This cannot continue

"A parasite has insidiously invaded the body of America." This lead sentence in the article below from Forbes Magazine should not only be taken seriously, but should provoke action by government officials.  Think it will?

Fraud And Disability Equal A Multibillion Dollar Black Hole For Taxpayers

A parasite has insidiously invaded the body of America. It has fed and grown large on nutrients from government handouts and now is enervating its host, our capitalist system.

Since our president entered the White House in January 2009 through September of this year 5.9 million people have been added to the SSDI or Social Security Disability program. That compares with less than 2.5 million jobs created during the same period. According to Social Security Administration data, currently including spouses and children, SSDI rolls have swollen to a bloated 10.9 million. A record one in fourteen workers is now on the SSDI dole. It’s like checking in a hotel and never leaving. Of the 653,877 souls that departed the program in 2011, 36% departed by being gracious enough to die, while 52% reached retirement age and seamlessly switched to other benefits. Only 6% returned to work and 3.6% exited the program due to medical improvement. According to Congressional Research Services this program cost taxpayers $128.9 billion in 2011 and was in deficit to the tune of $25.3 billion. Funded by the 1.8% payroll tax and comprising nearly 18% of all social security spending, at current pace the trust fund may be exhausted by as early as 2015.

I pulled up http://www.ssa.gov/  (then click disability) to look for myself at the so called “Listing of Impairments” and if length is an indicator for program efficacy, then SSDI would be one of the world’s greatest government safety net plans. There is a kaleidoscope of ailments from which to choose. Under Section 12, “Mental Disorders” section of the Disability Evaluation there is, statistically, a qualifying syndrome for all of us, not just in America, but in the entire universe. This one category alone printed out to twelve full pages.

Certainly each of us carries familiarity with subsection 12.04, “Affective Disorders”. It would be tiresome to redact the entire section but some examples are in order. Ever had “decreased energy”, “feelings of guilt or worthlessness”, “difficulty concentrating”, “sleep disturbance”, “anhedonia” (I had to look it up), or psychomotor agitation (I didn’t bother to look it up). If you answered yes to any one of these infirmities and it results in “difficulties maintaining social functioning”, or “marked difficulties maintaining concentration”, or “repeated episodes of decompensation” (I don’t know and don’t care), then bingo you are eligible for disability. If you don’t qualify on my above snippet, don’t despair, there are literally dozens of other possible maladies of the mind listed and most of us, if we want, can fall neatly into one or more of the mental illness baskets.

Somehow, if you are classified to be of sound mental composition, perhaps an examination of your Musculoskeletal System (in Section 1) might strike gold. Basically this section is all things “back” related. From my own experience and talking to doctors, virtually every person in their thirties and older will show “bulging” disks or some other form of spinal degeneration. It is quite difficult to medically argue against back pain. Fortunately for claimants, fibromyalgia has recently been added to our list of eligible diseases under SSDI. Often if your head hurts or you have muscle aches of indeterminate origins and doctors can’t specifically diagnose any name disease, they may call it fibromyalgia. Thank goodness SSDI can fill this void, since because of its non-specificity of symptoms, health insurance companies often turn down these highly subjective claims.

The Numbers Prove The Point

The numbers substantiate a shift to these hard to (dis)prove afflictions. Over the past three decade’s awards for mental illness climbed from 16% of total claims to one third by 2010. During the same period “back pain” increased its market share from 13 to 28%. It is a system begging for abuse.  A study by the NBER (National Bureau of Economic Research) found that for workers with low paying jobs, SSDI including Medicare replaced, on average, 90% of working income. (SSDI recipients get free Medicare after two years of receiving benefits.) In times of tepid job growth, like now for instance, wages are often stagnant, so if there is a choice between working at minimum wage versus doing nothing and earning almost equal amounts, sloth trumps exertion much more often than not. What are other explanations why at this juncture of a theoretically improving economy is our nation weighed down by such a bloated system? Well secondly, the qualification standards have been severely watered down. As evidenced by above statistics “back pain” is questioned much less today. It is not difficult to claim otherwise when a person says they are depressed. Also, more attention is paid to the applicants claims of pain and special trust is placed in the report made by the applicants own physician. Third, once invited into the club, why leave. In 1983, 163 per 1,000 people terminated benefits. Jump ahead to 2011 and that number has collapsed to only 74 per 1,000. In a crummy job market the incentive is to stay put and live off the fat of the government.  A fourth reason is that the labor participation rate, at 63.7%, is at its lowest levels in generations. This translates that of the millions who have thrown in the towel looking for employment, many have elected to enter the SSDI lottery. This leads us to the huge issue of fraud.

The Role Of Fraud

“We know there are individuals who will purposely withhold or fabricate information to collect government benefits they are not entitled to receive”. Those are the words of the Office of the Inspector General from their hearing on “combating disability waste, fraud, and abuse”.  The Senate conducted their own investigation which concluded that fully one quarter of all disability insurance claims decisions were flawed, improperly addressing “insufficient, contradictory, and incomplete evidence, thus increasing the chances of rewarding nondisabled persons.” The study also determined the Social Security Administration (SSA) failed to establish that claimants were properly screened to certify that they satisfied metrics in the Social Security Administration’s (SSA) medical “Listing of Impairments” to meet eligibility requirements that would qualify them for the DI program. The Inspector General’s office identified billions in fraud. The Senate study implies many billions more in abuses. Much of the ongoing program cheating comes from those who continue to collect disability payments but are stealthily employed on the side. Not surprisingly, some of the SSDI wounds are self-inflicted. The SSA loses hundreds of millions continuing to pay those who were honest and notified that they were returning to work.  The agency is supposed to conduct CDR’s or Continuing Disability Reviews to check in and determine the status of the disabled. I know it surprises everyone that there is a huge backlog and SSA is severely understaffed in this area. Probably the biggest area of abuse is those who gingerly slip through the vetting net and shouldn’t be getting disability payments in the first place. The contrived complexity of the SSDI system has spawned a cottage industry of doctors and specialized legal teams to navigate the byzantine multi-tiered documentation process. While the integrity of most lawyers and doctors is beyond reproach there are a few bad apples that make their living gaming the system. Remember what your mother preached, “if at first you don’t succeed, try, try again”. This small nugget of wisdom pays off especially when applying for SSDI. Often applicants may be turned down on the first or second attempt to receive benefits. Many times it is only through a court hearing that cases get resolved. Per a study by D. Autor and M. Duggan as many as 40% of all disability awards comes through the appeals process. Some judges gain the reputation of never seeing a claim they didn’t like………never refusing anyone. They also found in one recent year the SSA paid out as much as half a billion dollars to claimants attorneys. It seems to me it is always in the best interest of the lawyer to take a case to trial; it’s a win for him/her no matter what the verdict.

Broken System

As of August past the disability award (not including Medicare) was about $1,111 per month. So the incentive to do some menial dead end job loses appeal when the new job might or might not have health benefits…….certainly not as grand as Medicare.

The SSDI program is a microcosm of what ills the job market in America. When our president took office 40% of the population received some sort of government assistance. That number now stands at over 55%. There is an alphabet soup of welfare programs that create disincentive to seek gainful employment. Zerohedge.com published an excellent chart demonstrating when you add in all the free government goodies that a single mother with one child with gross income of $29,000 receives, that she effectively ends up with $57,327 in net income and benefits. She is better off than the mom with gross income of $69,000 who after taxes has a net income and benefits of $57,045. Some of the giveaways include SNAP Supplemental Nutrition Assistance Program formerly known as Food Stamps. If boredom sets in, look up CHIP or TANF. There is also Medicaid and the Housing Choice Voucher Program.  Have a look for yourself.  http://www.zerohedge.com/news/2012-11-27/when-work-punished-tragedy-americas-welfare-state Zerohedge.com published another chart on 11/22/12 demonstrating that a single parent family of three earning minimum wage ($14,500) per year has more disposable income than the family making $60,000 per year. The Wall Street Journal last week published some of the exchanges between Speaker Boehner and the President where the President kept repeating that he did not think the country had a spending problem. My translation is that he has no intentions of reducing any of the runaway programs that insidiously degrade our economic structure. The new tax increases on the “rich” are projected to bring $600 billion in revenues to the Treasury Department over the next decade. Deficits are projected to be $6.8 Trillion or elven times as much.

While there is certainly intransigence on both sides of the isle, the President as chief of state needs to rise above and be a leader. If not addressed in a meaningful way, our profligacy will one day in the not too distant future destroy our country. The Federal Reserve’s rigged artificially low interest rates are the only firewall standing between us and bankruptcy. Imagine if short term rates were 5% and the 10 year treasury was sitting at 7%.  Imagine servicing our $16 trillion debt at these rates. The time to act is now.