U.S. disability rolls swell in a rough economy

[PrisonerOfHope]

U.S. disability rolls swell in a rough economy
By Michael A. Fletcher, Published: September 20

MILLINOCKET, MAINE — The huge mills along the Penobscot River roared virtually nonstop for more than a century, turning the dense Maine forests into paper and lifting the thousands of men who did the hot and often backbreaking work into the middle class.

But the mills have struggled in recent years, shedding thousands of jobs. Now this area, whose well-paying jobs provided an economic foothold for generations of blue-collar workers, has become a place where an unusually large share of the unemployed are seeking economic shelter on federal disability rolls.

Between 2000 and 2012, the number of people in Penobscot County receiving Social Security disability benefits skyrocketed, rising from 4,475 to 7,955 — or nearly one in 12 of the county’s adults between the ages of 18 and 64, according to Social Security statistics.

The fast expansion of disability here is part of a national trend that has seen the number of former workers receiving benefits soar from just over 5 million to 8.8 million between 2000 and 2012. An additional 2.1 million dependent children and spouses also receive benefits.

The crush of new recipients is putting unsustainable financial pressure on the program. Federal officials project that the program will exhaust its trust fund by 2016 — 20 years before the trust fund that supports Social Security’s old-age benefits is projected to run dry.

The growth of the disability rolls has accelerated since the recession hit in 2007. As the labor market tightened, workers with disabilities that employers previously accommodated on the job — painful hips, mental disorders, weak hearts — were often the first to go. Finding new work often proved difficult, causing many to turn to the disability rolls for support.

The migration of so many people from work to the disability rolls is raising concern among lawmakers in Congress that the program is being stretched beyond its original intent of providing a safety net for former workers whose medical problems make them unable to work.

Last week, the Government Accountability Office found that the program made $1.3 billion in potentially improper payments to people who had jobs when they were supposedly disabled. The allegedly improper payments represent less than 1 percent of disability payments.

While fraud remains a concern, policymakers say the program’s biggest vulnerability is the subjective criteria that create a large gray area for applicants. A worker with physical impairments that are difficult to document precisely, like a bad back, can tolerate the condition while on the job but claim it as a reason to go on disability if he falls out of work for a prolonged period.

Many recipients first go on unemployment, which can last a few months or even more than year. Disability, by contrast, can pay out benefits for decades. The vast majority of recipients never return to work.

“The disability program is increasingly becoming a long-term unemployment program,” said Richard Burkhauser, a Cornell University professor who co-wrote a book on disability policy and has testified before Congress about the program. “We see a lot of it now because of the effects of the recession.”

The program, which is mostly funded by the Social Security payroll tax, paid out $135 billion in 2012, and it has spent more money than it has collected in payroll taxes every year since 2009, according to the Congressional Budget Office. People on disability can receive Medicare after two years, regardless of age, which adds another $80 billion to the program’s tab.

The trust fund has teetered financially as recently as the early 1990s, and Congress solved the problem by transferring money from the fund supporting Social Security retirement benefits. But with that program also on increasingly shaky financial ground as baby boomers retire, it remains to be seen how lawmakers contend with the looming shortfall.

Maine mill jobs vanish

The explosive growth of the disability rolls represents a new reality for Millinocket, a town that had been synonymous with blue-collar prosperity since the Great Northern Paper Co. opened the largest paper mill in the world here in 1900.

The company built a second mill in East Millinocket in 1906, and before long, Millinocket was known as “the magic city” because of its seemingly miraculous expansion.

The good times were still rolling when Eugene LaPorte graduated from high school in 1973. He went straight to work in the mill, and for years it looked like a great move: LaPorte became a supervisor, and at his peak, he had close to a six-figure salary.

“Who needed a college education?” LaPorte said. “I was living the dream.”

But that was before the company’s fortunes changed. In 1990, Great Northern was purchased in a hostile takeover and later went into bankruptcy. Most recently, a private equity firm, Cate Street Capital, has been struggling to revive its operation.

The vast majority of workers were let go. Once, the company employed 4,500 workers. Now, the count is down to about 400, according to local job-training officials.

LaPorte, 58, lasted until 2011. By then, he was battling a series of heart ailments, including a heart attack that struck while he was at work on Christmas Eve 2009. He also had asthma and diabetes.

Other laid-off workers have gone to the Eastern Maine Development Corp., the local job-training center, where they have learned the skills to work as technicians or nurses or in other jobs.

“People have to find a niche,” said Jon R. Farley, director of economic and workforce development at the job training center.

LaPorte wanted to return to the only job he knew. But he had no luck getting back in. He suspects that had a lot to do with his medical history. Finally, his wife, who runs a small trophy business, hit him with a dose of reality.

“They think you’re disabled,” she told him. “Why don’t you put in for it?”

At first, he resisted. But, he noted, he knows a “lot of people who have applied.” Finally, LaPorte filed for disability and, given his long list of chronic ailments, he was approved unusually quickly — in a matter of months.

An expanding program

When President Dwight D. Eisenhower signed the Social Security disability program into law in 1956, it was envisioned as a safety net for people ages 50 to 64 who could not continue working because of long-term medical problems.

The age criterion has since been broadened. Applicants are subjected to a detailed process in which Social Security examiners, administrative law judges and sometimes the federal courts pore over their medical records to evaluate their claims.

But many of the judgments are ultimately subjective: More than half of awards go to applicants who claim musculoskeletal disorders or mental impairments that are often hard to document conclusively.

The number of people on the disability rolls has been growing rapidly even though workers report being ever healthier in surveys. They are also less likely than ever to have physically demanding jobs.

The nation’s aging population explains part of the increase. As workers age, they are more likely to develop physical or mental impairments. Maine, for example, has one of the nation’s oldest populations and has long been among the national leaders in the proportion of working-age people receiving disability.

The growth in the number of women in the workforce — which expanded the number of people covered by the program — is also seen as a factor in disability’s expansion. Changes in program eligibility in 1984 made it easier to qualify for the program with maladies such as pain and depression.

Lawmakers are concerned that some states have encouraged unemployed workers with disabilities to apply for the program, shifting the economic burden for the jobless to the federal government.

A recession option

But the most salient factor in the program’s explosive growth, many economists say, is the difficult job market — particularly for people with few educational credentials.

“The Social Security disability program has become an economic option for many people,” said John Dorrer, an economist and former acting commissioner of the Maine Department of Labor. “As a result of the economic downturn, a whole lot of unskilled males 50 and over were bounced out of the labor force.”

For decades, the number of applicants has almost always increased during economic downturns.

“The bad economy has coincided with baby boomers hitting the disability-prone years,” said Daniel W. Emery, a disability lawyer in South Portland, Maine. “Most people want to work. But employers are less apt to make accommodations when the economy is down. One thing I always ask people is whether they liked their jobs. Often, people just tear up when you ask them that.”

Benefits are hardly generous. They average $1,130 a month, and recipients are eligible for Medicare after two years. But with workers without a high school diploma earning a median wage of $471 per week, disability benefits are increasingly attractive for the large share of American workers who have seen both their pay and job options constricted.

In 2004, nearly one in five male high school dropouts between ages 55 and 64 were in the disability program, according to a paper by economists David Autor and Mark Duggan. That rate was more than double that of high school graduates of the same age in the program and more than five times higher than the 3.7 percent of college graduates of that age who collect disability.

“When you are faced with job loss, what do you do?” said Andrew Houtenville, director of research for the University of New Hampshire’s Institute on Disability. “This is not necessarily shirking. To be on disability insurance, you have to have a pretty serious condition. If you have a severe disability and a job is no longer available in your region you go to disability, and you get stuck there.”

These days, LaPorte spends a lot of his free time riding his Harley-Davidson motorcycle to bike rallies around New England. He enjoys the freedom, but he said he would prefer to be working than collecting a government check.

“I wanted to go to work,” he said. “I love making paper. Fifty-eight is a ridiculous age to retire.”

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