House Committee on Ways and Means, Subcommittee on Social Security Hearing on SGA Levels for the Blind and Work Incentives Deputy Commissioner, Susan M. Daniels testified,
March 23, 2000
Mr. Chairman and Members of the Subcommittee:
Thank you for inviting me to discuss current work incentives for blind individuals and other people with disabilities. This is an important issue, and the Social Security Administration looks forward to working with you on finding ways to help more Americans with disabilities successfully return to work.
Today I would like to discuss the definition of disability and how work activity for both blind and non-blind individuals relates to it; our current work incentives and the recent changes in the law; and some pending proposals in that area.
Definition of Disability
The Social Security Act (the Act) defines disability as the inability to engage in any substantial gainful activity (SGA) because of a medically determinable physical or mental impairment(s):
- That can be expected to result in death, or
- That has lasted or, that we can expect to last for a continuous period of not less than 12 months.
We use earnings guidelines to evaluate whether the work activity is SGA and whether we may consider someone disabled under the law. While this is only one of the tests used to decide if a person is disabled, it is a critical threshold in disability evaluation.
Blindness (sometimes referred to as statutory blindness) is the only impairment defined in the Act; all other impairments are defined in regulations. Blindness is defined as central visual acuity of 20/200 or less in the better eye with best correction, or a limitation in the field of vision in the better eye so that the widest diameter of the visual field subtends an angle of 20 degrees or less (tunnel vision).
Blind individuals do not have to meet the "recency of work" test (generally, work in 20 out of the last 40 quarters) to be eligible for disability benefits. Approximately 120,000 of our beneficiaries meet the statutory definition of blindness. (About 50,000 are Supplemental Security Income beneficiaries aged 18 to 64; approximately 100,000 are Social Security beneficiaries; about 30,000 are concurrently receiving benefits under both programs.)
Substantial Gainful Activity (SGA)
The Act requires the Commissioner to prescribe in regulations the criteria for determining when earnings demonstrate an individual's ability to engage in SGA. The Act also specifies that a different definition of SGA applies to blind individuals. With an impairment other than blindness, effective July 1999 earnings over $700 a month generally demonstrate SGA. For someone who is blind, effective January 2000, earnings over $1,170 a month generally demonstrate SGA.
Prior to 1978, the SGA amount was the same for both blind and non-blind individuals. The Social Security Amendments of 1977 made the SGA threshold for blind individuals the same as the monthly exempt amount under the retirement earnings test (RET) for individuals at or above the normal retirement age (NRA), an amount which has generally been indexed that amount to average wage growth. At the time, Senator Birch Bayh indicated that blindness was a "distinct and unique condition" and that "The blind, as a group, suffer largely artificial impediments when they seek to enter and compete in the labor market." The two thresholds (the exempt amount and SGA) rose together from $334 a month in 1978 to $940 a month in 1995, while the non-blind SGA amount rose from $260 a month in 1978 to $500 a month in 1990.
The Contract with America Advancement Act of 1996, enacted March 29, 1996, significantly increased the RET exempt amount (rising to $2,500 a month in 2002 for individuals at NRA). It de-coupled the SGA amount for blind individuals from the RET, and instead continued to index the then-existing SGA amount for average wage growth. Meanwhile, SSA increased the regular SGA amount in regulations to $700 a month effective July 1999.
For individuals who are blind and age 55 or older, if their work requires a lower level of skill and ability than the work that they did before age 55, benefits are suspended, not terminated, when earnings demonstrate SGA. Benefits are then payable for any subsequent month that earnings fall below SGA.
Work Incentive Provisions
Congress enacted work incentive provisions that were strongly supported by the Administration to provide beneficiaries with the support they need to move from benefit dependency to independence. Work incentives assist beneficiaries with disabilities to enter or reenter the workforce by protecting entitlement to cash payments and/or health care until this goal is achieved.
Some work incentives are common to both the Social Security Disability Insurance (SSDI) and Supplemental Security Income Program (SSI), while some are unique to one program or the other. Because even the common work incentives may be treated differently by either program, I would like to briefly discuss work incentives as each program treats them. I would also like to point out the special work incentives that apply only to blind beneficiaries of either program. SSDI Work Incentives
There are several work incentives for SSDI beneficiaries built into the Act, most notably impairment-related work expenses (IRWE), the trial work period (TWP), the extended period of eligibility for reinstatement of benefits (EPE), and continuation of Medicare. These are dependent upon the disabled beneficiary continuing to have a disabling impairment.
When determining SGA, we deduct from gross earnings the cost of certain impairment-related work expenses. We deduct beneficiaries' IRWE paid during a period of work when:
- The item or service enables them to work;
- They need the item or service because of their disabling impairment;
- They pay the cost and are not reimbursed by another source (e.g., Medicare, Medicaid, private insurance);
- The expense is "reasonable"--that is, it represents the standard charge for the item or service in their community.
The TWP allows disabled beneficiaries to test their ability to work for at least 9 months. During the TWP, beneficiaries receive full benefits regardless of how high earnings might be. The TWP continues until the accumulation of 9 months (not necessarily consecutive) of "services" performed within a rolling 60-consecutive-month period. We use this "services" rule only to control when the TWP stops. "Services" means any activity in employment or self-employment for pay or profit or of the kind normally done for pay or profit (whether or not it is SGA). We currently consider work to be services if earning are more than $200 a month (or more than 40 self-employed hours in a month).
Once benefits have been ceased due to SGA, the EPE allows automatic reinstatement of benefit payments for any month in which earnings fall below SGA. Benefits can be reinstated anytime during the 36-month period following the end of the TWP, and will continue as long as requirements are met. Currently, Medicare coverage continues during this period and for three additional months. At that point, disabled individuals can buy Medicare coverage. Effective October 1, 2000, based on the new Ticket to Work Incentives Improvement Act, premium-free Medicare is extended an additional 4 years.
In addition to providing incentives to work, we also refer disabled beneficiaries to their local State Vocational Rehabilitation (VR) agency, or to other service providers in the public and private sector who try to help beneficiaries return to work. In fiscal year 1999, SSA paid State VR agencies about $120 million for their services provided to over 11,000 beneficiaries with disabilities who worked at least 9 months at the substantial gainful activity level. Although this was a record year for reimbursements, we look forward to much more progress in this area.
SSI Work Incentives
Some general information about the SSI program is useful to explain the work incentive provisions as they apply to that program. The SSI program differs from Social Security in that the monthly Federal benefit standard (currently, $512 for an individual and $769 for an individual with an eligible spouse) is reduced dollar-for-dollar by the amount of the individual's "countable" income--i.e., income less all applicable exclusions. The result of this computation determines whether the individual (or couple) is eligible and the amount of the benefit payable.
SSI law defines two kinds of income: earned and unearned. Earned income is wages, net income from self-employment, remuneration for work in a sheltered workshop, royalties on published work, and honoraria for services. All other income (including income received in kind) is unearned.
When determining an individual's countable income, exclusions are taken for various types of income. There is a general $20 exclusion, generally applied to an individual's for unearned income. In the case of earned income, we exclude a portion of the $20 general exclusion that has not been used, and then exclude the first $65 and one-half of the remainder of the earnings. This greater exclusion for earned income acts as a work incentive for all SSI recipients.
In determining the benefits of disabled individuals, we exclude IRWEs. For the disabled, we exclude work expenses directly related to the individual's disability, such as attendant care services, assistance in travelling to and from work and personal assistance related to work. I will discuss allowable deductions for blind SSI beneficiaries in greater detail later.
Under SSI we also exclude income set aside or being used to pursue a plan for achieving self-support (PASS) that has been established by a disabled or blind person. These plans are established to help blind and disabled individuals become self-supporting by excluding income that is set aside to help the individual reach a specific occupational goal. In December 1999, there were 1,045 SSI recipients with a PASS established, although not all of those individuals reported earnings for that month.
Finally, the laws governing SSI contain provisions that enable blind and disabled individuals to continue working and receiving income beyond the limit that would normally result in ineligibility.
Under section 1619(a), a disabled beneficiary who would cease to be eligible because of earnings over the SGA limit (currently $700 a month) can continue to receive cash benefits until the amount of earnings would cause him or her to be ineligible for benefits under SSI income counting rules. Being a recipient of this special benefit equals being an "SSI recipient" for Medicaid eligibility purposes.
Section 1619(b) provides "SSI recipient" status for Medicaid eligibility purposes for certain SSI recipients. These individuals have earnings which preclude the payment of an SSI benefit but are not sufficient to provide a reasonable equivalent of the SSI, social services, and Medicaid benefits that the individuals would have in the absence of earnings. For these individuals, the loss of the social service and Medicaid benefits would seriously inhibit their ability to continue working. However, these individuals have to be otherwise eligible except for their earnings.
According to SSA's Office of Research, Evaluation and Statistics, there were approximately 340,000 SSI disability beneficiaries (or 6.4 percent) who were working In December 1999. About 70,000 of these individuals were receiving benefits under section 1619(b). These beneficiaries do not receive an SSI payment but retain their Medicaid coverage. Almost three-fourths of those who received this type of SSI benefit had amounts of earned income below the substantial gainful activity level.
Blind Work Incentives
I have already discussed how the SGA level differs for blind beneficiaries and how it applies to SSDI beneficiaries who are blind and age 55 or older. SSA also does not count any earned income a blind SSI beneficiary receives that is used to meet any expenses needed to earn that income in determining SSI eligibility and payment amount. Unlike IRWE, blind work expenses (BWE) do not have to be related to blindness. As a result, any expense reasonably attributable to work is to be excluded, dollar for dollar, not simply those related to the impairment.
Some examples include guide dog expenses; transportation to and from work; Federal, state, and local income taxes; Social Security taxes, attendant care services, professional association fees; and union dues.
Ticket to Work and Work Incentives Improvement Act of 1999
As you know, the President signed the Ticket to Work and Work Incentives Improvement Act of 1999 (the "Ticket") into law last December. I want to express my thanks, Mr. Chairman, to you, and the members of the Subcommittee, for your support in getting the "Ticket" passed. This legislation will help disabled individuals who want to work by lessening their fears about losing health care coverage and income during attempts to work. It improves and expands their VR choices, providing enhanced work incentives, outreach activities and new service structures.
The provisions most pertinent to today's discussion include:
- The Ticket to Work and Self-Sufficiency Program--which provides beneficiaries with opportunities to get vocational rehabilitation services, employment services or other support services from approved providers that they can choose, and which will be phased in beginning 2001.
- Part A premium-free Medicare coverage for disability beneficiaries who return to work is extended for four and one-half years beyond the current limit effective Oct. 1, 2000.
- Quick reinstatement within five years without filing a new application for beneficiaries with a disabling condition whose benefits have ended because of earnings from work.
- Prohibition against initiation of a continuing disability review (CDR) while a beneficiary is "using a ticket" or based on the work activity of an individual receiving benefits for at least 24 months.
Ever since the "Ticket" was enacted, we have been actively engaged in the hard work of implementing its various provisions. We again look forward to working with you as the different provisions take shape and begin to show the results we anticipate-more people with disabilities entering or reentering the workforce.
Legislation has been introduced in both the House (H.R. 1601) and the Senate (S. 285) that would equate the SGA amount for blind individuals with the RET exempt amount at NRA. Currently that amount is $1,417 a month, which is scheduled to rise to $2,500 a month in 2002 (30,000 per year), and to be indexed to average wage growth thereafter. I would like to point out that approximately 60 percent of workers today earn $30,000 per year or less. If these bills were enacted effective 2000, we estimate 5-year costs of $0.9 billion and long-term costs to the Social Security trust funds at -0.01 percent of taxable payroll; in other words, passage of such a provision would have a detrimental impact on long-term solvency. Any consideration of these proposals should be done in the context of Social Security solvency legislation.
H.R. 5 as passed by the House would eliminate the RET at NRA effective this year. As you know, the President has promised to sign a clean bill to eliminate the RET at NRA. Obviously, such enactment would affect the preceding SGA proposal; that proposal, if combined with H.R. 5, would completely eliminate the SGA amount for blind individuals, thus permitting a blind individual to earn any amount and still be eligible for benefits. Under this scenario, effective 2000, we estimate 5-year costs of $2.6 billion and long-term costs at -0.03 percent of taxable payroll, an even greater negative impact on long-term solvency. Note that the elimination of the RET at NRA has no impact on long-term solvency, but there are additional Medicare and Medicaid costs as well.
Mr. Chairman, we want to build on the momentum provided by the enactment of the "Ticket" and to increase incentives to work for all people with disabilities. Our commitment is to make every effort to enrich the lives of all people with disabilities and to help all those who want to work do so.
As Commissioner Apfel testified before this Subcommittee last year, as a nation, we are best served when all our citizens have the opportunity to contribute their talents, ideas, and energy to the workforce. We look forward to working together with the Subcommittee and Congress to achieve the proper equilibrium of equity and actuarial balance in the area of disability work incentives. I will be happy to answer any questions the Members may have.