately on the inability to earn. However, the formulation of the standard varies: in Germany, the test is whether the applicant can engage in gainful activity only irregularly or can achieve only insubstantial income; in both the United States and Canada, the line is drawn at the inability to perform substantial gainful activity; in the United Kingdom the reference is simply incapacity for work. Each of these is effectively a full incapacity requirement; benefits are paid only if the applicant cannot work at all, at least not at a job reasonably within his or her vocational limits.
• Impairment alone does not trigger the award of a benefit; rather benefits are awarded based on the effect of an impairment on an applicant's capacity for work. Moreover, proof of incapacity for work, while always due to impairment, is measured against an individualized vocational standard appropriate for the particular applicant. As a result, disability assessment procedures must be designed to identify and categorize individual vocational factors such as age, education and past work experience, and then to evaluate how and to what extent these factors may limit the range of work an applicant can be expected to perform.

In brief, the assessment of eligibility for cash benefits in all countries focuses on the severity of the work disability. And the assessment encompasses the varied elements of work disability: the severity of the applicant's impairment, the tasks of work he or she can reasonably be expected to do, and his or her ability to perform those tasks. In each country's system, a particular individual may need and qualify for earnings replacement income and also be a good candidate for rehabilitation services. But the assessment of eligibility for the two kinds of interventions necessarily differs.

The statutory definition of work disability for Social Security benefits is both very strict and quite generic. The exact rules for implementing it are spelled out in regulations issued by SSA. The regulations are updated periodically and any changes in regulations are subject to public review and comment before they become final policy.

Because the statutory definition is generic, its application in regulations can and should be updated over time to reflect changes in the broader society that have an impact on the nature of work disability -- such as new disabling diseases, new treatments for existing conditions that make them less disabling than in the past, and environmental changes in the nature of work, the tasks that constitute work, and the skills required to perform those tasks. Key concepts defined in the law are discussed below.

The law defines work disability generically as inability to engage in any substantial gainful activity (SGA). The law does not further define SGA, but specifies that the executive branch should prescribe criteria for determining when services performed or earnings derived from services demonstrate an individual's ability to engage in SGA.

The definition of work disability takes account of vocational factors and uses a national economy test. It asks whether applicants, given their age, education, and work experience, can do any kind of work that exists in the national economy, which is further defined to mean work that exists in significant numbers in the region where the applicant lives or in several regions of the country. Because disability is defined in relation to the demands of work, the nature of what constitutes work disability should change as the nature of work changes. Further, the law recognizes that individuals' educational attainment and transferable skills influence what they can do. As educational and skill requirements of jobs change, the evaluation of the interaction between impairments and the ability to do jobs that exist in the national economy should also change.

The Social Security Act specifies that a medically determinable physical or mental impairment that is expected to last 12 months is necessary, but not sufficient, for a finding of work disability. The condition must be considered to be directly related to the person's inability to engage in SGA. According to the law, it also must be demonstrable by medically acceptable clinical and laboratory diagnostic techniques.

These elements of the statutory definition of work disability in the Social Security Act are brought together as follows:

• Disability means inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months;
• An individual shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education and work experience, engage in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists in the immediate area in which he lives, or whether a specific job vacancy exists for him, or whether he would be hired if he applied for work.
• "Work which exists in the national economy" means work which exists in significant numbers either in the region where such individual lives or in several regions of the country.

"A physical or mental impairment" is an impairment that results from anatomical, physiological or psychological abnormalities which are demonstrable by medically acceptable clinical and laboratory diagnostic techniques.

• The Commissioner of Social Security shall by regulations prescribe the criteria for determining when services performed or earnings derived from services demonstrate an individual's ability to engage in substantial gainful activity. ⁽²⁾

A five-step sequential process is used to determine whether an applicant for Social Security disability benefits meets the definition of work disability in the law. The sequential process is spelled out in regulations and is illustrated in figure 5-1. Each step in the sequence poses a different question about the nature of the disability. At each step a decision is made either to allow or deny the application or to move on to the next step.

• Step 1 asks, "Is the applicant is engaging in SGA?" If so, the application is denied.
• Step 2 asks, "Does the applicant have a severe impairment?" If not, the application is denied.
• Step 3 asks, "Does the applicant have a medically determinable impairment that meets or equals the medical listings?" It refers to listings in regulations of over 100 medical conditions that are considered to be of such severity that the condition can be presumed to constitute work disability. ⁽³⁾ At this step, SSA draws on medical evidence from treating sources or a consultative exam (by a physician paid by SSA) to document the existence, severity, duration and prognosis of the person's impairment. If the applicant's condition meets or equals a listed condition, benefits are allowed. If benefits are not allowed at Step 3, the sequential process calls for an assessment of the person's residual functional capacity (RFC) to do various kinds of work activities.
• Step 4 asks "Does the impairment(s) prevent doing past work?" The applicant's RFC is compared with functional capacities required to do his or her past work. RFC is classified mainly in terms of the exertional demands of jobs. The current RFC assessment produces a finding that the person is capable of sedentary, light, medium or heavy work. That capacity is then compared with the person's prior work experience to determine whether he or she can do work at the exertional levels required by past work. If the person can do past work, the application is denied. If the person is unable to do past work, the assessment goes to Step 5.
• Step 5 asks "Does the impairment prevent doing any other work?" Applicants' RFCs are considered in conjunction with their age, education, and work experience to determine whether they can do any other work that exists in significant numbers in the national economy. Their age, education and transferable job skills are taken into account to determine whether they have the residual capacity to do kinds of work they have not done before.

For persons with solely exertional impairments, the assessment of ability to do other work is aided by the "vocational grid," which was codified in 1979 regulations and has not been updated. The grid dictates a decision about work disability (and eligibility for benefits) based on the person's age, education and transferable skills, in conjunction with his or her RFC to do sedentary, light, medium or heavy work. If the person is found able to do other work, the application is denied. If not, the application is allowed.

For persons with impairments other than exertional ones -- such as cognitive, emotional, sensory, postural (stooping, crouching, kneeling) or environmental (inability to tolerate fumes, dust, noise) impairments -- the grid does not apply. It is to be used, however, as a "framework" for evaluating the person's ability to do other work. If the grid does not apply, opinions of vocational specialists ⁽⁴⁾ or vocational experts ⁽⁵⁾ can be used as evidence that there are, or are not, jobs the particular individual can do.

In evaluating the five-step sequential process used to determine which applicants for disability benefits meet the Social Security Act definition, the Panel finds at least four objectives to be traded off against each other:

• the accuracy of the assessment of an individual's work disability (validity),
• the consistency of these assessments across deciders (reliability),
• the perceived legitimacy or credibility of the criteria as viewed by applicants and the public (credibility), and
• the capacity of the system to produce reasonably prompt and low-cost decisions (administrative efficiency).

Using these criteria, the Panel evaluated the sequential determination process and the role of medical evidence, functional assessment and the vocational factors -- age, education and work experience -- in that determination process.

The Sequential Process

Each step in the five-step disability determination process requires a progressively more in-depth, detailed and individualized assessment of the applicant's ability to work. As such, the sequence as a whole seeks to achieve administrative efficiency by allowing or denying applications at early steps in the process when that can be done with acceptable levels of validity, reliability and credibility.

Steps 1 and 2 are used only to deny applications. They are used to screen out cases that would ultimately be denied, and to do so promptly, to avoid the administrative burdens, costs and delays that applicants, disability adjudicators, private physicians and others experience when asked to provide medical and other evidence needed to make determinations at later stages in the process. As such, both steps rank high on administrative efficiency in providing prompt, low-cost decisions.

Step 1 ranks high on validity, reliability and credibility. If the applicant is engaging in SGA, that is prima facie evidence that the person has the capacity to do so (validity). SGA is measured as a test of monthly earnings, which can be measured with consistency (reliability). And the fact that one is working is easily understood to be evidence of ability to do so (credibility).

The measure of earnings that constitute SGA takes into account certain impairment-related work expenses or employer subsidies. These expenses or subsidies are deducted from earnings when determining whether a given level of work effort constitutes SGA. In order to maintain the validity and credibility of the SGA standard, the Panel is recommending that the level of earnings that constitutes SGA be updated and automatically adjusted to keep pace with the economy (see chapter 9). With these changes, the Panel finds that the SGA test is an appropriate first step in the determination of work disability.

Step 2 also ranks high on administrative efficiency. This step avoids the need to develop medical evidence and conduct a nonmedical functional assessment in cases where the person is out of work for reasons other than disability, such as unemployment or the person's choice not to work.

Step 3 is the first step at which benefits are allowed. At this step, the medical listings are used as a proxy for work disability. They are used to presume that an applicant whose condition meets the medical listings meets the statutory definition of work disability.

The presumptive validity of the listings is supported by the context of their use. Benefits are allowed at Step 3 if and only if the presumption of work disability based on the severity of the applicant's impairment is corroborated by other circumstantial evidence. In the case of Social Security disability insurance (DI), the presumption of work disability at Step 3 is buttressed by the following findings:

• the person has significant and recent employment prior to the onset of the disabling condition (as shown by meeting insured status requirements, which is ascertained before the disability assessment begins); but
• the person has not been engaging in SGA for at least five months (Step 1); and
• the person has applied for benefits that generally amount to less than half of his or her prior earnings from work; and
• the person has a severe medical condition that is expected to last at least a year or result in death.

Only when all these conditions are met are DI benefits allowed based on the presumption that an impairment that meets or equals the medical listings constitutes work disability.

The use of the medical listings as a proxy for work disability has several advantages. The listings promote administrative efficiency because medical assessments are more readily available than functional assessments of ability to work. If properly constructed, medical listings criteria should be reliable and credible. They are based on consensus medical opinion and are defined, insofar as is possible, in objective terms. Because the listings are used to presume work disability, they are and should be set at a high threshold of impairment severity to achieve validity. They are designed only to answer the question, "Is this applicant highly likely to meet the statutory test of disability, without further inquiring into vocational issues?"

In the Panel's view the continued use of the medical listings approach is sound adjudicative practice. As discussed further below, however, we believe that further work needs to be done to ensure that the listings measure equivalent severity of presumptive work disability across body systems and that they are kept current in relation to medical practice and the demands of the work place.

Medical Evidence Is the Foundation of the Disability Assessment for Social Security Benefits

Some have questioned the reliance on medical evidence to establish work disability, which by its nature is a functional rather than strictly a medical construct. The Panel finds nevertheless that medical evidence has many valuable properties in assessing work disability for Social Security benefit purposes. The Panel recognizes the value of "demedicalizing" disability assessments for other disability-related purposes, such as to allocate nonmedical goods or services (see box 5-2). However, for the purpose of assessing work disability for Social Security benefits, the Panel believes that any attempt to shift to a purely functional assessment would be a mistake -- indeed a virtual impossibility for the reasons outlined below. At the same time, functional assessment is a critical part of the disability assessment.

Medical evidence often is functional in nature. For example:

• Treadmill tests are used to measure cardiovascular functioning under work-like exertional conditions; and ejection fraction tests (the proportion of the volume of the left ventricle that is ejected when the heart pumps) are used to measure the heart's functional efficiency.

• Exercise tests are used for respiratory conditions to measure respiratory function similar to treadmill tests for cardiovascular conditions.
• Range of motion tests are a form of functional assessment of musculoskeletal conditions.
• Diagnostic tests that include medical evidence of functioning and symptomatology are used for many mental disorders.

Medical evidence is often essential to establish the prognosis and duration of a particular disease or impairment. If a condition has a very poor prognosis, it would be inhumane to delay a finding of work disability until an individual actually experienced the kind of functional loss that would show up on a solely nonmedical functional assessment. Examples of such a condition may include AIDS, neoplasms and other progressive diseases. If a person is not working and has a very poor medical prognosis, it is appropriate to allow benefits before the expected functional loss becomes evident in nonmedical terms -- such as debilitation or total collapse.

A related situation occurs when medical evidence shows that a health problem (such as certain cardiac conditions) would be exacerbated with high risk of catastrophic functional loss if the person returned to usual work activity. In such cases, the humane policy is to allow benefits based on medical evidence showing a high risk of catastrophic functional loss, rather than requiring the person to work until the catastrophe actually occurs.

Medical findings are necessary to predict the duration of a particular impairment. A nonmedical functional assessment is a finding established at a specific point in time. Because benefits are paid only for impairments expected to last a year (or result in death), medical evidence can show that the expected duration is likely to be met, without waiting until death or the required duration has actually occurred.

Evidence from medical sources enhances validity and credibility. Medical evidence can serve as a check on apparent functional limitations that might be motivational in nature. As such, it also lends legitimacy and public acceptance to the disability determination and the benefits that are paid. Assessments by medical professionals have credibility in the public's perception. While well-trained lay persons are quite capable of implementing rules and procedures to assess work disability in many situations, the medical component of the assessment is important for public acceptance that the judgments are valid and fair.

Evidence from medical professionals enhances validity, administrative efficiency and credibility in other ways as well. Over-reliance on evidence from nonmedical sources -- such as neighbors, supervisors or co-workers -- poses several risks: it may unduly burden the providers of evidence (a problem that has been raised by schools in the case of child applicants); it may weaken public acceptance that the evidence is, in fact, valid; and it may be viewed as an unnecessary violation of the privacy of the individual, whose disability application, at least arguably, is not the business of neighbors or others who may know the person. In some cases, evidence from nonmedical sources is needed. However, good reasons exist for allowing applications based on medical evidence when that evidence is sufficient.

Medical evidence can, in many instances, improve the consistency and reliability of decisions across decision makers. The use of medical criteria enhances objectivity and consistency through the use of scientific findings and by, in effect, borrowing the unifying tendencies of medical judgment that result from medical training and clinical practice. ⁽⁶⁾

Medical evidence is often more readily available than are nonmedical functional assessments. When it is available and is adequate for presuming inability to work, relying on medical evidence reduces burdens and delays for both applicants and adjudicators, thereby enhancing administrative efficiency (see box 5-3).

In summary, nonmedical functional assessments are an essential part of the full sequential determination process, the Panel believes that medical evidence is the foundation for assessment of work disability for cash benefits. A finding of a medically determinable impairment is required by the statute and it is important for the validity, reliability, credibility and administrative efficiency of disability decisions.

Functional Assessment Is Essential to Determine Work Disability When It Cannot Be Presumed

When medical evidence is not sufficient to presume that a person is work disabled, a functional assessment is needed to determine whether, in fact, the person is unable to engage in substantial gainful activity. To determine whether applicants can or cannot work requires assessing their residual functional capacity and comparing it with the demands of their past work. If unable to do past work, applicants' residual functional capacities are assessed in light of their age, education and work experience to determine whether they can do any other work that exists in the region in which they live or in several regions of the country.

Functional assessments have valuable properties with regard to the validity of disability determinations. They are an actual test of work disability, rather than a presumption of that finding. A finding of disability based on functional assessment is not a lower standard of severity. Instead, it is a different and more direct test of work disability (see box 5-4). At the same time, the validity of functional assessments depends on how closely the functions being assessed relate to the demands of work that exist in significant numbers in the national economy. As the demands of work change, the functional assessment of work disability needs to be updated.

Vocational Factors -- Age, Education and Transferable Skills from Prior Work -- Are Essential Elements of the Assessment of Work Disability

The law specifies that vocational factors -- age, education and work experience -- be taken into account when determining whether a person with a medically determinable impairment is, in fact, able to do his or her past work or any other work despite the existence of a severe impairment.

The Panel believes that age, educational attainment and prior work experience are critical to the validity of determinations about whether a person is functionally able to work despite the existence of a severe impairment. With favorable vocational factors -- such as advanced education -- a person can work despite quite significant physical impairments. On the other hand, with negative vocational factors -- such as advanced age, limited education and no transferable skills -- impairments that make workers unable to do the kind of work they have done in the past would constitute work disability.

As discussed in chapter 1, the prevalence of work disability in the general population as reported in household surveys rises sharply with advanced age. And the risk of work disability declines with advanced education (table 1-5). While those who report a work disability in household surveys do not necessarily meet the strict test of disability in the Social Security Act, the survey data show the strong connection between age, education and work disability.

The nature of a person's prior work experience is also critical in determining whether he or she can continue to work despite the onset of a significant impairment. The same impairment might constitute total incapacity for a whole range of jobs, yet not interfere with the ability to perform another set of jobs. Whether or not workers are able to return to their prior work has much to do with the nature of that work. If not able to do their prior work, their age, transferable skills (as measured by work experience) and aptitude (as approximated by educational attainment) are key factors in determining whether it is feasible or economically rational for individuals or for society as a whole to invest in retraining for new careers that require new job skills. ⁽⁷⁾

For these reasons, the Panel finds that vocational factors such as age, education and transferable skills from work experience are essential to the validity of the assessment of work disability (see box 5-4). It also believes that these criteria need to be updated as the tasks of work and skill levels required for work change.

Based on its evaluation of the SSA disability determination process, the Panel makes several recommendations for improving this process. Each requires targeted research in order to implement it.

Systematic Ways to Assess the Interaction Between Nonexertional Impairments and Vocational Factors are Needed

In response to long-standing concerns about the lack of consistency in disability assessment, SSA in 1979 published in regulations its vocational grid. The grid is used to determine disability based on the interaction between vocational factors and the applicant's residual functional capacity to perform various levels of work, which is defined in exertional terms -- sedentary, light, medium or heavy work.

During the last 15 years, disability applications based on nonexertional impairments have become more common. These include conditions such as cognitive, emotional, sensory, postural (stooping, crouching, kneeling) or environmental (such as inability to tolerate such conditions as fumes, dust or noise) impairments. For these conditions, the grid does not apply. Instead, regulations say it is to be used as a framework for evaluating the person's ability to work despite his or her impairment. According to SSA, disagreements as to when the grid applies, and the assessment of work capacity when it does not, are common causes for initial disability decisions to be reversed on appeal. ⁽⁸⁾

The obvious question is whether the reliability of decisions on mental and other nonexertional impairment applications could be improved by developing systematic criteria -- perhaps in the form of appropriate grids -- for evaluating the interaction of specific categories of nonexertional impairments and vocational factors such as age, education and work experience. While the Panel is not in a position to answer this question, it believes it is an important area for research and policy development at SSA.

Medical and Functional Criteria Should Be Periodically Updated to Take Account of Changes in the Environment

The definition of work disability in the Social Security Act is a dynamic one that can and should be interpreted in light of changes in the broader environment. Impairments that constitute inability to work should be expected to change gradually as medical and rehabilitation techniques change, new assistive technology becomes available and the nature of work changes. Advances in medical care include improvements in diagnostic abilities, as well as therapeutics, that may affect degrees of disability and other functional outcomes. As the Americans with Disabilities Act brings about a more accessible environment for persons with mobility impairments, those impairments may become a lesser barrier to work. At the same time, changing work demands may make cognitive or emotional impairments a greater impediment to work. Updates in the regulations -- the medical listings, assessment of RFC and vocational factors -- should be expected to gradually change to keep pace with the changing nature of work disability.

Categories of impairments that account for a significant portion of the disability rolls, or where rapid growth has prompted concern are good candidates for expert review to ensure that recent experience, new research and state-of-the-art knowledge are incorporated into the Social Security assessment of work disability. For example, the mental impairment standards have been in place for 10 years. It would be timely to undertake a full review of the mental impairment standards in light of recent experience and research in the professional mental health community.

The assessment of pain is an important element of disability determination for a range of musculoskeletal impairments. As required by Congress, SSA convened a Commission on the Evaluation of Pain, which reported in 1986, and a Committee on Pain and Disability of the Institute of Medicine, which reported in 1987. Both recommended research to develop pain assessment instruments, which has now been completed. ⁽⁹⁾ SSA should convene an expert group to determine whether and how to apply what has been learned to the Social Security disability determination process.

Criteria to Target Continuing Disability Reviews Should Be Refined

SSA's initial determination of eligibility for benefits also screens those allowed benefits according to their prospects for medical improvement. The screen is used to diary a date for a later continuing disability review to determine whether medical improvement has occurred. According to SSA, the screens currently used are poor predictors of medical improvement.

The Panel believes that research should be undertaken to refine these initial screens to more accurately predict cases where medical improvement is expected and set a date for subsequent review. That expectation should be communicated to the beneficiary when benefits are awarded to set the expectation for return to work.

The Panel is recommending a wholly new approach to linking beneficiaries with return-to-work services (see chapter 6). The cost effectiveness of this new approach rests on having reasonably valid criteria to identify and screen out beneficiaries who are likely to medically improve and regain the capacity to return to work without receiving services for which providers would be compensated under this plan.

Research Is Needed to Evaluate the Consistency of the Medical Listings

Experts on SSA's medical listings report that considerable variation exists among the medical listings for different body systems in terms of the severity of impairments that are presumed to constitute work disability. The medical listings for each body system -- such as musculoskeletal, cardiovascular, respiratory, or mental conditions -- have been developed separately over the years. The listings for each body system are updated separately, usually by convening medical specialists in that particular body system to develop criteria that are believed to constitute work disability. To date, no systematic research has been done to evaluate the consistency of the presumptions underlying the medical listings. The Panel believes that such research should be undertaken and that the Disability Evaluation Study being developed by SSA is an opportunity to do so.

In evaluating and updating the disability adjudication criteria, greater attention needs to be given to issues of specificity and sensitivity. In clinical practice, when a physician seeks to diagnose a patient's condition, specificity refers to the desire to avoid making a false diagnosis when the condition is not in fact present. Sensitivity refers to the desire to avoid missing the diagnosis of a condition that in fact exists. Whether the diagnostician is more concerned about making a false diagnosis or missing a true one depends on the seriousness of the condition and the dangers involved in treating it. For example, in diagnosing a condition for which open-heart surgery is the proper treatment, the physician wants to be very sure about the specificity of the diagnosis. On the other hand, when diagnosing the risk of a condition that poses great dangers for the patient (or to public health at large) and the treatment for which is relatively benign and cheap, such as preventive vaccine, the physician would emphasize the sensitivity of the diagnosis to ensure that all potential cases are treated.

In the case of Social Security disability determinations, the condition decisionmakers seek to identify is inability to engage in SGA because of a medically determinable impairment. The intervention it offers is cash benefits to partially replace earnings that have been lost for the duration of the work disability. Whether one should be more concerned about "false positives" (allowing benefits when the individual might, in fact, be able to work) or "false negatives" (denying benefits when the person is unable to work) depends on value judgments about the negative consequences of either type of error and the prospects for remedying it.

In the case of Social Security disability, inappropriate denials would mean that the individual would be without support from either earnings or disability benefits. In the absence of a generalized income support safety net, criteria causing wrong denials bring the risk of economic deprivation of those wrongly denied. These adverse consequences are partially mitigated by the ability to appeal the denial or to reapply for benefits.

Criteria that permit inappropriate allowances could result in unwarranted benefit expenditures and the loss of public confidence. These adverse consequences are mitigated to some extent by work incentive provisions that encourage beneficiaries to return to work despite the existence of their impairments. The risk of inappropriate allowances is also mitigated, to some extent, by other program design features that make benefits an unattractive alternative to work for those who can maintain their earnings despite significant impairments.

Given the cost of either type of error, it is clear that proper adjudication of disability applications has high social value. Research needs to be done to evaluate the disability adjudication criteria in terms of both their specificity and their sensitivity. For example, it is not known what proportion of individuals in the general population could meet the medical listings for a particular condition, yet are working, nor how vocational factors, such as age, education and work experience, or other environmental factors serve to compensate for or compound the work limitations posed by the medical condition. SSA's Disability Evaluation Study provides an opportunity to address such questions in a national probability survey.

The answers to these questions are important for various policy reasons. In particular, there should be some consideration of setting standards for sensitivity and specificity for the disability criteria; both for the medical listings in and of themselves and for the sequential process as a whole, which takes account of actual performance of SGA, residual functional capacity and vocational factors.

Research using data on actual work experience, in conjunction with medical and vocational characteristics -- such as age, education and work experience -- and individualized assessments of work capacity, could be used to evaluate the consistency of the medical listings across body systems and provide a systematic way to validate the criteria used to determine work disability for benefit eligibility. The Panel recommends that resources be devoted to the data collection and analysis necessary to complete such research.

1. F.S. Bloch, "Disability Benefit Claims Processing and Appeals in Six Industrialized Countries: Canada, Germany, Sweden, the Netherlands, Great Britain and the United States," Occasional Papers on Social Security (Geneva, Switzerland: International Social Security Association, 1994).

2. Sections 223(d)(1)(A), 223(d)(2)(A), 223(d)(3) and 223(d)(4) of the Social Security Act.

3. The other evidence that supports this presumption is discussed in the following section and in box 5-3.

4. Used by state agencies in initial decisions.

5. Used by administrative law judges at hearings on appeals of denied applications.

6. As greater reliance is placed on evidence provided by a claimant's physician, rather than on evidence from a consultative exam by a physician employed by SSA, there may be a need for more broadly educating the medical community about the kinds of medical evidence that is used to assess work disability.

7. Walter Oi observes that, in addition to the severity of the disabling condition, the disabled worker's expected remaining working-age years -- which are a function of the age at onset, expected duration of the condition and its impact on life expectancy -- are key determinants of whether it is economically rational for the individual or society at large to invest in training and return to work efforts for the individual. W.Y. Oi, "Employment and Benefits for People with Diverse Disabilities," Disability, Work and Cash Benefits, J.L. Mashaw, et al., (eds.) (Kalamazoo, MI: W.E. Upjohn Institute for Employment Research, forthcoming).

8. Social Security Administration, Deputy Commissioner for Finance, Assessment and Management, memorandum, "The Disability Hearings Quality Review Process," October 17, 1994.

9. U.S, Department of Health and Human Services, Report of the Commission on the Evaluation of Pain, (Washington, DC: U.S. Government Printing Office, 1986); M. Osterweis, A. Kleinman, and D. Mechanic, (eds.), Pain and Disability: Clinical, Behavioral and Public Policy Perspectives (Washington, DC: National Academy Press, 1987); K.S. Rucker, et al., "Final Report on All Aspects of the Pain Assessment Instruments Development Project," unpublished paper, Virginia Commonwealth University, Richmond, VA, 1994.

Ms. OWENS. Then finally, there are other remedies, and this Congress did, in Public Law 106, introduce a demonstration project where Social Security could test return to work tracks. They are doing a demonstration of a return to work track so that applicants can choose a track, rather than benefits and get temporary benefits and health care benefits, and so forth. We need to look at the results of that demonstration to see if that does give us more information on making change. Thank you.

[The prepared statement of Ms. Owens follows:]

Chairman SHAW. I was just inquiring how many pages those chapters were.

Ms. OWENS. I didn't read them.

Chairman SHAW. Thank you. Dr. Growick.

Dr. GROWICK. Thank you, Chairman, and good morning. It is still morning. I will try to be brief, respect your time. I am Bruce Growick, from Ohio State University, where I train rehabilitation counselors, case managers, the very people that work for insurance companies like Unum helping individuals with disabilities go back to work.

I am also the past Director of the Rehabilitation Division of the Ohio Bureau of Workers' Comp, and Workers' Comp in Ohio is somewhat unique in that it is an exclusive State because we have primarily a State fund that runs worker comp, analogous to the Social Security Administration in the way in which it collects premiums through payroll deductions and protects people against disability.

Over the last few years, the rehabilitation services in Ohio and the Bureau of Workers' Comp have been deregulated and vended out to rehabilitation case managers, the students that I teach and our graduates, much like the private insurance company, to very good results by the way.

I am also a past President of the International Association of Rehab Professionals. We have about 3,400 members all over the country and elsewhere who do this very thing in terms of helping individuals with disabilities go back to work.

Lastly, if that isn't enough, I am also a Vocational Expert for Social Security, and I have been doing that for about 14 years, and I have sat in probably over a thousand disability hearings. So, I actually have been in hearings, the last adjudicatory step in that five-step sequential process where individuals actually have to come in before an Administrative Law Judge and demonstrate the fact. If they don't meet the list, they have functional limitation severe enough, according to the medical evidence, that they can't do any of the jobs that are described in the DOT, that Dictionary of Occupational Titles, which is really our source document that the Labor Department produces. It is from that experience that I provide the following remarks.

My basic concern is that the Social Security Administration, from all of my readings and all of my experience, is centered on benefits rather than services, and there is really a disconnect between having individuals go before a system, a rather complex and lengthy system, prove disability, all the while they are not receiving, many of them, the appropriate services to go back to work, which is the antithesis of what the insurance companies do.

Now, if you run the Social Security Administration like an insurance company you would want to address the claimant with a claim for disability while providing them with the appropriate services. Unfortunately, that is not happening to a tremendous degree. As a matter of fact, when I was first hired as the VE, Vocational Expert, for Social Security, I was specifically told that I was only there to provide an opinion, to opine on whether that individual can go back to work as they currently are, not consider rehabilitation at all, and that disconnect continues to exist.

The disconnect is really, I think, one of the major issues, and obviously it is a very complex problem that we are dealing with, is a very major issue inasmuch as you need to create some systemic changes across the Federal Government leaping from one agency to another. The Ticket to Work is an excellent start. I had the pleasure, thanks to you, 5 years ago, to testify in front of this Committee and we did get the Ticket to Work law passed. Unfortunately, a ticket to work happens after the claimant has already been granted disability. As mentioned by the Director of the Council that was created, many of our constituents, the individuals who apply for disability, don't understand why they have to go through this lengthy process and all of a sudden they get a ticket. The rehabilitation has to start up front. That is the basic premise of the industry we are in, the field. Rehabilitation services need to be provided early.

The insurance company has done loads of studies showing the benefit-cost analysis of providing those services. Return on investment, anywhere from $8 to $25 on each dollar spent. The insurance companies would not be doing what they are doing if it wasn't smart practice, and that is in part what the Social Security Administration needs to do.

I applaud you for trying to look at the definition of disability, the front end of the process, and one of my major suggestions in my written testimony is that the evaluation process for eligibility should also consider something for feasibility. There is a slight difference, and I don't want to try to become too academic, but the difference between eligibility and feasibility, eligibility from a legal standpoint you are eligible for benefits, which is quite different to say that you have residual capabilities and you are feasible for return to work, which is what the 3,400 members of our international association do. They help individuals with all the brand new technology, with the benefits of the Americans with Disabilities Act and everything else to return to work.

So, my recommendation is that up front you should have feasibility as well as eligibility. You might want to look at time limited benefits. The horse is already out of the barn, so to speak. Once a person has been granted disability the Federal Government tells me I am permanently totally disabled, end of story. I am receiving my benefits.

Unfortunately, now, one last recommendation is that you do have the reauthorization of the Rehabilitation Act coming up next year, and I also had the opportunity to testify in front of the Work Force Development while that was -- the Rehab Act was part of it. My recommendation is somehow take a look at what is happening with reauthorization of the Rehabilitation Act, the State-Federal system, combining those sources with Social Security in some way.

The other recommendation is the new office in the Labor Department. The President's Committee on Employment of the Handicapped was moved over to the Labor Department. The Labor Department started, the very first time, with a lot of promise in terms of returning individuals to work. I think as you look at the Social Security system, including the definition of disability, you should look at leveraging what you are doing there with what other governmental agencies are doing so that you don't have these separate silos, as we call it in the Midwest, these resources that are not talking to one another and are not working together. Thank you very much.

[The prepared statement of Dr. Growick follows:]

Chairman SHAW. Thank you. Dr. Blanck.

Mr. BLANCK. Thank you, Mr. Chairman, for the opportunity to be here. I am also from the Big 10 like Bruce, except instead of being a Buckeye I am a Hawkeye. I am principal investigator on the large project funded by the National Institute for Disability Rehabilitation Research and a Member of the President's Committee on Employment of People with Disabilities and have been asked to speak on one very focused point, and that is that, as has been brought out today in the testimony, that the definition of disability under the DI programs as compared to the Americans with Disabilities Act they serve different yet important complementary national policy goals.

Now we have heard testimony about the definition of DI and the incapacity to work. The ADA in contrast, we should be clear, is to encourage work. It seeks to eliminate discrimination against individuals with disabilities. The law defines, as you know, a physical or mental impairment that substantially limits a major life activity, but to be covered under the ADA the individual does not have to be totally unable to work. As a matter of fact, a person who is qualified to work often works with the provision of reasonable accommodations, and studies that I have done and studies that have been done at UnumProvident have shown really important cost effective benefits to employers accommodating workers with disabilities in the workplace and getting them back to work.

So, there are different statutory purposes of ADA and the DI program. Primary among these differences is that when an individual is disabled for purposes of the DI programs it does not take into account the possibility of reasonable accommodation. So, since I am the last to go today, I will summarize briefly my opinions in this area and then perhaps give a longer time for questions to the Committee.

Number one, a person with a medical condition obviously may be entitled to disability benefits under DI and still be a qualified person under the Americans with Disabilities Act, and that is simply because the person can perform particular job functions in a particular job perhaps with reasonable accommodations.

Number two, a person may qualify for DI benefits on the basis of these regulatory presumptions, this five-step process we have heard about, that he is not able to work, and this may be true, even though that individual could return to work in a particular job with reasonable accommodations, and therefore these regulatory presumptions that I think has been brought out by the testimony of the UnumProvident doctor are really not related to a definition of who is a qualified individual with the disability for purposes of the ADA.

Third, I think importantly, because as has also been brought out, disability changes dramatically over time in terms of severity and time. A person who is qualified to work today who perhaps is discharged in violation of the Americans with Disabilities Act can nevertheless become increasingly disabled and then appropriately receive disability insurance benefits.

So, finally, for these reasons, the one point I have been asked to talk about today is that let's not confuse the definition of disability under the Americans with Disabilities Act with definitions under the DI programs. The ADA is much more specialized. It is on a case-by-case basis. Perhaps it is a model for some of the reasons we have heard today about how to think about new concepts of the definition of disability under DI programs. Certainly, and I think my views, by the way, have been endorsed by the U.S. Supreme Court in the 1999 Cleveland v. Policy Management case, where they unanimously said these same sorts of points, that both of these definitions, can comfortably co exist. The DI definition, to advance the national goal of returning people to work primarily by providing monetary support and insurance, and the ADA independently is to prevent discrimination on the basis of disability in the workplace. Thank you, Mr. Chairman, and I look forward to your questions.

[The prepared statement of Mr. Blanck follows:]

Chairman SHAW. Thank you very much. This has been very insightful. I was just asking Kim Hildred, our chief staff person here, as to when is the last time other than the Ticket to Work that Congress really took a close look at that and she said 1984. So, I guess we are just as guilty as the SSA of using 1991 job descriptions. So, I think that there is an awful, awful lot that we have gained today and learned today from all of you witnesses.

Dr. Growick, I would like to thank you publicly for your input with regard to the Ticket to Work legislation, which is something that as Chair I am very proud of and I am sure every Member of this Committee is very proud of as well as our staff. Your input and contribution to that was great. Mr. Becerra.

Mr. BECERRA. Thank you, Mr. Chairman, and I appreciate the comments of all the witnesses. Let me see if I can try to condense the various questions that I have in my mind so I can try to do it all in 5 minutes and get some thoughtful responses.

What I hear you all saying is that we should try to restructure our view of the disability insurance program so that we are not just trying to give someone something for a disability and treat them as if they can never get back to being functional, but to try to help them, if possible, get back to a stage where they are functional and therefore self-sustaining. If that is our course, it seems that what we are going to probably find is that a lot of these individuals can probably return to some state of functionality, but will require quite a bit of assistance, treatment, modalities that are out there these days, the automation that is out there to try to help them.

Who would be responsible for the cost to providing that? If I could ask you to be brief in that because I can then follow up with some other questions. Who would take on the responsibility for that individual to cover the cost of the treatment, the program, the equipment that would be necessary?

Mr. SEIFERT. If it didn't fall to their private insurance, and some private disability and health insurance companies do provide those types of services and technologies, then it would have to fall to the government. We are talking about incredibly expensive technologies that are quite beyond the means of a person whose income is diminished by disability or, in the event that they are still working to some degree before maybe filing for DI, is somewhat diminished from where it was. So, but again it is an individualized thing.

Mr. BECERRA. So, if there is no private insurance then you are probably looking at the government to cover the cost?

Mr. SEIFERT. More than likely, and like you said, it all comes down to the money. If the government doesn't pay for the assistive technology, then it will pay for the benefits. So, it just depends -- if Medicaid pays for the specific technology and the person doesn't come under Social Security, well, then you have saved on one side but you have spent on the other side.

Mr. BLANCK. There is another area, too, and that is tax incentives and tax credits to employers to provide many of these accommodations, which often are expensive but often are rather modest in price. In Iowa we have passed legislation which we are quite proud of, maybe other States have it as well, to have a tax credit for small employers who employ people with disabilities who need these sort of assistive technologies. It is a nice way to get people back to work, to encourage cost effective strategies for employers, and to remove it out of the governmental insurance system as well. It is a win-win for everybody really.

Ms. OWENS. I want to make one point. I think that there are certain people of working age for whom these additional services and benefits will make a difference and will return them to work. It is also important that there be a baseline program for people to have wage replacement. There are a certain number of people who cannot go back to work and need to have that baseline program. Perhaps that didn't come out clearly in my statement.

When you are looking at that other group of people, one of the things we have heard is that there are a lot of programs available within the government that aren't integrated. I think Mr. Gerry mentioned that and I think we need to take a look at that. How do we integrate those programs and be sure that the goals are the reintegration of people who can be back into society.

Dr. ANFIELD. I would like to raise two points that I think are suggested in the testimony that I provided. One is the recovery rates for our long-term benefit claimants who also receive SSDI benefits are considerably higher than Social Security, and the other is since implementing the more rigorous stewardship of the experience, investing in the resources that I have described, my company has achieved a rate of recovery that is 30 percent higher than the industry average. This has been demonstrated through the mergers of three companies and thus is a proven model.

Mr. BECERRA. Dr. Anfield, a quick question to you, and maybe you can provide something in writing if you don't have a response that you can give orally. Has there been a comparison made between what private insurance offers in terms of both the rehabilitative assistance or other opportunities to try to get back to work along with the cash benefits for the disability and compared that to what SSDI provides and so you have a good comparison?

The other part is the clients that you have versus the clients that SSA gets. I would imagine that for the most part SSA is going to get the folks who don't have the wherewithal or didn't have employers who offered disability insurance, so they're going to have a universe that is going to be a lower income, a more modest income than some folks that you have been able to provide assistance to. Maybe I could ask you to do that just as a follow up, if you could do that.

[The information follows:]

Our company has not conducted any studies that compare the private insurance industry with SSDI in terms of rehabilitative assistance and benefit payments, but we believe the General Accounting Office has recently completed such a study that the Subcommittee may find helpful.

UnumProvident and SSA share common claimants. About 86 percent of all Unum, Provident, and Paul Revere Long Term Disability claims beyond 3 years have SSDI offsets. In the second quarter of 2002 the average monthly gross benefits (UnumProvident + SSA benefit) for recovered claims receiving an SSDI offset was $1,746 (thus, the average annual income on which wage replacement benefits were predicated is approximately $33,000). Our recovery rate demonstrates the effectiveness of our return to work model: It was 5.3 percent in 2001 compared to 3.2 percent in 1999 (the year of the merger between Unum and Provident). The SSA has previously reported its SSDI recovery experience at a rate of one-half of one percent.

Mr. BECERRA. Mr. Chairman, if I could ask one last question of Dr. Blanck.

Chairman SHAW. Go ahead.

Mr. BECERRA. Dr. Blanck, you mentioned reasonable accommodation, and ADA provides that, and I think that has worked tremendously well. Reasonable accommodations for the most part requires the employer to make the accommodation at the employer's expense?

Mr. BLANCK. Right.

Mr. BECERRA. If we are now looking at the possibility of DI, disability insurance beneficiaries into a workplace setting again, reasonable accomodation, are we still assuming that the employer covers the entire cost of that accommodation? Are we looking to now have the individual, the government providing the disability insurance to do that? How do we do it because I suspect that the accommodations that would be required for some of the folks that would be receiving disability insurance would be greater, and that I would think would impose a heavy burden on the employer to try to accommodate that individual?

Mr. BLANCK. That is quite right and I think that is a very astute point. There needs to be a partnership clearly. This is a study for GAO to look at the net return of X numbers of thousands of dollars that the government might provide for an accommodation with the extended work life of that particular individual, and I think that strategy, combined with tax credits, is a very powerful strategy. I mean employers need workers. They need workers in our knowledge-based setting. It is clearly increasingly people with disabilities work in knowledge-based jobs. We are moving away from our manufacturing sector, and a partnership of that sort would be very effective. You are quite right, under the ADA the employer is obligated to bear the cost of that typically.

Mr. BECERRA. Thank you all for your testimony. I think it is enlightening and I hope it spurs us to move in a positive direction. I am not sure what direction that is because, as I said, I have some trepidation about where it takes us if we are not willing to put the money behind what we say, but I thank you very much. Mr. Chairman, again thank you so much for having these three hearings. It is great.

Chairman SHAW. Just for your information and the information of the people here, the General Accounting Office is doing a certain amount of research and they are going to report back to us on what is the effectiveness of some of these incentive plans that are out there, some programs that will give us some guidance. Mr. Hulshof.

Mr. HULSHOF. Thank you, Mr. Chairman. I want to echo what Mr. Becerra said as far as the series of hearings we have had, especially even today. With one, only one, exception, everybody has been really focused on the topic at hand. This has been really so fascinating I guess to us as a Subcommittee, if we could somehow trumpet in a national town meeting that is televised, I mean these sort of issues, because I really do think that we are on the cusp of some significant changes and you all have addressed them. It also raises the challenges that we face, and that is what if we, Congress, could enact policy in a vacuum? Where would we go? Mr. Becerra has mentioned trepidation.

My friend Mr. Pomeroy from North, by gosh, Dakota as he says, mentioned quandary of the policy. Mr. Seifert, you mentioned policy changes. Here we have had this program that has been very successful, but it has been primarily a safety net to provide cash benefits for individuals who can't work, and then we are trying to focus now on shifting that program to returning to work, as Ms. Mitchell is nodding back there.

We talked about early intervention and, Dr. Growick, as you said very eloquently, we are moving in a direction that we can provide rehabilitation services in an earlier fashion. We have got assistive technologies. I mean, what a dynamic area this is. What is the right policy and that of course is, as you mentioned, somewhat academic exercises of policy. Then when you add the politics that we deal with, and I mentioned Dr. Growick, just, you know that, Mr. Chairman, when you came to my district and we had convened a field hearing, we were greeted with protesters as you remember. Whether it is time limited benefits, which is an intriguing idea, but, boy, think of the politics there.

Mr. Seifert, you mentioned in your testimony support raising substantial gainful activity level for non-blind disabled individuals to the same level as those who are blind. Boy, there is a political issue. My constituents back home are still wondering why I haven't gotten on certain pieces of legislation to support the blind and raising it and tying it back into certain Social Security levels.

So, you have got the policy and the politics, and then we have also heard today from -- the challenges of implementation. We have heard from both SSA. We have heard from GAO, even these great ideas and great legislations that were enacted in 1999, and we still are talking about how do we make it work. So, again, I think it has just been fascinating.

Let me zero in because I also have limited time. Mr. Seifert, just a couple of things. Specifically, a point that I find you made that is very well taken, and that is the sliding scale. I have a very active disabled community back home in Missouri, specifically in Columbia, Missouri, my home. This whole cash cliff or income cliff, which, when we talked about this and we now have this demonstration project, the sliding scale. I am going to ask you to be a devil's advocate. Can you think of any reason why we should not make this demonstration project the law of the land? I mean, can you think of any policy reason or political reason why not to have the sliding scale? Because I, from day one, I know we had to do the demonstration project, but from day one it seemed just that the policy should be, you know, when we have this Ticket to Work, that we should make this not just a demonstration project but it should go across the country. Are there any arguments against making the demonstration project uniform?

Mr. SEIFERT. There are some who would perceive that a sliding scale on the DI benefit would fundamentally change it to a partial disability program and would entice people to apply. That is the argument that is advanced by some people. It is a facetious argument, but the people who make it happen to be actuaries who score it and they score it high, and so consequently we don't have it. It was probably the one biggest thing, of all the things we did in the Ticket to Work, that we did not fix, I mean, we crossed several jurisdictional boundaries in this Congress. It is implemented across several departments of the Federal Government. It was a huge piece of legislation. It enjoyed wide bipartisan support.

The thing we didn't do in that bill was eliminate the SSDI cash cliff. We didn't do it because a couple of actuaries said it might cost a lot of money, offering not a shred of proof, with no evidence. In fact, from my understanding with some experience in the private sector, quite to the contrary, there is evidence that it would in fact save money. Other than their concerns, I can think of no reason not to do that then.

Mr. HULSHOF. Well, again, I just thank each of you for the contributions you have made and the series of hearings has been quite enlightening and also pointing up , though, the challenges we continue to face, especially in this dynamic area of trying to help people return to work. It is not often, as I have said several times, it is not often that we have a group of individuals across the country who come to us to Congress and say we want to be taxpayers and yet this is the group that, as you know, the opportunity to work is a basic human dignity. I do agree that the Ticket to Work is a major step forward, probably the greatest thing since ADA, to help a segment of our population that is trying to become self-sufficient. So, with that, and seeing the red light on, Mr. Chairman, again my compliments on this series of hearings and thank the panels.

Chairman SHAW. Thank you. I would like to associate myself with the comment of Mr. Becerra and the comment that you just had with regard to the value of this hearing. We have got a system that is broken. We have got to do a better job. It is easy to sit up here and blame others, but Congress certainly is to blame. We have got a cliff. The Social Security is aware of that. It did say it was going to cost billions of dollars. Perhaps we should be a little more innovative with some tax credits or something if they lose all their benefits, and that is a big problem.

The fact that we haven't heard anything about job counseling at this hearing worries me. The fact that we don't have this program hitched up to rehabilitative services for those that require it is of great concern. I think we have a system now where we are just saying that all you have to do is continue to be a disabled person and not work and you will continue to get your benefits.

That echoes and rings a little bit like what we were doing before with welfare reform. We were paying people not to get married, have children, and not work. Believe it or not, that is exactly what a lot of folks did. In this situation we make it very, very difficult, and I am not drawing a parallel between this and the broken welfare reform bill, but we are making it very difficult for people to break out of this and try to -- we went a long way with the Ticket to Work. I think we do have to take another look at this and to be sure that some rehabilitative process is in place and is connected with this.

We have got so many people doing so many things in so many areas, and they never see each other. Whether we have it in the offices administering the Temporary Assistance to Needy Families payments or whether they are doing -- taking care of people that have been laid off and receiving benefits for a period of time. There are just so many people that are doing these things, and we don't seem to be doing anything in this area except just simply evaluating and sending out checks, and I think there is a lot more that we can do to help the people that we all want to help.

I want to thank this panel for coming. When you get back to Iowa, be sure to tell Marion and Charles that we asked about them. I have got to tell you, it is written here as if it is a witness. I know I have trouble with names, but this one is your fault. Thank you all very much. This hearing is concluded.

[Whereupon, at 12:40 p.m., the hearing was adjourned.]

[Questions submitted by Chairman Shaw to the panel, and their responses follow:]

1. The U.S. General Accounting Office (GAO) found that your agency is using outdated information about the types and demands of jobs in the economy when determining whether an individual is capable of doing other work—is this true?  What efforts are underway to address this?  Do you have research on the number and characteristics of individuals who might receive benefits if these criteria were updated?

Answer:

SSA uses the most up-to-date occupational information available when determining whether an individual is capable of performing work that exists in the national economy.  Although the job information contained in the Department of Labor's (DOL's) Dictionary of Occupational Titles (DOT) has not been revised since 1991, it remains the most up-to-date detailed description of occupational information available that matches with the level of analysis used in the current SSA disability determination process.

DOL has developed a new database system of occupational information, the Occupational Information Network (O*NET).  As required by the Office of Management and Budget, this system is based on the 2000 Standard Occupational Classification (SOC) system and contains information on approximately 950 occupational categories, as opposed to the nearly 13,000 separate job titles in the DOT.  DOL is currently collecting new data from current workers through a survey process.  It will take a number of years to update the entire database.  In the meantime, the occupational characteristics data in the current O*NET database are analyst ratings derived from analysis of the component DOT occupations.  SSA is continuing to use the data at the more detailed DOT level.  In addition, as DOL acknowledges, O*NET is not designed for use in adjudicative programs and, even when complete, it will not meet SSA's needs.  We have been working, and will continue to work, with DOL to address our occupational data needs, which require more detail on the physical demands of work, in order to compare it to an individual’s residual functional capacity

For the past couple of years, DOL and SSA staff have been working together with individuals from the private sector (e.g., vocational rehabilitation representatives and those of insurance industry workers' compensation programs) to develop approaches that will yield occupational data that we can use in our programs.  SSA's Associate Commissioner for Disability recently met with the Assistant Secretary for the Employment and Training Administration, the component in DOL that is responsible for the development of O*NET, to discuss how our Agencies can best work together to develop the occupational information and data that SSA needs.  Our staffs are currently preparing a white paper that will form the basis for cooperation in developing this kind of occupational data.

We currently have two other related projects:

1.  Job Demands: This is a Disability Research Institute (DRI) project intended to identify the physical and mental demands required to perform work.  It should result in more useful descriptors for jobs.  We plan to follow-up with another project to validate and calibrate job demands and to develop instruments for occupational analysis.

2.  Non-Medical Factors: This project is intended to assist SSA in updating its other vocational policies (i.e., not directly related to DOT/O*NET issues).  It began with a research contract to investigate the effects of age, education, literacy, and skills in terms of vocational capacity assessments.

We do not have information about the number and characteristics of individuals who might be affected if these criteria were updated.  That would depend on how the criteria are updated.

2. You mentioned in your testimony that you have begun looking at disability programs, including the definition of disability, in the context of other federal programs for individuals with disabilities.  What is the timeline for any action or results from this examination?  What role do short-term disability or partial disability, changes in work, medicine, and technology, and individual’s expectations play in this examination? 

Answer:

Work on developing the concepts for this project has just begun.  We are currently assessing what is known about public and private disability insurance program design and experience to construct a knowledge base for all aspects of disability insurance coverage and program provisions.  We intend to take a comprehensive look at definitions of disability from both the medical and functional perspectives, assess the potential of current technology in mitigating the disabling impacts of physical and mental impairments, look at issues related to personal motivations and incentives to work, and consider the private and foreign experience with short-term and partial disability benefits in the context of enhancing return to work efforts.  Since this work is just beginning, we do not have enough information as yet to set a firm timeframe for the completion of all the many tasks involved in an undertaking of this scope.  We will inform you as soon as a workplan is adopted for this project.

3. You stated in your testimony that SSA has formed a partnership with the Departments of Labor, Health and Human Services, and Education, as a part of the President’s New Freedom Initiative.  Would you explain this partnership, including its goals, the research SSA is undertaking as part of it, and its timeline for action? 

Answer:

There are several collaborative efforts underway as part of SSA’s response to the New Freedom Initiative:

• Department of Labor (DOL) Navigators:  SSA is collaborating with DOL, Employment and Training Administration, to conduct research into establishing within the State-operated One-Stop Centers a staff position that will provide employment services and expert information on SSA’s employment support programs.  This position in DOL One-Stops is tentatively called the Disability Program Navigator (DPN) or “Navigator.”  The Navigator would be responsible for addressing the needs of individuals with disabilities who are seeking training and employment opportunities by helping them access, facilitate, and navigate the various complex Federal, State, and local programs.  The demonstration of this position will be performed during fiscal year (FY) 2003 and FY 2004.
• Comprehensive Employment Opportunities (CEO) Demonstration: Under the leadership of Secretary Thompson, the Centers for Medicare and Medicaid Services is working together with other Federal agencies to offer States the opportunity to implement a comprehensive employment demonstration project.  The demonstration will use existing grant funds with pre-approved waivers and other resources to create a coherent package that addresses the major obstacles to employment.  The grant announcement for these demonstration projects will be published in early FY 2003 with projects beginning in the second half of FY 2003 and continuing for 5 years.
• Youth Employment Strategy: Under the New Freedom Initiative, the Departments of Education, Labor, Health and Human Services, and SSA have formed a working partnership to help children with disabilities who receive Supplemental Security Income (SSA's income assistance program) improve their economic status.  The four agencies will be pooling their resources to develop demonstration projects that would assist impoverished children transition from school to employment.  Pilot projects will begin in early FY 2003 and a general announcement of grant availability should be published in Spring 2003.  Projects would begin in late FY 2003 and continue for 3-5 years.
• Early Intervention Demonstration: SSA is also developing an early intervention demonstration project which would provide medical and other support benefits to individuals with disabilities before impairments become permanent.  SSA plans to use its demonstration waiver authority to offer certain applicants for disability benefits the option of choosing a cash stipend and return-to-work services in lieu of pursuing the benefits application with the goal of returning to work without coming on to the benefits rolls.  This project will take extensive time to plan and test operating procedures.  It is expected that the early test sites will be operational in late FY 2003 with full implementation of a large demonstration in 2005.

4. The actuaries tell us that beginning in 2008, the disability insurance (DI) program outlays will exceed income.  Are we to expect either a legislative proposal or a plan for changes that the agency will be making via regulation to address DI trust fund solvency?  When will it be ready? 

Answer:

DI trust fund solvency must be addressed within the context of the overall solvency of the OASDI trust funds.

5. You mention in your testimony that SSA plans on testing several models including such interventions as integrated service supports and collaboration with employers.  Also, you state that you plan to study the extent to which the listings are predictive of work ability.  Could you please explain these projects more?  What are the specific goals that you hope to accomplish with each? What is the time line for each project? 

Answer:

There are several research projects, highlighted under the response to question #3 above, that relate to our efforts to strengthen the links between SSA’s disability programs and employers.  The key to the success of these initiatives is the use of the Department of Labor’s One-Stop system to provide a single point of contact for information and access to all benefit programs and employment services available in each beneficiary’s community. 

In addition to the Youth Transition, Comprehensive Employment Opportunities, and Early Intervention demonstrations, mentioned above, SSA plans to conduct research into the potential for improvements in the treatment of serious mental illness, particularly mood (affective) and anxiety disorders, as a means of enhancing the independence and productivity of beneficiaries with these conditions and of reducing their dependence on disability benefits.  The research will be designed during FY 2003, and should be implemented in early FY 2004 and run for about 4 years with preliminary results available by FY 2006

The study on the extent of the predictability of the medical listings is under development.

6. To what degree do the Listings of Impairments take into consideration prescribed treatment, or the availability of assistive technology or advanced prosthetics in determining disability?  Recognizing these are clearly very difficult and complex issues, as many individuals simply do not have access to needed medicine or rehabilitation, are changes to the listings to address these issues being considered by SSA? How? 

Answer:

The design of the disability program limits the extent to which SSA might assess an applicant on the basis of anticipated benefits from medical treatment that has not been prescribed by the individual's treatment source(s), and that the individual has not undergone.  The law states that “Nothing in this title shall be construed as authorizing the Commissioner or any other officer or employee of the United States to interfere in any way with the practice of medicine or with relationships between practitioners of medicine and their patients, or to exercise any supervision or control over the administration or operation of any hospital.”  Social Security Act section 216(i)

However, program updates (i.e., revisions to the Listing of Impairments) do reflect advances in medical treatment and technology.  That is one of the most important reasons we periodically update these criteria.  Further, program rules require that we consider any benefits that individuals have received from medical treatment when making our disability determinations.  Finally, we do have rules and procedures for assessing whether an individual willfully fails to follow the treatment prescribed by a treating source and these rules preclude the payment of benefits for any individual who willfully fails to follow prescribed treatment.

7. In their testimony, GAO points out the need for SSA to reorient or change the direction of their disability programs from being centered on an inability to work to one focused on capacity to work with assistance given to promoting return to work.  Reorienting these programs, however, would raise a number of issues.  For example, would the definition of disability change, how would the programs' involvement with Medicaid and Medicare be affected, and would accessibility and costs of medical and assistive technologies outweigh the benefits?  Are you currently looking into these issues and how? 

Answer:

All of these issues are important in a comprehensive approach to the complex medical, functional, and behavioral aspects of disability and the programs affecting people with disabilities.  Addressing these issues will require coordinating the efforts of several federal agencies with responsibilities for these various programs and a commitment to resolving conflicts between the programs.  SSA is working with the Departments of Health and Human Services, Education, and Labor to create a comprehensive approach to all the needs of people with disabilities, their service providers, and employers through the One-Stop system nationwide.  Discussions are also beginning to address the housing and transportation issues unique to people with disabilities to further strengthen program and service coordination.

8. Some have suggested that SSA play a more active role in helping to provide vocational rehabilitation or employment support services for claimants, even before they begin receiving benefits, and providing time-limited benefits while individuals with disabilities are undergoing this rehabilitation.  Could you explain the process by which claims are now referred to a State vocational rehabilitation office?  Would you comment on the idea of time-limiting benefits for individuals who may be able to return to work quickly through rehabilitation, and the idea of linking the application for benefits with an automatic referral for vocational rehabilitation, as one of our later witnesses, Dr. Growick suggests?  What are your thoughts on providing additional employment support services early in the application process, or soon after receiving benefits?  What would you say are the pros and cons of providing these services?  What are your thoughts on allowing SSA’s disability program to provide more employment resources, much as the current welfare system operates?

Answer:

• Could you explain the process by which claims are now referred to a State vocational rehabilitation office?

The Ticket to Work and Work Incentives Improvement Act of 1999 repealed the mandated referral of applicants for disability benefits to State VR agencies.  SSA Field Offices and State Disability Determination Services (DDS) are discontinuing the referral of beneficiaries as the Ticket program is rolled out.  The referral process is no longer applicable in the initial 13 ticket States and will be discontinued in the remaining States as we phase in the Ticket program for those States.  The mandatory referral requirement will end nationwide by late 2003. 

For those States where the Ticket program is not yet implemented, the State DDS using criteria supplied by the State VR agency decides which applicants for disability benefits have rehabilitation potential and refers them to the appropriate State VR agency for formal evaluation.  This occurs at the same time that the DDS determines if the applicant satisfies the criteria for receipt of disability benefits.

• Would you comment on the idea of time-limiting benefits for individuals who may be able to return to work quickly through rehabilitation, and the idea of linking the application for benefits with an automatic referral for vocational rehabilitation, as one of our later witnesses, Dr. Growick suggests? 

The use of time-limited benefits may work well with applicants who are good candidates for participating in a return-to-work program and have a high probability of being ready to work within a relatively short period of time.  SSA is currently developing plans for a demonstration of early referral for rehabilitation and return-to-work services at the time of application for benefits.  For applicants who are judged to have a high probability of being awarded benefits and who appear to be good candidates for return-to-work services, current plans would let the applicant choose to put the application for benefits “on hold” in exchange for immediate referral and evaluation for services.  Participants would receive cash stipends during evaluation and receipt of services.  For rehabilitation attempts that are unsuccessful, applications for benefits would be “reactivated” without penalty.

As for automatic referral for rehabilitation services, we believe such a policy would be advantageous only for those with good rehabilitation potential.  Many applicants for disability benefits are too impaired and/or are of advanced age and are, thus, not likely to be able to participate in a VR program or return to work.  Also, since motivation to actively pursue a plan of rehabilitation is essential to successful completion of the plan, assessment of rehabilitation potential, including motivation, is an efficient means for allocating scarce rehabilitation services.  We believe the voluntary nature of the Ticket to Work program, combined with the Benefits Planning, Assistance and Outreach network of expert advisors, is consistent with this approach.

• What are your thoughts on providing additional employment support services early in the application process, or soon after receiving benefits?  What would you say are the pros and cons of providing these services?

U.S. General Accounting Office
Washington, DC 20548
August 20, 2002

The Honorable E. Clay Shaw, Jr.
Chairman, Subcommittee on Social Security
Committee on Ways and Means
House of Representatives
Washington, D.C.  20515

Dear Mr. Shaw:

1. We all know that quality research is one of the most important aspects in developing any policy, and especially in determining whether changes are necessary, which changes to make, and how to evaluate them.  Could you comment on SSA’s research plans regarding disability, including how effective it is, whether they are undertaking the research they should, and whether they are able to do this?

2. Given all the changes that have happened, and are expected to continue, in technology, medicine, and work, do you think the criteria to determine disability can keep pace with these changes?  If yes, how?  What changes would need to be made?

3. You mention that the updating of the medical listings was stopped in the early 1990s for a variety of reasons—including staffing resources and competing priorities.  SSA recently renewed efforts to update the medical listings, but the completion of the updates has been delayed.  Could you explain why these updates have been delayed again?  Would you expect more or fewer people to be considered disabled and eligible for benefits once all the listings are updated?

As SSA explained to us, SSA’s acting administrator approved the completion dates initially submitted to us for updating the Medical Listings.  When the new Commissioner was confirmed in November 2001, she subsequently reviewed the schedule and timing of revisions.  As a result of that review, according to SSA officials, the dates were revised (in some cases by less than a year).  We do not have information that allows us to assess whether the revised Medical Listings will likely lead to a greater or fewer number of persons deemed eligible for benefits.  Conceivably, some applicants whose severity no longer meets or equals the severity of conditions in the Medical Listings could still be allowed benefits under the decision making steps that follow the Medical Listings step; others may be denied benefits after completing these steps.

4. The SSA is faced with a potential problem about how to assess whether an individual would be able to perform any work—part of the criteria for assessing disability.  It now uses the Dictionary of Occupational Titles (DOT) to help assess whether an individual is able to work—but, this source has not been updated since 1991, and the Department of Labor does not plan to update it again.  Instead, they have created a replacement, called the O*NET—but this does not contain all the detail about the physical or mental demands of any particular job.  How would you recommend SSA address this problem?

5. Some have suggested that the $780 substantial gainful activity (SGA) amount for disability is too low to be able to provide an individual with any of the basic necessities, and that it should be raised to the level provided for individuals who are blind, which is $1,300.  What do you think is the right amount that an individual should be able to earn before he or she cannot receive benefits?

6. Do you think it is time to view disability in the context of short-term and long-term?  If so, why?  If not, why not?  What would be the drawbacks?

7. It is always helpful to get the perspectives on issues from the private sector.  In his testimony, Dr. Anfield provided some interesting recommendations based on his experience in the private sector.  His three key recommendations were:

-adopt benefits that emphasize a return to work (providing transitional work funding, partial payment and rehabilitation services);

-acknowledge that recovery is incremental (work with individual at every stage of recovery to determine the level of functioning); and

-offer expanded definitions of disability so that individuals can focus on becoming self-sufficient.

Can you provide your comments on each of Dr. Anfield’s recommendations?  Do you think these are valid recommendations?  Will they work?  If SSA adopts these recommendations into their policy, will claimants benefit?

Sincerely,

Robert E. Robertson
Director, Education, Workforce, and Income Security Issues

[1] National Academy of Social Insurance, The Environment of Disability Income Policy: Programs, People, History, and Context (Washington, D.C.:1996).  In 1996, the SGA level was $500 per month.

[2] U.S. General Accounting Office, Social Security Disability Insurance: Raising the Substantial Gainful Activity Level for the Blind, GAO/T-HEHS-00-82 (Washington, D.C.: March 23, 2000).

I am responding on behalf of the National Academy of Science’s Committee to Review the Social Security Administration’s Disability Decision Process Research. I should state at the outset that the scope of the committee’s inquiry and deliberations were limited to the contract mandate as specified by SSA. These were (1) to review the research plan, timeline, and all completed research projects for developing a new decision process for disability and offer comments and recommendations on the direction to the research; and (2) to review the scope of work for the disability survey in the request for proposals, and the design and content of the survey as proposed by the survey contractor and subsequent modifications made and make recommendations as appropriate. My responses, therefore, will be based on, and limited to, the committee’s deliberations in these areas of study.

The committee in its final report endorsed these concerns about disability policy and management that underscored the need for fundamental change in the Social Security disability programs. In fact, SSA also recognized these problems when in the early 1990s it decided to rethink and fundamentally redesign the disability decision process. At that time it stated that “the fragmented nature of the disability process is driven by and exacerbated by the fragmentation in SSA’s policymaking and policy issuance mechanisms. Policy making authority rests in several organizations with few effective tools for ensuring consistent guidance to all disability decision makers. Different vehicles exist for conveying policy and procedural guidance to decision makers at different levels in the process. “… the organizational fragmentation of the disability process creates the perception that no one is in charge of it. …” (Plan for a New Disability Claims Process, SSA, 1994).

After reviewing these concerns and based on its own assessment, the committee concluded that SSA desperately needs a long-term, systematic research program to inform and guide (a) the anticipated growth in demands on SSA’s disability programs, and (b) improvements in the disability determination process. For many years much of the research and analysis was in the same organization as program operations. Moreover in the past two decades downsizing adversely affected both the Office of Research, Evaluation, and Statistics and the Office of Disability Programs. It is critically important for research and statistics to be independent of the program operations in order to be able to rise above and beyond the immediate programmatic needs. At the same time the two organizations need to collaborate in identifying short-term and long-term research and analysis needs. In the past 2-3 years SSA has taken some steps to strengthen its research and statistics arm. Clearly much more is needed to meet the demands for research and statistics in the coming years. It should be noted here that most Departments of the Federal Government have these components separate and the committee hopes that SSA will continue to do so.

Therefore the answer to your question—Is the lack of research and basic analysis tools for disability a matter of priorities, a management issue, or a resource issue?—has to be all of the above.

Question 2: Your committee recommended that SSA improve its research in several ways, including (1) to develop criteria to measure performance, and evaluate the current processes and any proposed changes relative to these criteria, to assess rehabilitation and return to work decisions, and (2) to develop ways to incorporate external factors into the disability determination process and understand the effects of changes on the people they serve. If the agency were given the appropriate resources, does the committee believe that the agency is capable and willing to conduct this research, and conduct it correctly?

Yes, the committee recommended improved and enhanced research in several areas including the two specified by you. In its second interim report issued in the summer of 1998, the committee recommended that early in the redesign effort, SSA should specify how it will define, measure, and assess the criteria it will use to evaluate the current disability determination process, as well as any alternative processes being developed. As the committee explained, in any scientific process, the standards of acceptance or rejection are declared before, and not after, data are analyzed. Similarly in an evaluation research process, evaluative criteria and validation plans should be determined by the agency early in the research process, and not as planned at that time by SSA, after the prototype decision process is developed. In its concluding remarks the committee urged SSA to adopt a rigorous research design process to develop, early in the research, objective validation criteria and plans to be able to make the ultimate judgments on whether or not the proposed changes will yield the desired results.

Since then SSA has decided to give up the research for redesigning the disability determination process and informed the committee that it will undertake improvements within the current system and devote its attention at this time to updating the medical listings. The same issues regarding SSA’s research approach identified by the committee in 1998 appear to exist today, and in the absence of information to the contrary, the committee has assumed that the agency again has not conducted such baseline analysis leading to the current activities to improve the existing process incrementally.

Regardless of whether SSA attempts to redesign and develop a new disability determination process or leaves the current process in place and makes improvements within the individual components of the sequential process, it needs to establish objective measurable criteria against which the current process can be assessed. Studies should be conducted on the existing process and data analyzed in the context of the established criteria in order to identify the nature of the problems with the current process, and then evaluate the extent to which any proposed change would lead to improvement. As the committee has pointed out, without such a capacity proposals for reform may be proposals for change, but it is impossible to determine whether they are proposals for improvements of the present.

Moreover, throughout the documents relating to the redesign research reviewed by the committee, SSA appears to recognize the need to test the new disability decision process by applying standards of validity, reliability, sensitivity, specificity, credibility and flexibility, simplicity in administration, consistency, accuracy, timeliness, equity and fairness. Yet, to the committee’s knowledge no measurable criteria have been established to test the current and the new or updated components of the process along any of these lines.

The committee was encouraged to learn that SSA through its Office or Research, Evaluation, and Statistics awarded a cooperative agreement to the Disability Research Institute to undertake research for developing a process of validation of the Listings in order to assess them and to ensure that changes made actually result in improvements in the disability decisions. When the project is completed and implemented, it should help validation efforts for future revisions of the Listings and other components of the decision process, but no such input exists for the revisions currently underway or completed.

Noting the limited resources allocated to Social Security research activities and the need to revitalize and strengthen the research programs of the Office of Research and Statistics, the committee recommended in 1998 and again in its final report that SSA’s research, statistics, and evaluation staff and its extramural program be expanded substantially. No amount of extramural research will replace the need for the agency to invest in the internal research capacity; extramural research places its own demands on the agency’s research staff. Even when the external researchers are competent, the oversight responsibility rests with the agency for careful evaluation of the work to ensure the quality, adequacy, and appropriateness of the products, and for designing the approaches to testing and experimentation.

The committee, therefore, believes that if the agency were given the appropriate resources in terms of both dollars and enhancement of qualified research staff on the ORES, it should be able to conduct the research correctly. The underlying assumption of course is that the SSA will give priority to conduct of such research.

You are correct in stating that various providers of disability benefits in the private sector and in other countries have different goals depending on the purposes of the programs. The Social Security Disability Insurance is a social insurance program; it is meant to serve as a safety net of last resort for those who are no longer able to earn because of severe disabilities.

The Ticket to Work and Work Incentives Improvement Act of 1999 makes clear that Congress is increasingly interested in the “return-to-work” model and is prepared to have SSA experiment with some alternative strategies that might facilitate the pursuit of work rather than benefits. Under this program, however, the recipients of the vouchers to obtain employment and vocational rehabilitation services first have to be eligible for disability benefits under the current statutory definition and SSA’s determination process, i.e., they have to be totally disabled. Ongoing evaluation is needed to assess the effectiveness of the program for the population it serves, and also in light of changing attitudes towards disability and work, SSA needs to test decision process models that emphasize rehabilitation and return to work and the implication on program resources and on the people the programs serve that impacts the lives of many people.

The issue of changing or not changing the goal of the program was outside the scope of the committee’s review and deliberation. However we would emphasize that SSA should learn from past experience and undertake adequate and appropriate testing and research before making major changes nationally in this mass production program.

Question 4: Do you think it is time to view disability in the context of short-term and long-term? If so, why? What would be the advantages? If not, why not? What would be the drawbacks?

The committee did not address the advantages and drawbacks of short-term and long-term disability for social security programs. As stated at the outset the committee’s tasks were very specific and our analysis focused on the current statutory definition of disability as it applies to SSA.

Question 5: Ms. Owens stated in her testimony that in conducting their research into disability income policy, NASI concluded that determining disability should be based on the amount of earnings that an individual is capable of achieving. Do you think determining disability should be based on earnings? Why is it important to use this criterion or why is it not important? What should be the threshold of earnings to determine an individual’s capacity to work?

Determining the optimum threshold of earnings was clearly outside the scope of the committee’s study mandate.

Question 6: Some have suggested providing time-limited benefits to individuals who may need cash assistance while they are participating in vocational rehabilitation services. What are your views on this subject?

The committee did not discuss this issue; it was outside the bounds of its contract with SSA. However, the committee has repeatedly stated in its reports that SSA should conduct appropriate studies to investigate the feasibility and practicality of any change and then to analyze the data to ensure the change will be an improvement over the status quo as measured against objective predetermined criteria. It should be noted that the current law provides for retroactive reimbursement for vocational rehabilitation if the beneficiary recovers enough to leave the rolls because of substantial gainful activity.

More than a million workers with severe disabilities annually apply for disability benefits. That is not a small number. Before Congress enacts such a change in the program it needs to consider the implications on financing such a program and providing adequate resources to vocational rehabilitation agencies to absorb the mass influx of clients. The Social Security Act does have provision for vocational rehabilitation and work incentive programs for beneficiaries.

Question 8: Many advances have occurred since the disability programs were implemented, such as changes in the field of medicine regarding diagnosis and treatments, as well as technological advances such as synthesized voice devices. Can you provide your thoughts on the role remedies play relative to disability, such as advances in medication and assistive technology that allow individuals with disabilities to become less dependent on a caregiver? Should these advances be considered in defining and determining disability? If so, should individuals who do not have access to these advances be penalized? Shouldn’t all individuals with disabilities be treated fairly?

As the committee has stated in its final report, in recent years the concept of disability has generally shifted from a focus on diseases, conditions, and impairments per se to one of functional limitations caused by these factors. The definition of disability used in the Social Security disability programs was developed in the mid-1950s when a greater proportion of jobs were in manufacturing and more required physical labor than today. It was therefore expected that people with severe impairments would not be able to engage in substantial gainful activity. Over the years, the nature of work has shifted from manufacturing toward service industries; medical and technological advances have made it possible for more severely disabled persons to be employed. At the same time the changing demands of work also limit employment prospects for individuals whose social and adaptive functioning is impaired by mental disorders. The current labor market places emphasis on cognitive and technical skills, advanced education, and the ability to communicate and interact with others. People with disabilities, especially those with mental impairments, have poor employment prospects in such a market.

In recent years, public attitude also has changed as reflected in the enactment of the Americans with Disabilities Act of 1990 (ADA). Critics have suggested that SSA’s definition of disability and its process for determining program eligibility have not kept pace with the changes. The committee recognizes the administrative difficulties involved in paying more attention in the disability determination process to the physical and social factors in the work environment. Moreover, it might require major shifts in the orientation of the Social Security disability programs to ways to influence the environment in which the applicant might work and to “return-to-work” activities, and might ultimately involve changes in SSA’s implementing regulations. In the face of these challenges, the committee recommended that in order to develop systematic approaches to incorporate environmental factors in the disability determination process, SSA should first undertake research on the dynamics of disability; the relationship between the physical, social, and work environment; and understanding the external factors affecting the development of work disability.

Question 9: The SSA is faced with a potential problem about how to assess whether an individual would be able to perform any work—part of the criteria for assessing disability. It now uses the Dictionary of Occupational Titles to help assess whether an individual is able to work—but this source has not been updated since 1991, and the Department of Labor does not plan to update it again. Instead, they have created a replacement, called the O*NET—but this does not contain all the details about the physical or mental demands of any particular job. How would you recommend solving this problem SSA is faced with?

As indicated in your question, the Dictionary of Occupational Titles (DOT) is no longer being updated by the Department of Labor, leaving SSA with no replacement. The DOT has served as a primary tool for determining whether a claimant has the capacity to work. The Department of Labor (DOL) is replacing DOT with the Occupational Information Network (O*NET). The committee expressed concerns about the problem and made recommendations to SSA early in the study and then again in its final report. It had several discussions with SSA, as well as with DOL staff and others on this matter. It was a subject of discussion at its workshop. Because of the critical importance of this issue and the attention given by the committee, I am summarizing below from the committee’s reports.

The committee, in its preliminary assessment of SSA’s research plan for redesigning the disability determination process (the second interim report issued in 1998), had expressed its concerns that O*NET as it was being developed for DOL would not meet SSA’s needs and made recommendations towards resolving the problems. Among other problems, O*NET provides average rather than minimum levels of performance for each occupation as needed by SSA. O*NET’s physical ability scales may be inappropriate for persons with disability. It was not clear to the committee how SSA planned to overcome these problems. The committee also questioned how SSA planned to supplement O*NET with respect to contextual and other factors that are not well-covered in O*NET. There were no indications in the research plan that the gaps in O*NET will be carefully considered and no specific research to fill those gaps was identified. The committee, therefore, had recommended that SSA should develop an interim plan for an occupational information classification system until a more permanent solution is found, and to explore entering into an interagency arrangement with the DOL to initiate a version of O*NET that would better serve SSA’s needs to assess ability to engage in SGA.

Discussions at the workshop sponsored by the committee on Measuring Functional Capacity and Work Requirements (IOM, 1999) pointed out the problems associated with using O*NET for SSA’s purposes. The DOL expects to use O*NET, as a comprehensive database of work requirements for use in job training, job counseling, and job placement for the department’s employment and training programs and for use by individual state Employment Security Agencies in the extensive work that they do with workers who need jobs or who have recently become unemployed.

As discussed at the workshop, although O*NET is very useful for DOL’s purposes, SSA’s purpose in defining the functional capacity to work for purposes of the disability legislation is very different from the purposes of the DOL in creating O*NET. SSA’s purpose is much more difficult. Moreover, the labor market and occupational literature indicate that there are many difficult measurement problems related to occupation and job characteristics. Information developed by job incumbents is not always consistent with the information developed by job analysts, and the information developed by job analysts is not always consistent with the views of workers’ supervisors. In addition, from the perspective of the worker—as with a disabled individual—it is often a bundle of capabilities that the worker brings to the job that makes the work experience a success or a failure.

Workers with the same educational backgrounds have different skills, work ethics and orientations to work. These in turn bring a different bundle of capabilities to a job, and their performance is affected by those capabilities. In addition, the task of developing a set of factors that capture the essence of each occupation that makes practical sense is complex and difficult. Clearly, a great deal more careful research and experimentation is required to evaluate what functional capacity to work really means and exactly how it would be applied to persons with disabilities.

When the committee reviewed SSA’s redesign research plan, there were no indications in the plan that the gaps in O*NET will be carefully considered and no specific research to fill those gaps was identified. The committee, therefore, had recommended that SSA should develop an interim plan for an occupational information classification system until a more permanent solution is found. The committee also suggested that SSA enter into an interagency arrangement with the DOL to initiate a version of O*NET that would collect information on minimum, in addition to average, job requirements to better serve SSA’s needs to assess ability to engage in SGA.

Subsequent to the committee’s assessment of the problems in 1998, SSA asked its redesign contractor to undertake a comprehensive assessment of O*NET as a replacement data source for the current decision process. Although SSA did not necessarily expect this work to produce a resolution to the problem, it believed that it must complete such an analysis to move forward. This assessment surfaced several negative aspects of the O*NET structure and content that could lead to problems if SSA incorporated O*NET into the decision process. The contractor found that more than half of the occupational units had at least one domain for which the majority of descriptors were unreliable. A major overarching problem with O*NET is the numerical ratings. These ratings do not seem to be consistent across occupational units. The contractor’s analysis found that the ratings of more than half of the descriptors are unreliable. Moreover, the DOT titles are grouped by dimensions that are unrelated to worker characteristics or requirements of the O*NET descriptors. Several of the 54 selected descriptors contain O*NET ratings with inter-rater reliabilities lower than .70.

The contractor’s report concluded that the numerical ratings on O*NET descriptors, and therefore on any O*NET occupational unit, underlie the problems of O*NET. Therefore, SSA must exercise extreme caution in drawing inferences about the relation between specific numerical values on a rating scale and specific level of required functioning. The report further states that the foregoing concerns provide sufficient evidence to warrant SSA’s careful consideration of the quality of either analyst or incumbent ratings as conducted and proposed for O*NET. The report also suggests that O*NET’s descriptor data may not be as precise as they seem, resulting in measurement errors as well as improper interpretation of the severity of claimants’ impairments.

On further inquiry regarding any progress made by SSA in working with DOL to bring about a resolution of the problems, the committee was informed in late 2001 that SSA realizes that O*NET will not work for its needs without major reconstruction of the system. The committee was informed at that time that SSA is taking steps towards resolving the problems and has reopened its dialogue with DOL to explore other ways of incorporating information about the requirements of work into the decision process and is actively pursuing with DOL the issue of an occupational database on a national level to avoid two separate databases with separate funding. It was also planning to meet with the various associations of rehabilitation specialists, occupational and physical therapists, and workers’ compensation analysts. Private sector stakeholders have organized an interdisciplinary task force. It plans to meet with SSA and DOL to decide what is needed and how best to go about getting the information. The committee has no further information on these activities, but hopes that they were productive.

Clearly, without an appropriate characterization of job requirements that can be matched to the vocational characteristics of disability claimants, SSA might be cast back into the era in which it relied extensively on the testimony of “vocational experts,” or their written evaluations, as the way to integrate claimants’ functional capacities, vocational factors, and the demands of work into an objective determination of their capacity to engage in substantial gainful employment. Barring some resolution, SSA will be left with no objective basis upon which to justify decisions concerning an individual’s capacity to do jobs in the national economy. SSA needs to undertake without further delay needed research and collaboration to improve its ability to identify and measure job requirements for the purpose of determining work disability.

The issue of what is the right amount that an individual should be able to earn and yet receive benefits was not discussed by the committee as it was beyond the purview of the committee.

That completes the answers to the questions submitted to me. I will be happy to meet with you to discuss and/or elaborate on any of the issues covered in my responses.

Sincerely,

Gooloo S. Wunderlich
Study Director

Thank you for the opportunity to respond to questions following my testimony before your committee on July 11^th regarding the definition of disability in the Social Security programs. My answers draw on the work of the Disability Policy Panel of the National Academy of Social Insurance (NASI) on which I served. Some of my replies refer to sections of our final report, Balancing Security and Opportunity: The Challenge of Disability Income Policy.

1. You mentioned a demonstration project currently ongoing in three states (Wisconsin, Maryland, and Delaware) in which temporary disability benefits are being given. What is the status of this project? Do you think the goals of this project show promise? If so, why?

The demonstration project was authorized under the Ticket to Work and Work Incentive Improvement Act of 1999, which added section 234 to the Social Security Act. It calls for the Social Security Administration (SSA) to carry out demonstrations to evaluate various changes in the disability benefit program and authorized SSA to test interventions with applicants, as well as beneficiaries. The Early Intervention Demonstration to Return Applicants for Social Security Disability Benefits to Work is being designed by researchers affiliated with SSA's Disability Research Institute. Professor Monroe Berkowitz of Rutgers University is leading the design work. In collaboration with SSA, they will select three or four states to pilot test the demonstration early in 2003. A detailed report on the design plan can be found at www.disabilityresearch.rutgers.edu/research.htm. This is the first time that SSA has experimented with offering return to work services to applicants and I look forward to seeing the results.

2. You stated in your testimony that in conducting their research on disability income policy, NASI concluded that determining disability should be based on the amount of earnings that an individual is capable of achieving. Can you provide your thoughts as to why determining disability should be based on earnings? Why is it important to use this criterion? What should be the threshold of earnings to determine an individual's capacity to work?

My main point was that work disability--that is loss of capacity to earn a living from work--is the right concept for determining eligibility for wage-replacement benefits from Social Security. This definitional concept fits with the purpose of Social Security, which is to provide income to partially replace lost wages.

The NASI Panel reviewed a range of other disability definitions. It concluded that different definitions are appropriate for programs that offer different kinds of services or benefits. For example:

• A definition based on need for assistance with activities of daily living is appropriate for determining who should receive help in paying for services that assist with these activities.
• A definition based on need for, and likely benefit from, vocational rehabilitation services, is appropriate for deciding who should be eligible for publicly financed VR services.
• A broad definition that encompasses all who are at risk of discrimination in employment or public access is appropriate for defining who is protected by civil rights legislation in the Americans with Disabilities Act.

When the purpose of the program is to provide cash benefits to help people meet their living expenses because of they are unable to earn wages from work, then a definition based on work incapacity is appropriate.

The Panel found that the definition of work disability used in the Social Security program is very strict. It is more stringent that definitions commonly used in private short-term, or long-term disability insurance. It is also more strict than definitions used in many public employee benefit systems for federal, state, or local employees. A less strict definition of work disability for Social Security would allow more people to qualify for benefits and, consequently, would increase the cost of the program. (The Panel's review of other definitions is in chapter 4 of Balancing Security and Opportunity, which I submitted for the record.)

3. Do you think it is time to view disability in the context of short-term and long-term? If so, why? What would be the advantages? If not, why not? What would be the drawbacks?

Short-term disability insurance (STDI) is now provided in five State programs: California, Hawaii, New Jersey, New York, and Rhode Island. It is also offered by some employers in other States. Many European countries provide STDI to all their citizens.

Short-term disability insurance has a number of advantages from the perspective of both workers and employers.

• First, STDI provides income continuity for workers when they have health problems that are a temporary impediment to work. The worker retains the job to which he or she is expected to return after full recovery. There is an advantage to the employer and other workers in supporting sick workers while they recover at home instead of "working sick" to the detriment of the productivity, health, and safety of other workers.
• Second, STDI provides support during the first phase of what may turn out to be a long-term, or permanent, impairment. The worker retains a connection to his or her employer and may be able to return to a different job with the same firm when the medical condition is stable.

The NASI Panel found that many American workers lack the protections of short-term disability insurance. Fully 30 percent of private sector employees have neither formal sick leave nor short-term disability insurance. Another 26 percent of such workers have only sick leave, which typically pays for a few days or weeks--far less than the five month waiting period for Social Security disability insurance.

The NASI Panel considered a proposal to adopt universal short-term disability insurance in the United States, but did not recommend it because of its cost. The rationale for such a proposal would be threefold: to fill gaps in income during temporary disability; to promote early intervention by linking workers with return to work services to accommodate permanent impairments; and, it is hoped, to reduce reliance on long-term disability benefits. The main drawback of such a proposal is its cost. One study, done a number of years ago, estimated that such a plan would cost roughly 1 percent of earnings that are subject to Social Security taxes (Balancing Security and Opportunity, p. 24).

4. Some have suggested time-limiting benefits to individuals who may need cash assistance while they are participating in vocational rehabilitation services. What are your views on this?

The NASI Panel considered a policy of imposing time limits on Social Security disability benefits, but did not recommend it. Such a policy is very different from short-term disability insurance. Accordingly, it is not likely to have the same advantages unless other features of STDI are also adopted. Key differences between STDI and Social Security disability insurance include the following:

• STDI begins at the onset of disability, or after sick leave has been used, without a 5 month waiting period before interventions begin.
• Ill or injured workers on STDI continue their connection with the current employer. A job remains available for them. DI beneficiaries, in contrast, no longer have a job.
• Employers who provide STDI usually provide health insurance as well. In 2000, just over half (52 percent) of private sector employees were included in their employers' health insurance plans, while about a third (34 percent) were covered by short-term disability benefits (U.S. Department of Labor, 2002). The health coverage continues while the worker is on short-term disability benefits so that he or she has access to treatment. Applicants for Social Security benefits, in contrast, include people who did not have health coverage on their prior job and those who lost health coverage when they left their jobs.
• The definition of disability for STDI is less strict than the Social Security test. It typically relates to "inability to do one's own job" rather than "inability to perform any significant work in the national economy."
• Finally, when private sector return-to-work efforts are not successful, employers or their insurers often help the individual qualify for Social Security benefits. In contrast, if Social Security were time-limited, there would be no other safety net to turn to.

The NASI Panel found that current Social Security policy already has aspects of time limits, which can set an expectation for return to work when that is feasible. That is, when benefits are first allowed, beneficiaries who have some prospects for medical recovery or return to work are scheduled for a continuing disability review (CDR) within the next 1-3 years. During that time, they may get vocational services. When implemented with compassion and integrity, CDR policy can set an expectation of recovery or return to work when that is feasible, while still providing continued support for those who don't recover or find jobs they can do.

There are three other points I would like to make about return to work and Social Security disability benefits. First, the NASI Panel emphasized that the large majority of beneficiaries will not be able to return to work. It is a program for people with very severe and long-lasting impediments to work. The title of our report reminds us of this, Balancing Security (for those who can not return to work) with Opportunity (for those who can).

Second, it is important to measure our successes well. The return-to-work rate varies greatly depending on the period of time being examined. We often hear a very low return-to-work rate of less than 1 percent. This rate compares the number of people who return to work in a year with the total number of people on the DI rolls that year. But recovery and return to work take time.

The Panel received special tabulations from the Social Security Administration that followed people who entered the DI rolls in a given year over the next 5 to 6 years. These data show more positive results about the fraction of beneficiaries who recovered or returned to work, as well as sobering results about others (Balancing Security and Opportunity, page 110). The results are attached as Table 1. Within 5 to 6 years of entering the DI rolls:

• Just over half (53 percent) of people were still on the disability benefit rolls;
• Fully a quarter (26 percent) had died;
• Nearly a fifth (18 percent ) had shifted to retirement benefits; while
• About 3-4 percent had recovered or returned to work.

The 3-4 percent success rate may not be as high as some would like, but it is better than the more common figure of less than 1 percent. Perhaps more important, these data show (as we would hope) that younger beneficiaries are the most likely to recover or return to work. When measured as a percent of those who were still alive and not retired, 6 percent of all beneficiaries had left the rolls because of recovery or return to work. They include:

• 11 percent of those under age 40 and
• 13 percent of those under age 30.

The 11-13 percent success rate for young adults leaving the DI rolls is better news than we usually hear. These data covered the period between 1988 and early 1994. During part of that time, SSA had stopped doing continuing disability reviews in order to process a backlog of new claims, because it lacked the resources to do both. It would be useful to know whether results are different now. You could ask SSA to provide this kind of information each year so that policy makers can track how changes in policy, administrative practices, and the broader economy affect recovery and return-to-work rates.

This brings me to my last point. The NASI Panel urged that SSA be provided adequate administrative resources so that it can fairly and promptly decide new claims and conduct continuing disability reviews as called for in current policy. Failure to properly fund administration ill serves both beneficiaries and taxpayers.

5. It has also been suggested that SSA should refer claimants for vocational rehabilitation when they apply for benefits. What are your views on this issue? Do you believe state vocational rehabilitation bureaus have the resources to potentially serve such an influx of people?

It is clear that State vocational rehabilitation (VR) agencies are not equipped to serve all applicants for Social Security disability insurance and SSI disability benefits. In fiscal year 1999, VR agencies served about 1.2 million people and rehabilitated about 232,000 (U.S. Department of Education, 2001). In fiscal year 2000, SSA received about 1.6 million applications for Social Security disability insurance and about 1.6 million applications for SSI benefits, most of which were for disability (SSA, 2001). (Some individuals may have applied for both types of benefit.) It is highly unlikely that VR agencies could serve more than twice as many people with their current resources. More importantly, many people who receive Social Security or SSI disability benefits are not good candidates for the services State VR agencies offer.

The NASI Panel examined the experience of VR agencies in placing Social Security and SSI beneficiaries and other clients in competitive employment. It found that VR agencies had higher success rates with young adults and that many of the clients they had successfully placed were not received Social Security or SSI (Balancing Security and Opportunity, table 6-2, page 106). While some have criticized VR agencies for not serving more Social Security and SSI beneficiaries, their results with non-beneficiaries are also important. In many of these cases, VR agencies may be "getting rehabilitation first" so that their clients get the assistive devices and training they need without turning to the Social Security program.

6. Do you believe the Listing of Impairments should be altered in terms of their consideration of prescribed treatment, or the availability of assistive technology or advanced prosthetics in determining disability?

The NASI Panel concluded that listings should be regularly reviewed and updated in light of changes in medical technology, the nature of impairments, and the demands of work. This analysis is discussed in chapter 5 of Balancing Security and Opportunity, which I submitted for the record.

7. The SSA is faced with a potential problem about how to assess whether an individual would be able to perform any work--part of the criteria for assessing disability. It now uses the Dictionary of Occupations Titles to help assess whether an individual is able to work--but, this source has not been updated since 1991, and the Department of Labor does not plan to update it again. Instead they have created a replacement, called the O*NET--but this does not contain all the detail about the physical or mental demands of any particular job. How would you recommend SSA solve this problem?

The NASI Panel did not address this specific issue. This is a separate and important question. If the Committee wanted NASI to undertake such a study, I would be happy to propose it to the NASI Board of Directors, on which I serve.

8. Some have suggested that the $780 substantial gainful activity (SGA) amount for disability is too low to be able to provide an individual with any of the basic necessities, and that it should be raised to the level provided to individuals who are blind, which is $1,300. What do you think is the right amount that an individual should be able to earn before he or she cannot receive benefits?

NASI's Disability Policy Panel review the SGA threshold and recommended changes in it. At the time, the threshold was $500 a month. It had remained $500 since 1990 and had been $300 between 1980 and 1990. We recommended that the SGA threshold be updated to the amount it would have been had it been indexed to keep pace with wage growth since the beginning of the DI program. That would have been about $760 in 1996. We further recommended that it be indexed to keep pace with wage growth in the future (Balancing Security and Opportunity, pages 159-160). Changes consistent with the Panel's recommendations were adopted in regulations during the 1990s.

To raise the SGA threshold to $1,300 would enable more people with significant impairments to receive Social Security disability benefits. Consequently, it would increase the cost of the DI program. The NASI Panel considered, but did not recommend, this change because its charge was to propose low-cost ways to strengthen the connection between disability benefits, rehabilitation, and work.

9. It is always helpful to get the perspectives on issues from the private sector. In his testimony, Dr. Anfield provided some interesting recommendations based on his experience in the private sector. His three key recommendations were to:

• Adopt benefits that emphasize a return to work (providing transitional work funding, partial payment, and rehabilitation services);
• Acknowledge that recovery is incremental (work with individual at every state of recovery to determine the level of functioning); and
• Offer expanded definitions of disability so that individuals can focus on becoming self-sufficient.

Can you provide comments on each of Dr. Anfield's recommendations? Do you think these are valid recommendations? Will they work? If SSA adopts these recommendations into their policy, will claimants benefit?

These recommendations represent enlightened disability management in the private sector. I, too, have private sector experience in disability management. If these initiatives were widely adopted in the private sector, somewhat fewer people would turn to Social Security. As I mentioned earlier, workers with severe impairments turn to Social Security when private disability management efforts don't work or aren't available because employers don't provide private disability insurance and disability management in the first place. I would add that employers and private insurers have flexibility in their policies that is not available in public programs. In the private sector, we can use discretion to offer services and supports over and above those required in our contractual obligations to workers when we believe those efforts will be cost effective. Return to work investments can be cost-effective when workers have special skills that are difficult and costly for the employer to replace. Less skilled workers who are easily replaced by healthy, and perhaps younger and lower paid workers, are not as likely to receive added investments in return to work.

As a public program, Social Security has an obligation to treat all applicants equally. The benefit expansions Dr. Anfield proposes are likely to benefit some Social Security claimants. Others would not benefit. The changes are also likely to increase the cost of the program.

Thank you for the opportunity to respond to these questions. I will be happy to provide any other information that would be helpful to the Committee or its staff.

Sincerely,

Patricia M. Owens
Member, Disability Policy Panel

References

Balancing Security and Opportunity: The Challenge of Disability Income Policy, Jerry L. Mashaw and Virginia P. Reno, eds, (1996). Report of the Disability Policy Panel, National Academy of Social Insurance.

Berkowitz, Monroe, (2002). Designing an Early Intervention Demonstration to Return Applicants for Social Security Disability Benefits to Work, Disability Research and Education Program, Rutgers University, www.disabilityresearch.rutgers.edu/research.htm.

U. S. Department of Labor, (2002). Employee Benefits in Private Industry, 2000, News, USDL: 02-389, July 16.

U.S. Social Security Administration, (2001). Annual Statistical Supplement to the Social Security Bulletin, 2001, Tables 2.F5 and 2.F6.

U.S. Department of Education, (2001). Rehabilitation Services Administration, Report No. 33: Persons Served (Status 10-30) and Rehabilitated (Status 26) and Employee Person-Year, FY 1999.

Attachment

Table 1. Recovery and Return to Work Experience of DI Beneficiaries Over a 5 to 6 Six Year Period
Benefit status in February 1994 of persons awarded benefits in 1988, by age in 1988

Source: Balancing Security and Opportunity: The Challenge of Disability Income Policy, Final report of the Disability Policy Panel, National Academy of Social Insurance, 1996, page 110. Special tabulations provided by the Office of Disability, Social Security Administration.

[Submission for the record follows:]

National Association of Disability Examiners, Jeffrey H. Price, letter