Disability Insurance (DI) Administrative Law Judge Leniency

US Social Security Disability Insurance (SSDI) provides cash payments and Medicare eligibility to workers and their families when a disability prevents someone from substantial work. As one of the biggest social insurance programs in the world, SSDI provided approximately $147 billion to disabled American workers and their families in 2016. Roughly 5 percent of individuals between the ages of 25 and 64 receive SSDI, and about 7 percent of the US federal budget is spent on SSDI and related Medicare expenses.

Individuals who are initially rejected from obtaining SSDI have the opportunity to appeal their case. French and Song (2014) (Table 6, Panel G) exploit the random assignment of appeals to administrative law judges to assess the causal effect of SSDI receipt on future outcomes. Hendren and Sprung-Keyser (2020) translate these estimates into their implied MVPF.

MVPF SUMMARY

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Hendren and Sprung-Keyser (2020) begin with an initial benefit level of $13,560 and the same assumption from Maestas et al. (2013) that SSDI receipt causes 19.2% of individuals to reduce their earnings under the income eligibility threshold. Together, this provides the mechanical cost of the transfer and means the counter-factual transfer per recipient is $10,956. On the cost side, Hendren and Sprung-Keyser (2020) begin with the mechanical transfer of $10,956 and the additional transfer cost of $2,604 based on those who reduce their earnings to receive the SSDI benefit. Next, Hendren and Sprung-Keyser (2020) use the estimate from French and Song (2014) that marginal SSDI recipients have $5,787 less in labor earnings. At a marginal tax and transfer rate of 20%, Hendren and Sprung-Keyser (2020) get an additional fiscal externality of $5,787 * 20% = $1,157 and an MVPF of $10,956 / ($10,956 + $2,604 + $1,157) = 0.74 (95% CI [0.71, 0.78]).