How to Bring the Disabled Out of the Economic Closet.
By Michael Gorback, M.D., at the Center for Pain Relief in Houston, TX:
N.B.: The disability benefits system as described here is a very simplified version. It is incredibly complex, so I have limited the discussion to some rather broad generalizations. However, I believe the message does come through that the system discourages behavior that would reduce taxpayer burdens while improving self-esteem and economic well-being among those with disabilities. I have only recently begun to delve into this issue, so if I have made factual errors please be kind in the comments. ;-)
As a pain specialist, I see quite a few people who receive disability benefits. Most of them receive federal benefits, which comprise both income payments and Medicare benefits.
My two main objections to the current system are the delay in medical benefits and the disincentive to return to work. The first is obvious; the second is a bit more subtle.
The most obvious problem is that, although one might be granted disability benefits, the income starts in five months but the health insurance (Medicare) doesn’t kick in for two years. But for the majority on disability, Medicare is a necessity.
The following scenarios do not represent actual patients. They are fictitious composites of patients I have treated in the past, used for illustrative purposes.
Let’s consider the case of Jack, who has avascular necrosis of the hip. He can’t walk without assistance. He needs a hip replacement. Unable to find work due to his incapacity, Jack lost his job and ended up on disability. He now receives his $800/month pittance from the government, but he won’t have Medicare coverage for a hip replacement until 2020. Jack’s employer has told him he would be re-hired if he could walk. Instead, Jack will be on the public dole for two years instead of going back to work. You can’t pay for a hip replacement on $800/month.
The more insidious problem with federal disability policy is that there are disabled people who are capable of generating income but won’t because if they do, they will lose not only their financial benefits but their health benefits as well.
Most people on Social Security Disability (SSDI) can earn about $1,700/month without losing their benefits (blind people can earn about $1,900). The government subtracts $85 from the outside income amount (I have no idea how they arrived at $85), divides the result by two, and that is how much their SSDI income benefit is reduced.
Exceed those income numbers and you lose both income and Medicare benefits. There are “deductions” available. For example, if your disability requires certain accommodations such as hiring private transportation to get to work, that expense can be deducted from income before the calculation is made.
There is a very nasty “gotcha” here. If you report that one month you made $900 (well below the $1700 limit) you run the risk of attracting the attention of your disability overlords. They might re-open your case to see if you really need the financial benefits. I doubt many people want to try that because they would lose both the financial and Medicare benefits.
For comparison, I used to pay $950/month for an HMO Bronze plan with a $6,000 deductible before I went on Medicare. My premiums are about half and my deductible costs less than a dinner for two at a fancy restaurant. Who wants to risk it?
Susan was paralyzed in a skiing accident. She’s 50 years old, paraplegic, and lives in a nursing home. Last Christmas, Susan, a very intelligent woman, decided to pass the time making jewelry. The nursing home staff noticed it and started buying jewelry from her. But the nursing home forced her to stop, claiming that she was not allowed to have any outside income. This was a big hit to a smart creative woman with the capability of earning a little money that would have allowed her to gain self-esteem as a productive member of society.
Suppose Susan were allowed to earn money making jewelry, but for each dollar of income she’d lose perhaps half a dollar of disability payments? Susan gets to add to her sense of self-worth and obtains some economic independence, and the taxpayers aren’t paying for all her income benefits.
Allan was hit by a bus and suffered a severe fracture of his hip and pelvis. He required a hip replacement, which became infected and had to be removed. With no ability to exercise plus the superimposed depression that many in his situation suffer, Allan’s weight gradually rose to 350 pounds. The orthopedic surgeon wouldn’t replace his hip due to his weight. Bariatric surgeons wouldn’t operate because he couldn’t participate in their perioperative exercise program.
We finally broke this vicious circle by finding a bariatric surgeon who understood the situation. Allan lost a couple of hundred pounds, got his hip replacement, and he’s up and about. Allan and I both like to hunt. One day he dropped off a couple pairs of camo pants that he no longer wanted. At 5’8” and 185 pounds I couldn’t close the waistband. I’m starting to hate Allan.
Allan is a talented craftsman and painter. He sells his products privately for cash. When I saw samples of his work, I suggested that he start a legitimate business because he could make a lot more than $800/month. He agreed he could make a lot more money, but he was afraid to because if he did that, he’d also lose his Medicare coverage (Allan is in his 50s).
Suppose we made a deal with Allan: start a legitimate business. Advertise on Etsy, eBay, Amazon, or wherever. Make a lot more money. But, for every dollar he earns, he’d lose half a dollar of disability income. So, Allan goes into a legitimate business, earns $3,000/month and loses $800 in disability payments. Allan is not only off the dole, but the government collects sales tax and perhaps income tax, FICA, and Medicare tax. However, we allow Allan to keep his Medicare coverage.
Where is the downside if we allow disabled people to earn money, deducting it from their benefits, and allowing them to keep their medical coverage?
There is precedent for this type of deduction: workers who begin collecting Social Security before reaching full retirement age will lose $1 from their benefit payments for every $2 they earn above the annual limit. For 2019, that limit is $17,640, which is less than the cap for disability.
What is the downside to letting Jack immediately start his Medicare coverage, get his hip fixed, and return to work, thus getting him off both the income dole (and resume paying income tax) and Medicare, since he will have private insurance at his old job?
Over the years I have encountered many people on disability who participate in an underground economy of barter and/or under-the-table cash deals. I had one patient who made $50,000/year as a technical writer. She worked “underground” to keep her medical benefits.
If we separate the income and medical benefits, we create productive citizens who are off the disability-income rolls, generate tax revenues, and regain the self-esteem that comes with feeling like a productive member of society.
This underground economy among the disabled is a sign of systemic dysfunction. I would love to see an OMB analysis of how many taxpayer dollars could be saved if we allowed those receiving disability income benefits to generate unlimited income in the legitimate economy while keeping their health insurance benefits. By Michael Gorback, M.D., at the Center for Pain Relief.
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