Labor Force Participation Is Key Assumption Behind Proposed Disability Social Security Budget Cuts

Before he became commander-in-chief, President Donald Trump swore to his supporters that there would be no cuts to Social Security under his administration. That was then. Today, social security is facing significant budget cuts. In fact, it might not even survive during the ten years that it would gradually lose funding.

Trump Cuts Disability Social Security Funds to Make People Work Again

Drastic Budget Cut on Social Security Proposed Over The Next 10 Years

According to budget director Mick Mulvaney, the Trump administration is proposing a massive $72 billion spending cut on both disability social security benefits and Supplemental Security income. If approved, the said cuts would be done gradually over a span of 10 years. Previously, the Social Security Administration has already undergone a 10 percent budget cut back in 2010.

Proposed Social Security Budget Cuts Assumes More Can Return To Workforce

Trump's plans to bring costs down rest on one critical assumption, that some people who are currently classified as disabled can return to work. Per the proposal, people with disability currently had low labor force participation rates. Moreover, it is believed that federal government is currently not doing enough to encourage individuals to return to the labor force.

Instead of remaining on disability, the Trump administration wants to create more incentives and pathways to allow those on temporary disability to get their jobs back again. They further argue that disability insurance programs should be more focused on helping people remain in the workforce and become self-sufficient.

Social Security Spending Levels Has Been Down Recently

Republican proponents of the severe budget cuts argue that a tightening is needed due to reportedly growing number of beneficiaries in the program. Today's numbers, however, tell a different story. In fact, the spending levels on Social Security Disability Insurance have tapered off recently. Last April, an estimated 9.455 million people received disability benefits. This is down by 121,000 when compared to the number of people who received benefits in April of 2016. The said is only averaging a modest $1,032 each month.

On the other hand, there is also a proposal to conduct a series of tests in the midst of all the intended social security budget cuts. That is, Trump's administration is looking to test ways in which they can increase labor force participation among people with disabilities. The administration is also looking to make participation in these tests mandatory for all program applicants and beneficiaries.

Budget Proposes Tests That Can Cost As Much As $100 Million

What concerns some experts, however, is that budget has no expectation that such testing will achieve any savings in the budget in the short run. Moreover, the tests would also come with significant costs. In fact, it is expected to add as much as $100 million in budget costs. That said, proposed budget assumes that the tests would start generating an annual savings between $3 billion to $5 billion each year, beginning 2023 which they expect to reach a maximum of $18.6 billion by 2027.

On the other hand, putting more temporarily disabled citizens back to the workforce may also help increase funding for disability insurance. This is because 2.37 percent of the 12.4 percent total payroll tax actually goes straight into the disability fund. This is split evenly between the workers and employees. If no changes are made to disrupt this current system, it could mean that there is still a foreseeable future for social security at the moment.

As social security continues to lose its budget funding and more Americans get denied disability, hospitals and other healthcare institutions may find it difficult to determine a patient’s benefits eligibility when processing them for required treatments. Fortunately, there are a number of eligibility management companies that can readily provide assistance. They will work with your institution to determine each patient's eligibility to make processing more efficient and less costly.

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Categories: Eligibility for Social Security Disability