What Factors Explain the Drop in Disability Insurance Rolls from 2015 to 2019?

In 2015, the number of individuals receiving Social Security Disability Insurance (DI) benefits began to drop for the first time in two decades.  This drop was caused by a wave of terminations, as beneficiaries aged into the Old-Age and Survivors Insurance (OASI) program, combined with a steep decline in the incidence rate (the number of new DI awards relative to the insured population).  Yet, the forces driving down the incidence rate remain poorly understood.  Prior studies suggest that three factors could have played a role: 1) demographic shifts due to population aging; 2) a strong economy following the Great Recession; and 3) policy changes at the Social Security Administration (SSA).  Using data provided by the SSA’s Office of Disability Programs, this study examines how each of these factors contributed to the drop in the incidence rate.

The paper found that:

• A strong economy accounted for about half of the drop in the incidence rate.
• Policy changes – including a stricter process for awarding benefits on appeal – also accounted for a significant share.
• Population aging put slight upward pressure on the incidence rate.
• In terms of the total number on the disability rolls, the impact of aging on terminations far exceeded its impact on new awards.

The policy implications are:

• With the finances of DI now on a stronger trajectory, the time may have come to somewhat rebalance the goals of DI from encouraging labor force participation to protecting vulnerable people.
• Congress may want to consider merging the DI and OASI trust funds.