created by america's cable companies 35 years ago and brought to you as a public service by your local cable or satellite provider. >> next, the number of working age adults receiving disability benefits is rising. senator tom cotton talks about the effects of disability insurance and ways to improve it. [applause] >> thank you, john, and let me add my welcome this afternoon to the heritage foundation. social security's disability insurance program was established in the 1950s. like much of our federal government's social safety net, the disability insurance program was founded with noble intentions to insure that americans who could not work because of mental or physical impairment would not suffer from poverty or destitution.

however, over its nearly 60 years of existence the disability insurance program has morphed from a small scale anti-poverty program providing benefits to less than one-half of 1% of our population to a program that now provides not only disability insurance, but also unemployment and early retirement subsidies to over 5% of our population. 5%. well, rather than deal with the manifest problems in the disability program ranging from biased eligibility processes to outright fraud, congress chose in its recent budget deal to go with a short-term financial patch. they bailed out the program with $150 billion from the even more underfunded social security trust fund.

kicking the can down the road seems to be the best we can do under the current administration. in the face of an entitlement funding program that threatens to overwhelm our government's financial stability. despite the infusion of cash, the disability program will run out of money in 2022, with the social security program itself creeping closer to insolvency. it's hard to see where the money will come from then for yet another bailout. our guest, senator tom cotton, was one of the heroes who voted against that reckless budget fix, and he's here today to talk about some of the real reforms that could improve the efficiency and integrity of the disability insurance program. tom cotton the grew up on his family's cattle farm in yale county, arkansas.

he went from dardenelle high school to harvard and then on to hard lard law school. after -- harvard law school. tom left the law because of the september 11th attacks. he left to join the u.s. army. tom served in iraq with the 101st airborne and in afghanistan with the provincial reconstruction team. between his two combat tours, he served with the old guard at arlington national cemetery. tom's military decorations include the bronze star. between the army and the senate, tom worked for mckenzie and company and served one term in the u.s. house of representatives. tom and his wife anna had their first child this past spring. congratlations, senator. please join me in welcoming senator tom cotton.

[applause] >> thank you. thank you very much for letting me participate today and, ambassador miller, thank you for the very kind introduction. it's a privilege, as always, to speak at the heritage foundation, especially before this distinguished panel. rachel greszler and roe me that botch cha, your work at heritage has been instrumental in the cause of social security/disability reform. both staffers and legislators, as you probably know, rely on your analyses, and when reform does come, your great work will have advance ared the cause significantly. and kim hildred, your work on transitional benefits was a critical component to my own legislation. we all know the challenges of the social security/disability insurance program. grown far too large, well past the rate of demographics. there's a lack of program integrity, and those who should recover never leave the program. but i want to highlight today

two other specific concerns with social security disability. first, the effect of social security disability on communities, what might be called the disability tipping point and, second, on ways to better help those who can recover return to work. a dynamic of the disability program that's sometimes underappreciated is just how regional and concentrated it's become. be in arkansas we have the third highest rate of social security disability usage. only behind west virginia and alabama. about 75% of the working -- 7.5% of the working age population in my state collects disability benefits. by contrast, the dakotas, nebraska and wisconsin all have about 3% of their working age population on disability, less than half of arkansas' rate. and within arkansas the disparity is even more striking at the county level. arkansas, along with the other states in what's been called

greater appalachia, have counties where close to 20% of the population is on disability. that is an astonishing figure. one in five residents on disability in these places. that also means that disability is the largest source of income in those counties. on the other hand, other counties in arkansas -- particularly the fastest growing ones -- have rates of disability well below the national be average. the evidence is pretty clear. there's an inverse relationship between the rate of disability usage and population growth which most economists would agree is a good proxy for economic vitality. sadly, our 20 counties with the highest rates of social security disability suffered a population decline of more than 2% in the last four years alone while the rest of my state grew by more than 2%. by contrast, the 20 counties in

arkansas with the lowest rates of social security disability usage have boomed with population growth of more than 4% over the same time. this correlation is too striking to ignore. the same trend is also true nationwide. buchanan be county, virginia, had more than a 4% decline in its population in four years. mcdowell, west virginia, with a 21% rate of social security disability saw more than an 8% decline in its population. the fastest growing counties in the country in places like north dakota, texas and northern virginia by contrast have less than 2% of their population on disability or about one-tenth rate of the declining population counties. it's hard to say what came first or caused the other. population decline or increased disability usage. or maybe economic stagnation

caused both. regardless, there seems to be, at least at the county and regional level, something like a disability tipping point. when a county hits a certain level of disability usage, disability becomes a norm. it becomes an acceptable way of life and an turn source of income to a good-paying, full-time job as opposed to a last resort safety net program to deal with catastrophic injury and illness. after a certain point when disability keeps climbing and becomes endemic, employers will struggle to find employees or begin or continue to move be out of the area. population continues to fall in a downward spiral kicks in, driving once-thriving communities into further be decline. not only that, but once this kind of spiral begins, communities could begin to suffer other social plagues as well such as her win or --

heroin or meth addiction and associated crime. an urgent policy goal, therefore, should be to stop these typing points from being reached. there's nothing compassionate about accepting these rates of usage. it's bad for the communities and worse for the recipients. after all, they will receive poverty-level checks for the rest of their lives. those who can work but are instead on disability will hike hi again never -- likely again never receive a paycheck, never enjoy working with other, developing new skills and achieving the fulfillment that comes with the dignity of work. these tipping points along with the general increase in the number of disability recipients have also endangered the program's financial health including medicare benefits for recipients, the program now costs more than $200 billion per year or the equivalent of about half of all nondefense discretionary spending. in turn, the financial uncertainty around the

disability programs puts at risk the genuinely and permanently disabled who depend on program. i'm introducing legislation the address this challenge. it will have three main parts. first, social security will distinguish between those who are genuinely and permanently disabled and those who are disabled but expected to recover. today the system treats a paraplegic the same as someone with a severely broken leg who's expected to recover in a year. those who are expected to recover will be categorized as likely or potential to recover. second, it will allow beneficiaries in these to categories to earn an income while on the program through a benefit be offset. these beneficiaries can take time for rehabilitation and then gradually rejoin the work force. with the offset they won't be at risk of losing their benefits as they begin to earn more money on the path back to full-time work. further, this offset can improve the program's integrity, because

judges can review whether a beneficiary used the offset if the beneficiary reapplies to the program for permanent disability status. third, my legislation will also set timelines for these individuals to exit the program and return to work. if they're recovery goes more slowly than expected and they're not yet ready to return to work, they can reapply. but if they're no longer disabled, we must help them leave the program and return to the work force. the past years have shown that this approach is necessary if we want to increase the number of beneficiaries returning to the work force. social security's ticket to work program, for instance, has operated for more than 16 years. there are also dozens of other resources available to beneficiaries from countless federal agencies. yet after billions of dollars of studies, pilots and other programs, the return to work rate has dropped to nearly zero.

i believe that our challenge is in a lack -- isn't a lack of good intentions or lack of federal be programses. our challenge is a lack of expectations and a lack of incentives for those who can recover. my legislation attempts to fix this. these reforms won't solve all the problems of social security disability, but they will address one of the most urgent crises in the program and the one perhaps most corrosive to affected communities. thank you all for your interest in this issue, for your outstanding work on the topic and for allowing me to address you today. now we will turn to the real experts on the panel. thank you. [applause] >> thank you so much, senator cotton. i would ask can the panelists please now to join us. to continue the discussion right now, we're joined by very

distinguished group who i'm going to introduce as soon as i can find my notes. we have three speakers today who will discuss their proposals for transitional benefits for disabled individuals who might return to work as senator cotton talked about. also for private disability insurance option to increase the scope of the program. and a flat disability insurance benefit to make it more sustainable and more fair for those who are lower income to start with. our first speaker will be roe me that boccia, deputy director of the thomas a. roe institute and the grover m. herman be research fellow at the heritage foundation. romina focuses on the national debt including social security and disability insurance. prior to joining the heritage foundation, romina served as an

associate at the charles koch institute and as a policy analyst at the independent women's forum. kim hildred currently serves as president of hildred consulting. she served for 17 years as the staff director of the committee on ways and means subcommittee on social security. there she assisted committee republicans in the development and passage of legislation to strengthen social security, retirement, survivors and disability programs. be as well as in the oversight of these programs. her prior service also includes three years deciding social security disability claims for the states of kansas and wisconsin, followed by ten years of increasingly responsible positions in managing social security disability programs in the chicago and philadelphia regions. our final panelist is rachel

greszler, she's a senior policy analyst in economics and entitlements in the center for data analysis at the heritage foundation. in her current role, rachel focuses on social security, disability insurance, tax and pension policies. prior to joining the heritage foundation, rachel spent seven years as the senior economist on the staff of the joint economic committee where she focused on similar issues. so let's start with romina. >> thank you, terry. the bipartisan budget deal that passed last week did one thing right, it prevented automatic benefit be cuts for disability beneficiaries. but it failed to make substantial reforms to make the program work better for the beneficiaries that it serves and also for the taxpayers who fund it. it only included very minor changes to deter fraud and

reduce overpayments in the disability program. beyond that, it only included one demonstration project to test out a reform proposal that some believe will increase work participation among disability program beneficiaries. my remarks today will explore this demonstration project in greater depth, and in particular i will try to answer the following questions: is this policy change so promising that it was worth congress putting all of its eggs into that one basket in the budget deal? and among all of the policy options available for which congress could have authorized demonstration projects, was in the best one that congress could have chosen? and the answer to both of these is a flat out no. demonstration projects exist to test and measure the effect be of potential -- the effect of potential program changes. i'm sorry to tell you, but the

demonstration project that congress chose is among the least promising; that is, if we're trying to accomplish, if what we're trying to accomplish is to focus the program on those who need it the most and to reduce program costs as we do that. the demonstration project authorizes another variant of a so-called benefit offset policy. the idea behind it is to let disability beneficiaries work more without losing their benefits. this policy will likely increase entry into the disability program by individuals who can do some work, and it will discourage those already on the program be from leaving the rolls. that is if that is the only change that's adopted. now, when i say -- one might say, hey, let's not fault them, maybe it will work. the thing is that this proposal has been tried in different variations here in the u.s. and in other nations. because the u.s. is not alone in struggling under the weight of growing disability program spending and also the

accompanying reduction in labor force participation that occurs when individuals leave the labor market to join the disability rolls. most people agree that society does have a proper role until providing benefits more those who cannot provide for themselves. however, poor program design in the disability program ends up discouraging labor force participation among individuals who might otherwise work, and this is what program reforms should effectively address. now, before i get into details, i'd like to draw your attention to a story in this sunday's washington post about a young man named paul that illustrates this program -- this problem very effectively. are we able to pull up the slide? anyways, you can always find it online in the post as well. paul is 34, and in the picture in the post, he's shown with his rock climbing gear.

and i've actually seen paul at the rock climbing gym where i go as well. and the story is about paul who used to work at the outdoor outfitter rei for about five years, but he lost his health insurance coverage when his hours got cut back. now, paul has a rare condition that requires him to take endocrine system drugs to manage his condition. so the post writes about paul, and i quote here: so instead of going out and trying to support himself with another job, paul took the safer option, applying for social security disability insurance and medicaid. now, in order to qualify for disability benefits, applicants are required to prove that they are unable to earn more than $1,100 a month from working. this earnings it's is called the substantial gainful activity level. story in the post goes on to describe how paul, shortly after

being admitted to the disability program, got another job offer in d.c. that would have paid him enough to get him over that earnings test threshold. but then he risked losing his free medical and government cash benefits. so i was very saddened yesterday, as i was having my sunday coffee, to read about a young man who is holding back his professional career so he can maintain valuable disability benefits. this is a human tragedy. it is a tragedying of lost potential. tragedy of lost potential. some analysts have suggested that lawmakers should eliminate the earnings test or smooth out this benefits crash cliff by allowing individuals to work indefinitely for higher earnings while maintaining their disability benefits, because there are already a lot of programs on the books that allow individuals to test out their ability to work at these higher levels, but over or time

individuals are expected to leave the rolls. some analysts say that this is discouraging individuals from even trying to earn at higher levels. now, fiscal conservatives who are proponents of this policy believe that more individuals like paul might, once they earn substantial amounts above the earnings threshold, leave the rolls. they're hopeful that this might reduce costs over time. and the smoothing out is called a benefit offset policy, and the budget deal includes one variation of it. but existing research suggests that a benefit be offset would likely increase program costs by encouraging more individuals like paul who have marginal work capacity to enter the disability program. it is effectively a benefit expansion, and it would also discourage others from leaving the rolls. a national benefit offset program is, on the other hand, expected to increase the

earnings and disposable income of disability beneficiaries while increasing program costs at the same time as the program expands beyond its statutorily-targeted populations which is individuals who are unable to work at those levels of income. the social security administration began a similar demonstration project as was authorized in the be recent budget deal in 2009, and the researchers evaluating the program concluded that adopting this as a national policy would most likely increase program costs. a benefit offset policy encourages people like paul to accept higher earning positions or to work more hours by itself is inadequate to fix the problems in the social security program. it might increase some labor force participation among those already on rolls, but it's unlikely to reduce the number of individuals who are on the rolls if this is the only policy change that congress were to

adopt. now, in combination with other reforms that are more likely to resolve in program savings and return people to work, a benefit offset can improve the welfare of individuals with disabilities, and i was very encouraged to hear senate cotton -- senator cotton speak about just such a proposal. because one of the big issues with current program design is that it sets no clear expectation that individuals with marginal or temporary disabilities return to work. and by returning to work, i don't mean increased labor force participation by those on the disability rolls, but supporting yourself through work. be other nations, notably germany which is where i'm from, norway and the u.k., have built-in incentives for individuals to work to focus on accommodation and by time limiting benefits for certain populations. in 2014 then-senator tom coburn

introduced a bill that would have granted time-limited benefits when recovery expected for those on the rolls, and i'm glad to hear that senator cotton is picking up that mantle. this bill would also have established pilot projects to test early intervention efforts to help work-capable individuals like paul with disabilities to return to work before ever entering the disability program. and i look forward to hearing from my colleagues more about some of those promising reforms. >> thank you, romina. kim? >> okay. good afternoon, everyone. and thank you for the uni havation to be here today. invitation to be here today. this presentation is going to summarize our paper which was entitled "the transitional benefits for a subset of the social security disability insurance population." i want to acknowledge my co-authors, pam, dean and dr. jennifer christian. and this paper was actually submitted as a proposal to the

ssdi solutions initiative that's co-chaired by former chairman of the subcommittee jim mccrery and earl pomeroy. and so we were delighted to be able to submit this paper for that initiative. so to start, our paper addresses, essentially, a small subset of new beneficiaries who the social security administration currently identifies as expected to medically improve after a benefit be award is made. today there are about 3% of beneficiaries that are expected to medically improve. examples of medical improvement include those in a catastrophic accident or who had major thoracic surgery, abdominal or reconstructive is surgeries, those with impairments arising out of conditions that respond well to medical and/or rehabilitative treatment. these beneficiaries today are not provided with medical supports or employment services

that would facilitate their return to work, and so concern and should their benefits be ceased for continuing benefit relief as well, now are they -- [inaudible] in contrast, when congress first considered adding a disability insurance component to the social security program, many contemplated a system of transitional benefits coupled with vocational services designed to help people get back onto their feet and into the work force. so, essentially, our patient edge courages lawmakers -- encourages lawmakers to revisit the link between rehabilitation services and disability and consider creating transitional benefits for the small subset of new beneficiaries whose disability is not in question, but who have conditions expected to improve. the social security administration would administer a compassionate system of transitional benefits with employment support with the goal

of employment, financial independence and better quality of life. so as i mentioned in terms of the problem, beneficiaries with conditions that are expected to improve are not encouraged to work, nor are they provided with employment supports they need to return to work. continuing disability review backlogs which had reached 1.3 million by the end of fiscal year 2013 harm beneficiaries, according to a report by the bipartisan social security advisory board. and this happens by delaying return to work efforts which become more difficult with time, potentially creating a misimpression that eligibility is permanent regardless of disability status and preventing the social security administration from taking timely action to discontinue payments to beneficiaries who are no longer eligible, causing a misuse of program resources. beyond backlogs, there are other

problems facing the review process. if the decision sporting the initial finding is vague, decision makers may not be able to determine medical -- in addition employment challenges given the length of time that they wait for an award in addition to the length of time before continuing disability review occurs. and should they be ceased, they are not offering services to help them reenter the labor market. ..

and finally maintaining the beneficiaries of the to file a new application at the end of the transitional benefit period should they stood they are unable to work. under the proposal, disability determination services examiners, they are 100% federally funded state agencies who make those disability decisions. and administrative law judges would first determine as they do know whether the claimant than meets the statutory definition of disability decision-makers would use a predictive analytics model to determine whether medical conditions is expected

to improve. if so, transitional benefits would be awarded for a two or three-year period specified by the predictive model with the decision-maker having the ability to discretion to expand the traditional period of up to the maximum three-year traditional term. as soon as practicable contact information that any such as receiving transitional benefits would be sent to the local camp verde work incented coordinators under the current law work incented planning and assistance program which would be modified to prioritize services to transitional beneficiaries. including a direct referral to a ticket to work service provider. under a modified ticket to work program, that's a co-op program under the social security devastation, service providers will provide customized services to increase medical or functional recovery is necessary in order to achieve employment. and as mentioned there will be

no cap on earned income during the traditional benefit prayed to encourage work. so the paper further addresses a number of implementation issues. regarding the use of predictive modeling, it points to as this is expressed with predictive modeling in the continuing disability review process determined which mature diary cases should undergo a full medical review. it also points to ssa's needs to update the guideline to determine these diary assignments. the instructions for the examiners who set the diaries for when people will have a continuing disability review, if not been updated since the 1990s. so we point to the need for that to happen. and, finally, an expert than would be convened periodically to update the medical criteria used by ssa decision-makers together on medical improvement.

regarding appeals we propose making the decision to award a transitional benefits not available to avoid undercutting the goal of encouraging beneficiaries to take the steps needed to reenter the workforce instead of waiting for the appeals process to unfold. we point to examples where congress has included appeals in an analogous contexts in a desperate as for support we provide further details regarding the expedited and tailored services taking the existing return to work programs and a study regarding amended the rehabilitation act. as to require compliance transitional beneficiaries would be required to follow prescribed treatment and ticket vantage of return to work services is needed to facilitate a workforce retrenchment. ssa would be required to notify transitional beneficiaries six months in advance of their benefits spending so that they may take immediate action. here we go.

the paper also required that we would, all of the officer asked to specify statutory changes that would be needed under the proposal. and so we included a list of the statutory changes. as illustrated here. i think i jumped ahead. their i am. so you can see that those are just spelling out some the changes that would be required. and also asks us to identify some potential intermediate steps that could be utilized why lawmakers. so the paper includes certain intermediate steps. for example, a study to analyze the cd-r process to provide baseline data to and from a well-designed transitional benefit program. and congressional offers testing of all elements of the transitional benefit program through a pilot in a few states or the region which could be expanded if preliminary results

are positive. the paper includes options for demonstration projects through federal interagency agreements or state innovation or experimentation this date employment network partners. that can potentially be funded by nonprofit foundations or through social impact funds. finally, we were asked to address some of the questions or concerns that people may have about the proposal in the paper. including those, for example, who may simply oppose the concept of time limiting benefits. while we believe establishing transitional benefit for the small subset of beneficiaries whose conditions are inspected to improve, combined with employment support services, it's not only compassionate solution that pressures of these individuals but is also consistent with congress' intention to some disabilities would be temporary since the definition of disability to specify that the disability must

last for a continuous period of at least 12 months. we predictive analytics as a probabilistic analysis that would ensure more consistent outcomes nationally, and the senator spoke to some of these needs we see across the nation. we acknowledge the concept would impose greater administrative burdens as more applications may be processed due to those transitional beneficiaries who believe they might still be disabled. however, we explained what we believe is burdens would be manageable. although the cause are somewhat speculative we explain why we believe the increasing administrative costs could be eclipsed by the long-term savings to the trust fund. we also discuss why additional funding would not solve the issues addressed by this paper, and including the fact that the traditional term unlike the uncertain prospect of the cdr reinforces the fact of beneficiaries should be able to return to work a provide support and enable them to do so. in conclusion, the average ssdi

benefit is $13,980 a year, only slightly higher than what constitutes the poverty threshold for an individual living alone. we believe individuals with disabilities deserve better outcomes that are consistent with the americans with disabilities act. name the inclusion of individuals living with disabilities in all aspects of life, particularly employment. studies have indicated that age, health and time on the roles are characteristics associate with beneficiaries were glittered activity and employment success. we believe that limiting time on the roles for small subset of these beneficiaries have a high likelihood of medical improvement coupled with support and services aimed at improving health and increasing employment reentry will facilitate better economic outcomes and overall improved quality of life. thank you. >> thank you, kim. rachel? >> i'm going to discuss too big

picture reforms here. the first is an optional private disability component within the current ssdi system, and thus it is a flat to benefit. i'm going to start with three statistics. you are over 20 million working age people with disabilities in the united states today. about 11 million are on the disability insurance rolls. and yet 75% of people with disabilities, at 20 million figure, would like to be working in some capacity. but very few of them are, only 30% are employed. so what does does is there's more people with disabilities that are currently on the system. but yet there are more people overall but want to be working and that are not able to. so a lot of those receiving benefits would like to work either not able to answer the current system is impeding them from doing so. this first chart shows the percent of the population that

is not an sdi since its inception in 1956. it started a less than one half% ever over 5% of all people working age receiving this. so why are so many people working who are receiving benefits when we see that life expectancies are increasing, there's medical innovations that are allowing more people to recover from whatever disability they have to get back into the workforce. to our workplace accommodations at our jobs are more sanitary than they used to be. it's not that there' that is buf manufacturing or physical labor jobs but the are a lot of jobs that can be found today that only require minimal physical effort. have the roles been increasing despite that? a study by the federal reserve look at the change of beneficiaries between 1980 and 2013. they were able to account for about half of that rise in the roles.

you treated that rise to three factors. first was an increase in social security retirement age so people aged 65-67 when of the on disability was posted social security if they become disabled at that age. second, there's the aging of the population. the baby boomers are reaching old age is where they're more likely to become disabled. third, we've seen a rapid rise in women's labor force participation. whereas they were not eligible for ssdi before, they are now. yet that leaves about half of the rise which his opponent to 3 million people per year, or $42 billion in spending that is unaccounted for. there are a lot of problems within the ssdi system but we can kind of categorize them into two things. first are too many people dedicated getting on the rolls to begin with, and second, to few people are ever leaving the rolls. the proposal that i'm suggesting here is an optional private insurance system. this would address both of those

components. private disability insurance texas today for about one-third of workers. now, it's a totally different structure than the ssdi system. it's the same product, disability insurance, but incentives are entirely different and they are entirely different because of the financial incentives that are there. private disability insurance has to provide a product to employers and disabled individuals appreciate and is valuable to them, but they also to provide it at a low cost. if they do that through a very efficient and effective determination process, as you can see on this first chart, the average wait time for that initial decision from a private disability insurance provider is 41 days. almost nobody goes beyond the initial decision. it's not like transit for everyone and appeals. most people have a decision within 41 days. in the time period they are assigned a caseworker who was meeting with the individual who is asking who is the individuals with doctor, meeting with them

if needed, the with employer can figure what kind of medical help they need, what kind of workplace accommodations would allow them to get back to the job, or do they need a different education because they can no longer perform the job they were doing before? on the other hand, the social security system come into the just sit and wait for five months without working before they can apply to receive benefits. after that to go to the initial level, dds level where they weighed about 100 days or an initial determination. most people are denied at that stage and then they go want to appeal to and administer law judge. that whole process takes 560 days on average. during that time individuals are losing whatever of links they had to workforce, losing the skills and education at the beginning to believe that they really cannot work. the second component of the private disability that is more effective and efficient is the determination process.

this second graph is one glimpse of the. we've seen in the ssdi system that now 63% of all claims that are approved or for mental and musculoskeletal disorders. those are legitimate but they're also the more subjective ones that are harder to diagnose. on the other hand, in the private market you see only 35% of those claims are for the muscular and mental disorders. and so in addition to providing more workplace accommodations and having the goal of getting people back to work as opposed to just approving them because that's easier than denying and continuing to pay benefits because that's easier than going to a cdr because we are to our more than 1 million people waiting to have their ctrs. so in addition to that, the private market is not on providing higher benefits but at a lower cost. the first chart shows the level

of benefit individuals would receive the income levels. the light blue bars represent what they would receive from ssdi currently. the dark blue or what they would receive from private disability insurance. ssdi replaces on average 44% of workers income or as the private system typically replaces 60% of its providing higher benefits and it's doing it at a much lower cost. private cosmic to under $45 per year on average compared to about $867 per year that somebody making 50,000 would die in ssdi taxes. it's hard to do an apples to apples comparison because if an individual is on private disability and then they get on ssdi, there's an offset. even after accounting for those things, i did an analysis that showed the private market could continue to pay their 60% replacement rate for half the cost of what individuals are currently paying in payroll

taxes. so the proposal here would be to allow employers if they wanted to offer a qualified private disability insurance that would be at least equal to what ssdi provides no. employers who choose to offer this would receive a payroll tax credit, a portion of the current 1.8% on the employers themselves. they will receive the credit that would allow them the funds to purchase the private disability insurance to individuals who have an employer that goes through this privacy is my first applied to the private system. they might be under job and having trouble and it would be able to apply without having to sit there for five months and wait another 500 or so days to get a determination. they would have access to all those work returns boards and those rehabilitative efforts. of these initial decision if they were determined to be disabled they would receive those benefits for the first two to three years.

after that time if they're still disabled they would be transition to the ssdi system because there' there is a reasoo continue on with the private system is at that point they been determined to be continually disabled after two to three years. it's more efficient probably to let ssdi continue to pay the check but we've had the benefit of the initial determination going to the more efficient private sector, the individual having support along the way and all the efforts to try to get the back to work. then when they're determined not able, they would transition over. this has the benefit to the individual who has more support along the way. it vanishes the employer who could reduce their overall employment cost and is also an advantage to the ssdi system because the private employers, the payroll tax credit would be less than what it is costing ssdi and it would have reduction in the rolls as a result. the second proposal i'd like to talk about gets at the original

intent of social security. this is a nearly 60 year old program and when it was originally set up it was to ensure that people who become disabled or not destitute and living in poverty. and yet as we see, social security provides the largest benefits to the people who have the highest pre-disability income. the crap to the left shows that somebody with the highest income -- the craft -- where a minimum-wage worker is going to be receiving only $866 per month. as a result we see that nearly 2 million people who receive ssdi benefits are living in poverty. that wasn't the intent of the program and was to prevent poverty among the disabled. those are below already are even without enough income for the attorney to other government programs that are have an additional cost. if we were to implement and anti-poverty flat benefit equal

for everybody who goes into the system, visiting increase in benefits for about 35% of the population and a reduction for about 65%. we wouldn't propose to change benefits for anybody currently on the rolls, but going forward, and this is something that could be implemented relatively quickly, those in the future would receive the flat benefit. the reason we could do this today or start at a different is because this bill is that like social security would individuals plan to retire and they know they're going to need that money some day. disability as an unplanned event, and so to the extent that an individual wants to ensure that there could have a certain level of income if they become disabled, they can go out tomorrow and purchased us of the insurance in the private market that will ensure that level of income. this is getting at the proper rolls of the discipline chances to get it is that anti-poverty benefit anything beyond that is left up to individuals decide do i need 50%, 100%, what is it i

need? the government does not dictate that and set it at a certain percent but individuals can do what are just whatever additional amount they would need. in addition to restoring social security disability insurance program to its original intent, this proposal would go beyond solving social security shortfalls. over the next 10 years it would solve about two-thirds of the shortfall and that's only because we would grandfather in anybody in the current system. to craft your shows the light blue lines the social security shortfall in billions of dollars. the dark blue lines are the savings that would be a committed as a result of epidemic is flat benefit. as you can see beginning in 2023, the savings exceed the shortfall. that is, you're going up more money left over in the shortfall and so they could take that money and you could reduce the payroll tax itself, get more money back to individuals, more

take-home pay, allow them to purchase this build and private disbelief insurance to bring that up to whatever level of income they believed they would get if they become disabled. in short, these two proposals at the two components. to address the problems that are inherent in the current system to the private option, and then they also look at returning social security to its original intent and bringing about the financial savings that we need to keep the program solvent. i think we will turn to questions now. >> thank you, rachel. it is your turn. while you are formulating the questions, i'm going to start with one of my own, that's just to ask the panelists, they have described a situation, a program that is manifestly broken in many ways. it has a terrible incentive structure, provide inequitable benefits. the bureaucratic inefficiencies in running the program are terrible. it discourages people who are

currently disabled from returning to work, punitive measures. as senator cotton said it provides incentives that lured people into long-term dependency that effectively makes them wards of the state for their entire remaining lives. and now we've heard some very innovative and it sounds like reasonable proposals for reforms to the program. and i would just ask our panelists briefly, what are the politics of this? is this something that really is amenable to bipartisan action, or is this going to be another one of those failed debates in washington by the two parties talk past each other and nothing actually ever gets done to fix what is clearly a broken program? >> i'll take a first stab at

this. i think to some degree the disability politics are very much interwoven with the social security politics in general, where one party stands on position that no matter what no benefit cuts, and then defined benefit cuts in all sorts of interesting ways. many of these proposals that would return people to work, some people will say this is a benefit cut, that there do this benefit for the rest of their lives and we should not put any time limits or anything that could potentially do any harm to individuals, even when what we are really trying to do is to help them be independent. the other issue i think is that disability is a much, much smaller program than social security retirement program and is much less understood. it is highly complex, and lawmakers, many lawmakers don't understand it very well. and so they fear getting involved with the program. they might make a mistake.

they're all only a few that have shown leadership and willingness to learn about the program and really lead on these issues. with the reallocation of money from the retirement trust fund to the disability trust fund, it takes urgency to fix the issue in terms of legislative action off the table, but what we should now stressed is, or the cost and potential benefits to the individuals currently in the program and those joining the rolls now if we were to make the program work better for these individuals and the taxpayer, and not rely on the next let us an opportunity which will be seven years down the road and could very likely not be seized either. >> i think the recent budget deal just shows that this is a politically difficult topic. lawmakers showed behind closed doors can be negotiated a few small changes that came out and

said look, we've done some things to solve social security. we're paying for it but all they did was kick the can down the road, steal the money from so so scared to make both programs were soft in the long run. while it looks like we have some time, the same thing is going to happen, 2022 when disability is running out of money again and they are so far has not been the initiative to do any real reform on this rather than try to merge the two programs and further that w would push them back, the more likely are to just see a tax increase the nothing that is going to change the problems that exist within it. >> i would agree. the challenges, complexity, lack of urgency now with the new budget deal the past for sure, and there is not a coming together of parties or even constituents to try to tackle some of these very difficult challenges that the program faced, not only in term of long-term, having benefits, full

benefits be paid, but also in terms of one of the other challenges that we have is statute really is, really doesn't say very much in terms of defining disability. a huge amount of responsibility is placed on the social security administration to develop the supporting policies, to update the policies and really to maintain the program. as we know that's particularly challenging for the social security administration. so you have all of these competing factors i think to really make for this cocktail that ultimately in my view, hurt people with disabilities. >> thank you. questions from the audience? one right here. >> if you could just wait for the microphone and then please just identify yourself and state your question. do we have a microphone down

here? in the front. >> i wonder if you could talk about senator cotton, his proposal, and why lawmakers are so hesitant to take positions on this type of issue? >> panelists? >> kim, you probably know him best spent i think what we know is central is a discussion that a synergistic today. is not been introduced yet so we still come with the details of the proposal so his commentary i think willie speaks for itself in terms of the kind of principles that he has. we will see when the legislation is actually propose but i think another challenge, it's very difficult. rarely defined true leadership in terms of members of congress who really want to stake out a claim for this position.

oftentimes, some of the individuals receiving benefits and other advocates can be very resistant as my fellow panelists said. they can be resistant to change and be very afraid of change. so they can be a very scary thing. any changes to them. and that also makes our representatives and our senators a little bit hesitate to take on these very complex, very big challenges. at the end of the day i think if members can find bipartisan partners i think it will also help tremendously. i think we are starting to see more of that behind the scenes. this budget deal is probably one example of a more minimalist approach certainly but i think all of this discussion is helpful to helping the members understand the challenges the program faces and maybe we may see some of them working together. >> another challenge is also historical experience. congress did face in reforms in the 1980s that strengthened

the continue disability review process, the social security administration was encouraged to identify more individuals who were no longer eligible to receive those cash benefits and pay cash benefits were terminated. there was huge backlash and congress received many, many, many phone calls from constituents who have been relying on those benefits, even if their medical condition me to no longer eligible but that no other sources of income. when you get a constituent calling saying that they can't pay their mortgage anymore, that this is the -- that is a certain impact on a member of congress. i think that has a lot to do with it as well. how many other economic opportunities are there for these individuals. and this i is i think would've issued the program the program does act for to many individuals as a long-term unemployment or early retirement program. there are lots of incentives in the program that should be changed to not abuse the program

in that way because in the end of benefit that goes to someone who is utterly eligible is money it's not available for an individual who truly cannot work. >> and i think these proposals, transitional benefit and telling certain people that their expected return to work, it incites fear in those who are on the rolls now. i that phone calls of people who said i read this, i'm terrified. are they going to up my review? with a candidate by benefits? that's a result of the current system. that's what i'm talking about five months of waiting before you can apply and then another two years before you get benefits. then you sit on the rolls for a couple of years. by that point individuals believe they are disabled and they cannot do any work. if you start at the beginning with the transitional benefit and you say here's the system you go through, it looks more like a private visit to ensure where they are working with the doctors, seeing what kind of workplace support you can have, what type of medical corrections

might allow people to perform jobs or new type of job through education and training, that's an entirely different system and it doesn't need to be this year because people are there working with them along the way and showing them how they can get back to work, as opposed to just received a phone call one day and saying you're done, your benefits are a. so if we can shift to the structure. >> and, of course, one of the major issues is that when you face a long-term fiscal overhang like we did in this visibility program are also a social security system overall, you can make rather modest reforms now and fix the problem of the system and the deafness that has afflicted us all. [laughter] you can make rather modest reforms now or make very radical and putative reforms later. so it's very distressing when the congress kicks the can down the road and just ops in effect

to do nothing for the next seven years. that to me seems like a very strong abdication of responsibility or we have a question in the back. >> question for you, kim. you said about 3% of the current ssdi recipients -- [inaudible] and you also proposed among other reforms overhauling -- what do you think the percentage will be at the end of about overhaul period of? >> it's difficult to do because the combination of the criteria to not being updated for examiners to make the right decision, we also know that the quality review is very limited of these decisions, if any. so essentially unless an individual discord expected to medically improve, those are the kinds of people that examiners are going to give that die every

type of category. everyone else, there's a medical improvement not expected, those get a severe diarrhea and there's a very large cohort in the middle -- diary. so one of the reasons why we believe the predictive analytics is deeply important is that addictive analytics will use the data itself to really show what other types of impairments in there with the medical improvement, and those predictive analytics continue to use the data on an ongoing basis to ensure that not only to have a process that is much more accurate in terms of diaries, but also a process that's much more fair and consistent across the country. because we've seen some the challenges the program has faced, especially when as my colleagues have said there's a lot of there's a lot of judgment into certain types of impairments, when one is establishing their functional

capacity, their capacity that is doing it even with her disability. those functional capacities are determined by individual examiners, determined by administrative law judges. the examiners may have feedback from a position, they may not. there is a lot of subjectivity. the more that we can have the data and actual experience of individuals to drive the accuracy of those diary designations, i think we would see a larger population expected to medically improve, that make no mistake about it. the programmer is an important program for those are not expected to live a long period of time because of a very severe impairments. we're talking about those who do have those conditions that are expected to improve, and what are the kinds of support they're getting right now they're getting nothing under the current program. their reviews are delayed and all of a sudden they get a letter saying guess what, now we are going to review your plan. they have had no support up to

that point and did they are seized, they are provided no support at the moment, and we don't believe that is very compassionate. >> i think we have time for one more question. so right here in the front. okay, we have time for two more questions. we will start here in the front and then we will come back to you. >> elliott young with the institute. just a question for our panelists. given what we've seen with the recent efforts to replenish the highway trust fund and the sort of political machinations around that, and how people talk about tax increases versus trying to find ways to reallocate spending, how do you see sort of a long-term effort to smooth the changes in ssdi? i feel like there's a lot of

similarity between the concentrated benefits and dispersed costs of instituting another tax increase that might be more politically salient, even if that's not something that is best in the long term. how do you see this playing out? waterways we can perhaps put something on our representatives, sort of light that fire that might push them towards doing the right thing rather than the easy thing? >> the longer we wait the more likely it will be some sort of tax increase fix, because you're just going to get to a point where the shortfall is imminent and any policy reforms that you can possibly adopt, english were willing to cut benefits abruptly and steeply, which seems very unfair and nobody really wants to do, you are going to have to raise taxes or take the money from somewhere else.

right now, is being taken from somewhere else, by many in the you can see it as just another portion of the tax increase that is to come. because if you are thinking about the last reform effort in social security that was in the '80s, there was a massive tax increase and then there was some small reforms. small reforms that in today's environment i would consider big reforms raising the retirement age, reducing incentives for early retirement indivisibility program that probably are small reforms considering the vastness of the problem but since we haven't had any reform at all in today's context, these would be big reforms. we need leadership in the congress. presidential leadership can do a lot on those kinds of programs. beyond that with no legislative urgency i don't see how we are going to get all the interests to come together. you sort of have to face a worse scenario in order to agree to

changes that will ultimately make it -- make us better off. >> oon the positive side i would just point to the list of changes. trip to mention a lot of the decisions and with this program is structured and functions is determined by ssa and there's a lot of things that can be done to increase the efficiency of it to properly determine who is disabled, who is disabled. that would go along way in reducing the costs. >> i would just add i think a very fundamental question is so so scary essential is self financed. workers pay taxes to get disability benefits, survivor benefits, retirement eventually. the question is if social security in a future going to remain simply self financed, or are there other outside income like general revenues for example, i'm not suggesting that but these are some of the very clear choices that members are going to have to really think about, especially given the

challenges of medicare, the challenges of tax reform. these are very large questions that really face them and face the american people. i think that's a very important kind of first question. everyone pays into social security. everybody gets something out of it. how about if people start getting less and less out of it? are we going to continue to public support for the program? these are top tough questions but they are questions that have to be answered. >> thank you. now for the final final question. >> i did know if anyone could speak to what the senator mentioned about the regional usage of the benefit. is there a reason for that? i just thought that was an interesting point i did know if there was a cause. >> she's asked about the difference in the regional uses the disability insurance benefits. i'm not an expert on the product look at some of those statistics and justice in the percentage of

people with disabilities who are employed, and it ranges from over 50% and the dakotas to 25% in places like louisiana and west virginia. and i think part of that is cultural and the committed to develop and oftentimes when it. is on disability they can get a child on ssi or get child di benefits. my guess is a lot of the cost of the issues of the community in which they live and people see that others are able to get on ssdi benefits and how they're able to get on them and it just encourages them. >> they can also be a signal that there's fraud going on. it is certainly happen in some communities where lawyers, disability dollars have partnered up with physicians. and their has been kickbacks and doing that kind of statistical analysis sometimes can reveal these sorts of fraud schemes. but i think a lot of it is also what other economic opportunities are available in

this energy, and when there are few, then disability becomes a substitute for earned income. >> just briefly. the congress, or into law in the statute in order to determine disability, one has to consider age, education and work experience. how those are implemented by the social security administration is through the so called medical vocational rules. these rules had been in effect since the '70s. effort to update them have not been successful in the past. social security has embarked on an effort to begin the updating process, but that's a piece of the social security program that's out there that can cause differences in toward rates, depending upon taking age, education, work expense of individuals. and so it's always important to try to keep those rules as current as possible.

>> thank you very much. please join in thanking our panel for the discussion of today. [applause] [inaudible conversations] >> [inaudible conversations] >> all persons having business before the honorable the supreme court of the united states draw near and give their attention. >> my fellow americans, our country faces a grave danger. we are faced by the possibility

the steel industry will be shut down. therefore, i am taking two actions tonight. first, i am a directing the secretary of commerce to take the lesson of the steel mills and to keep them operating. >> in 1952 the united states was involved in a military conflict with north korea are at home a dispute between the steel industry and its union had come to a head. >> the korean war was a hot more than they needed steel for munitions, tanks, for jeeps, for all of those things that you needed in the second world war as well. if the steel industry went on an industrywide strike is going to be a real problem because it's basic to the things that an army and navy needs, and are forced to fight a war spring to avoid a disruption, president harry truman seize control and as a

result the pending strike was called off and steel production continued. however, the steel companies, led by the youngstown sheet and tube company in ohio disagreed witwith the action into the lawt all the way to the supreme court if we will examine how the court ruled in the case of youngstown sheet and tube company versus lawyer and impact on presidential powers are joining our discussion, michae michael gerhardt, professor at university of north carolina law school and author of power of president come at a forgotten presidents. and william holcomb political science professor at university of chicago and author of the wartime president, how without persuasion and co-author of while dangers gather. congressional checks on presidential war powers. that's coming up on the next landmark cases live tonight at 9 p.m. eastern on c-span, c-span3 and c-span radio. for background on each case while you watch order your copy of the landmark cases companion

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>> good morning, everybody. thank you all for attending this briefing sponsored by senator joe donnelly this morning, along with the american foundation for suicide prevention, the