Why Do State Disability Application Rates Vary Over Time?

Publication Date: January 2012

Publisher: Center for Retirement Research at Boston College

Author(s): Norma Coe; Kelly Haverstick; Alicia H. Munnell

Research Area: Economics

Keywords: Social Security

Type: Report

Coverage: United States


Social Security Disability Insurance (SSDI) applications and benefit receipts vary greatly by state, which has led to concerns about potential inconsistencies in the way that states apply disability standards. An earlier brief concluded that more than 70 percent of the variation across states in SSDI application rates is explained by state health, demographic, and employment characteristics; state policies and politics explain very little. Another concern has been the growth in the SSDI program over time. This brief uses the same data as the earlier analysis to answer a related question: How much of the trends in SSDI application rates within states can be explained by the different factors?

The discussion proceeds as follows. The first section provides background on the variation in SSDI application rates within states over time. The second recaps the model and the variables. The third section reports the results for a state and year fixed-effects model that identifies the changes within states that affect the SSDI application rates over time. To better understand the results, it also estimates equations for two types of SSDI applicants – those who apply to SSDI alone and lower-income individuals who apply concurrently to SSDI and Supplemental Security In-
come (SSI). The key finding is that when states limit the ability of insurance companies to price coverage based on an individual’s characteristics (“community rating”) and to deny coverage (“guaranteed issue”), SSDI application rates decline. This provocative result merits further exploration because it implies that health care reform, such as the Affordable Care Act, could have spill-over effects to the SSDI program.