U.S. Department of Health and Human Services

Exploratory Study of Health Care Coverage and Employment of People with Disabilities: Final Report

Executive Summary

David Stapleton, Gina Livermore, Scott Scrivner, Adam Tucker and David Wittenburg

The Lewin Group, Inc.

July 6, 1998

This report was prepared under contract #HHS-100-96-0012 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and Lewin-VHI, Inc. For additional information about this subject, you can visit the DALTCP home page at http://aspe.hhs.gov/_/office_specific/daltcp.cfm or contact the office at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201. The e-mail address is: webmaster.DALTCP@hhs.gov. The Project Officer was Kathleen Bond.

The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.

A. Introduction

Most policymakers agree that the current structure of the Social Security Administration's disability programs creates substantial work disincentives for people with disabilities. One set of policy options concerns changing the links both between Medicare and the Social Security Disability Insurance (DI) program, and between Medicaid and the Supplemental Security Income (SSI) program. More generally, reforms that expand access to health insurance for people with disabilities who are not DI or SSI recipients could have an impact on both employment and program participation. The purpose of this study is to examine empirical evidence on the relationships among health insurance, employment, and program participation of people with disabilities. Specifically, we present the findings of an analysis of expansions in the income threshold for the SSI work incentive program established by Section 1619 of the Social Security Act; these expansions have allowed many working SSI recipients to maintain Medicaid eligibility even after their incomes rise above the level that makes them ineligible for SSI payments. This report also presents findings from an analysis of the employment, insurance and program participation status of people with disabilities using the 1993 Survey of Income and Program Participation (SIPP) and the 1994 National Health Interview Survey (NHIS). This analysis focuses on groups of people with disabilities who would most likely be affected by expansions in public health insurance.

B. Analysis of 1619(b) Threshold Expansions

Section 1619 of the Social Security Act allows SSI disability recipients who work and whose monthly earnings exceed the substantial gainful activity level (currently $500) to receive Medicaid benefits and to remain eligible for SSI, but with reduced or zero payments, provided that their "chargeable income" (income after certain reductions) remains below the 1619(b) threshold. The threshold is partly determined by mean Medicaid expenditures for disabled SSI recipients in the recipient's state. Recipients concerned about loss of their Medicaid benefits have a strong incentive to keep their incomes below the threshold. As a result of rapid growth in health care costs, the threshold has increased considerably since the program's inception in 1981. The increase has also varied considerably across states. If, in fact, some SSI recipients restrain earnings and employment to stay below the threshold, one should find that the earnings of SSI recipients increase as the threshold expands.

Our analysis utilizes the growth in thresholds since 1990, and cross-state variation in that growth, to assess the impact of expanding the threshold on the earnings, employment, SSI payments, and SSI program participation of the 4.1 percent of 1990 adult SSI recipients under the age of 50 who had earnings from jobs covered by Social Security in 1990. The 50 percent of this group whose chargeable incomes were furthest below their state's threshold were used as a control group for the 50 percent with chargeable incomes close to their state's threshold ("full study group"), as well as for subgroups of the latter group.

Overall, we find very strong evidence that some SSI recipients who work substantially restrain their Social Security earnings to stay below the 1619(b) threshold. Results for 1990-91 earnings changes are especially strong. When we examined the 1990-91 period only, we obtained point estimates of the effect of a thousand dollar increase in the threshold on mean earnings for those in the full study group ranging from $117 to $482, depending on the specification used. All estimates were highly significant, and even larger estimates were obtained for the study group members whose chargeable incomes were closest to their state's threshold in 1990. It is difficult to know whether the "true" effect is near the bottom or top of the range indicated, but certainly the midpoint, $300, is a credible value. Such a value would be consistent with either 100 percent of those in the study group increasing their earnings by $300 when the threshold increases by $1,000, or 30 percent increasing their earnings by $1,000, or, more likely, some intermediate scenario.

Results for changes in earnings from 1990 to 1996 are much weaker, but still largely consistent with our predictions. The point estimates for the full study group range from $37 to $233. The weaker results for this period appear to reflect strong negative earnings trends for the recipients in our sample. These trends occur despite substantial overall growth of the economy over the period. It seems likely that deterioration in health conditions is a common explanation of earnings declines, and the weaker results may simply reflect the fact that the number in the sample for whom the threshold is of relevance declines over time.

The findings also are strongly consistent with the hypothesis that recipients reduce reported earnings to stay below the threshold when their chargeable unearned income increases. There is also some evidence, albeit not very strong, that threshold increases reduce SSI payments to those most likely to be restraining earnings. There is similar evidence that increases in chargeable unearned income reduce scheduled SSI payments of those whose initial earnings are closest to the threshold by less than statutory requirements, because of induced reductions in earnings. We find little evidence of impacts of threshold increases or unearned income increases on either employment or SSI participation. It appears that recipients make marginal adjustments to their earnings as a result of threshold and unearned income changes, not wholesale changes to their participation or employment status.

In examining the longitudinal data on 1619(b) participation, we noticed high monthly variability in participation. Past studies of participation have focused on point-in-time participation, without examining the dynamics of participation. The sample we constructed provided an opportunity for a limited dynamic analysis. We followed the monthly 1619(b) participation of those 1990 SSI recipients under the age of 50 who had earnings in 1990, from 1990 through 1996. We found that while only 33,000 of the roughly 128,000 recipients in the sample (26 percent) participated in 1619(b) for at least one month in 1990, almost 57 thousand (44 percent) participated in 1619(b) for at least one month during the entire 1990-96 period. The latter number is about 2.4 times the number of SSI recipients reported by SSA as participating in the program in December 1990. We conclude that point-in-time statistics on the share of SSI recipients participating in 1619(b) are much lower than the share of SSI recipients who ever participate, reflecting high variation in who participates from month to month.

C. Further Research

The 1619(b) analyses performed for this report provides some interesting insights about the dynamic use of that program and, more generally, the dynamics of employment, earnings, and program participation of disabled adult SSI recipients. The general impression left by this research is that there are many more SSI recipients who have significant involvement in the labor force than cross-section data indicate, and that their involvement is not very stable. A clearer picture of the use of the Section 1619 program and, more generally, of the employment and earnings of SSI recipients, could be obtained by following SSI “award cohorts” -- groups of recipients who receive their award in a given period -- through their entire SSI spell and, to the extent feasible, beyond it. Social Security earnings can be followed indefinitely into the future, as can receipt of DI benefits and return to SSI. Post-SSI mortality can also be observed.

Further analysis of 1619 participation might examine the extent to which SSI recipients use the program to: (1) provide assistance during a transition from SSI to self-support through employment; (2) provide assistance until additional support is obtained from some other source (e.g., DI); (3) maintain for substantial periods a higher level of income than SSI payments alone would provide; and (4) allow them to work intermittently, as their health or job availability permits, without loss of health benefits or SSI eligibility. It would also be interesting to examine the length of time from award until employment and earnings are reported and participation in the work incentive program begins. We may or may not see, for instance, that Social Security earnings of significant numbers of recipients return to pre-award levels soon after award -- an indication of the extent to which the work incentive program "induces demand" for SSI and Medicaid benefits.

It would also be interesting to examine how the dynamics of employment and program participation are related to beneficiary characteristics such as age, sex, marital status, and impairment. For instance, such an analysis might show that individuals with chronic disorders that are characterized by temporary acute episodes, such as many musculoskeletal and psychiatric disorders, work intermittently. The ability to move in and out of work, without loss of health insurance, may be especially important to such individuals.

Other analysis that fit within this framework include analysis of: other Medicaid expansions for people with disabilities, including TennCare and the Oregon Health Plan; the first introduction of 1619, in 1980; and the use of Impairment Related Work Expenses, Programs for the Achievement of Self Support, and individualized 1619(b) thresholds.

Newly matched data from SSA administrative records and the Survey of Income and Program Participation have created opportunities for longitudinal analyses of the employment of SSI and DI claimants both before and after they file disability claims. Such analyses could examine events that precipitate claims -- including job loss, insurance loss, and public policy changes, as well as the onset or worsening of a medical condition or impairment -- and how these events affect subsequent work activity.

All of these ideas rely on existing longitudinal data. Collection of new data from beneficiaries on their work histories, use of work incentive programs, use of other services, and support from families, counselors and employers would be useful to paint a clearer picture of the challenges that people with disabilities face when they seek to increase their earnings, and how those challenges can be overcome.

D. Employment, Insurance and Program Participation Status of People with Disabilities

Policies designed to expand health insurance coverage to persons with disabilities, or to de-link public health insurance eligibility from DI or SSI would:

• Allow non-program participants with disabilities who are employed but uninsured to obtain health care coverage without having to stop or reduce work effort; and
• Reduce incentives for disability program participants who can work to restrain their earnings in order to maintain cash benefits and health insurance coverage.

Our analyses of the 1993 Survey of Income and Program Participation (SIPP) sought to determine the size and characteristics of these two populations.

Using the 1993 SIPP, we estimate that there are 2.6 million persons with disabilities who are employed but uninsured. This group of people, which accounts for roughly nine percent of all persons with disabilities and 17 percent of all persons with disabilities who are employed, are the group for whom policies designed to make health insurance more widely available to persons with disabilities without requiring DI or SSI program participation will probably be most effective. These individuals would not be required to reduce their work effort in order to obtain eligibility for health insurance coverage. The effectiveness of such policies will depend, however, on the definition of disability used. The more stringent the definition, the lower the impact will be on the work effort of persons with disabilities. Based on a measure of severity that has been used in previous analyses of disability in the SIPP, over 2 million, or 78 percent, of the employed and uninsured persons with disabilities are not severely disabled. However, using the same definition of disability, there are approximately 577,000 additional persons with severe disabilities who are employed and uninsured.

We also found that another 2.5 million persons with disabilities are both uninsured and unemployed. While this group would be part of the target population of policies that expand health insurance to persons with disabilities, it seems unlikely that such policies would have much effect on their work effort. This group is older, less educated, and more severely disabled than the group of uninsured employed persons with disabilities.

Finally, we found that of the estimated 5.7 million people receiving DI and SSI, 537,000, or nine percent, are employed. These participants, who show some capacity for work, represent the target population for policies to expand or de-link health insurance coverage from income support programs for persons with disabilities. These individuals are considerably younger, more highly educated, and less severely disabled than DI and SSI recipients who do not work.

We also used the 1993 Survey of Income and Program Participation (SIPP) along with the 1994 National Health Interview Survey (NHIS) to examine patterns of health insurance, employment, program participation, and other characteristics of persons with disabilities. The primary findings from this portion of the study are:

• While persons with severe disabilities are very unlikely to work, persons with non-severe disabilities are only slightly less likely to work than persons without disabilities.

• Among the employed population, persons with disabilities are almost as likely as persons without disabilities to have health insurance coverage.

• Persons with disabilities are generally less educated and more likely to be living in poverty than persons without disabilities.

• Persons with disabilities who participate in DI and SSI are more likely to have severe disabilities than persons with disabilities who do not participate in either program.

E. Overview

In Chapter II, we present the analysis of the 1619(b) threshold expansions. In Chapter III, we present the findings from the analysis of employment, insurance and program participation status of people with disabilities. A reprint of Section 1619 of the Social Security Act and a description of the SIPP and NHIS-D variables used in the analysis appear in the Appendix.