The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding

More than 80 percent of nonelderly U.S. adults are insured against the risk of disabling physical or mental illness by Social Security Disability Insurance (SSDI). This article evaluates the causes of the extraordinary growth in SSDI enrollment, considers its fiscal ramifications, and discusses potential policy responses. While aggregate population health has improved by most measures in recent decades, the rate of SSDI receipt among nonelderly adults has nearly doubled since 1984. We project that SSDI receipt will rise by an additional seventy percent before reaching a steady state rate of approximately 6.5 percent of adults between the ages of 25 and 64, with cash benefit payments exceeding $150 billion annually (excluding Medicare). We trace the rapid expansion of SSDI to: (1) congressional reforms to disability screening in 1984 that enabled workers with low mortality disorders such as back pain, arthritis and mental illness to more readily qualify for benefits; (2) a rise in the after-tax DI income replacement rate, which strengthened the incentives for workers to seek benefits; (3) and a rapid increase in female labor force participation that expanded the pool of insured workers. Notably, the aging of the baby boom generation has contributed little to the growth of SSDI to date. Among several avenues for reducing SSDI growth, we suggest that the most promising are revamping the disability appeals process--in which the Social Security Administration currently loses nearly three-quarters of all appeals--and reducing the attractiveness of DI benefits for work-capable disabled individuals by providing additional access to public health insurance. By contrast, previous efforts to reduce the SSDI rolls by discontinuing benefits or by providing stronger return-to-work incentives have proved remarkably unsuccessful.

Underwater Ant House

The project seeks to design and test and submersible enclosure capable of sustaining oxygen breathing life. A mesh covered in a superhydrophobic coating can both restrain water up to a maximum pressure and retain a direct interface between air and water. Oxygen can transfer over this boundary if there is a sufficient difference in concentrations between the water and air. Multiple designs have been produced with the intent of testing and demonstrating these theories. 3D printing allowed for quick and customizable production of every component. Enclosures were made for testing the maximum allowable pressure and to fit an oxygen sensor. These mostly consisted of a rectangular frame with slotted to fit removable mesh slides. Oxygen concentration experiments were conducted with crickets as live subjects and were designed to analyze the transfer of oxygen through the mesh. The team ran tests to investigate additional factors including coating application and quality, the influence of the mesh substrate material on hydrophobic and coating properties, and mesh sizing influence. Testing indicates that there is sufficient oxygen transfer for small animals to survive. The enclosure can be submerged to approximately four centimeters before failure. This project demonstrates the feasibility of maintaining breathable air using a hydrophobic mesh enclosure and creates the opportunity for further investigation into possible uses of this technology.https://scholarscompass.vcu.edu/capstone/1212/thumbnail.jp

The Distortionary Effects of Government Procurement: Evidence from Medicaid Prescription Drug Purchasing

The federal-state Medicaid program insures 43 million people for virtually all of the prescription drugs approved by the FDA. To determine the price that it will pay for a drug treatment, the government uses the average price in the private sector for that same drug. Assuming that Medicaid recipients are unresponsive to price because of the program's zero co-pay, this rule will increase prices for non-Medicaid consumers. Using drug utilization and expenditure data for the top 200 drugs in 1997 and in 2002, we investigate the relationship between the Medicaid market share (MMS) and the average price of a prescription. Our findings suggest that the Medicaid rules substantially increase equilibrium prices for non-Medicaid consumers. Specifically, a ten percentage-point increase in the MMS is associated with a ten percent increase in the average price of a prescription. This result is robust to the inclusion of controls for a drug's therapeutic class, the existence of generic competition, the number of brand competitors, and the years since the drug entered the market. We also demonstrate that the Medicaid rules increase a firm's incentive to introduce new versions of a drug at higher prices and find empirical evidence in support of this for drugs that do not face generic competition. Taken together, our findings suggest that government procurement can have an important effect on equilibrium prices in the private sector.

Federal Policy and the Rise in Disability Enrollment: Evidence for the Veterans Affairs’ Disability Compensation Program

The U.S. Department of Veterans Affairs compensates 13 percent of the nation’s military veterans for service‐related disabilities through the Disability Compensation (DC) program. In 2001, a legislative change made it easier for Vietnam veterans to receive benefits for diabetes associated with military service. In this paper, we investigate this policy’s effect on DC enrollment and expenditures as well as the behavioral response of potential beneficiaries. Our findings demonstrate that the policy increased DC enrollment by 6 percentage points among Vietnam veterans and that an additional 1.7 percent experienced an increase in their DC benefits, which increased annual program expenditures by $2.85 billion in 2007. Using individual‐level data from the Veterans Supplement to the Current Population Survey, we find that the induced increase in DC enrollment had little average impact on the labor supply or health status of Vietnam veterans but did reduce labor supply among their spouses

Federal Policy and the Rise in Disability Enrollment: Evidence for the VA's Disability Compensation Program

The U.S. Department of Veterans' Affairs (VA) currently provides disability benefits to 2.72 million veterans of U.S. military service through the Disability Compensation (DC) program. Until recently, the medical eligibility criteria for this program were the same across service eras, with the key condition being that the disability was caused or aggravated by military service. But in July of 2001, the VA relaxed the eligibility criteria for Vietnam veterans by including diabetes in the list of conditions covered by DC. This change was motivated by an Institute of Medicine report, which linked exposure to Agent Orange and other herbicides used by the U.S. military in Vietnam, to the onset of diabetes. In this paper, we investigate the impact of this policy change on DC enrollment, expenditures, and the sensitivity of the program to economic conditions. Our findings demonstrate that the Agent Orange decision increased DC enrollment by 7.6 percentage points among Vietnam veterans and that an additional 3.3 percent enjoyed an increase in their DC benefits. Our estimates further suggest that the policy change increased program expenditures by $2.69 billion during the 2006 fiscal year and by$45 billion in present value terms. After the policy took effect, we find that the sensitivity of the program to local economic conditions increased substantially. Taken together, our results suggest that even relatively narrow changes in the medical eligibility criteria for federal disability programs can have a powerful effect on program enrollment and expenditures.

The Rise in Disability Recipiency and the Decline in Unemployment

Between 1984 and 2000, the share of non-elderly adults receiving benefits from the Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) programs rose from 3.1 to 5.3 percent. We trace this growth to reduced screening stringency and, due to the interaction between growing wage inequality and a progressive benefits formula, a rising earnings replacement rate. We explore the implications of these changes for the level of labor force participation among the less skilled and their employment responses to adverse employment shocks. Following program liberalization in 1984, DI application and recipiency rates became two to three times as responsive to plausibly exogenous labor demand shocks. Contemporaneously, male and female high school dropouts became increasingly likely to exit the labor force rather than enter unemployment in the event of an adverse shock. The liberalization of the disability program appears to explain both facts. Accounting for the role of disability in inducing labor force exit among the low-skilled unemployed, we calculate that the U.S. unemployment rate would be two-thirds of a percentage point higher at present were it not for the liberalized disability system.

Do New Prescription Drugs Pay for Themselves?: The Case of Second-Generation Antipsychotics

During the last several years, spending on prescription drugs in the U.S. increased at a 15% annual rate, with the US$ 178 billion spent in 2002 accounting for more than 11% of health care expenditures in the U.S. This growth has been largely driven by a shift to new drugs, which are typically more expensive than earlier drugs within the same therapeutic category. Recent research has suggested that the shift to new drugs may lower health care spending by reducing the demand for hospitalizations and other health care services. Using a 20% sample of Medicaid recipients from the state of California for the 1993–2001 period, I investigate this hypothesis for antipsychotic drugs—the therapeutic category that has accounted for more government spending than any other during the past decade. Using three different identification strategies, my findings demonstrate that the 610% increase in Medicaid spending on antipsychotic drugs during the study period caused by the shift to three new treatments has not reduced spending on other types of medical care, thus undermining the hypothesis that the drugs have “paid for themselves.” Because of data limitations, the findings for health outcomes are necessarily more speculative but suggest that the new medications have increased the prevalence of diabetes while reducing the prevalence of extrapyramidal symptoms among the mentally ill

Hospital Ownership and Public Medical Spending

The hospital market is served by firms that are private for-profit, private not-for-profit, and government-owned and operated. I use a plausibly exogenous change in hospital financing that was intended to improve medical care for the poor to test three theories of organizational behavior. I find that the critical difference between the three types of hospitals is caused by the soft budget constraint of government-owned institutions. The decision-makers in private not-for-profit hospitals are just as responsive to financial incentives and are no more altruistic than their counterparts in profit-maximizing facilities. My final set of results suggests that the significant increase in public medical spending examined in this paper has not improved health outcomes for the indigent

Hospital Market Structure and the Behavior of Not-For-Profit Hospitals: Evidence From Responses to California\u27s Disproportionate Share Program

I exploit a change in hospital financial incentives to examine whether the behavior of private not-for-profit hospitals is systematically related to the share of nearby hospitals organized as for-profit firms. My findings demonstrate that not-for-profit hospitals in for-profit intensive areas are significantly more responsive to the change than their counterparts in areas served by few for-profit providers. Differences in financial constraints and other observable factors correlated with for-profit hospital penetration do not explain the heterogeneous response. The findings suggest that not-for-profit hospitals mimic the behavior of private for-profit providers when they actively compete with them