No publicly presented Medicare reform proposal has addressed the growing problem of those younger than age 65 who are finding their way into the program through permanent disability.

Those who qualify for Social Security Disability Insurance (SSDI) and who have been disabled for at least two years are automatically enrolled in Medicare, no matter their age. That means a growing number of those under age 65—at least five million people—are qualifying for lifetime benefits, according to a recent tally published in the journal Health Affairs.

Policymakers are concerned about the rise in disabled adults because they often require expensive care, putting even more pressure on the health care system. The rate of growth is also troubling: it has more than doubled over the past two decades, from 2 percent of the U.S. population aged 25 to 64 in 1985 to more than 4 percent today. Cash payments made to SSDI beneficiaries exceeded $85 billion in 2005, the same year studied by the Health Affairs researchers, according to figures from the National Bureau of Economic Research (NBER).

What is now being watched closely by policymakers is whether the number of disabled entering Medicare is rising or leveling off. There's some evidence that the rate has flattened out, according to the Health Affairs piece, although that may be a temporary blip.

The Health Affair authors, in looking closely at the different kinds of disability, concluded that it's unlikely that disability rates will decline in the future:

"From a policy perspective, the flattening of disability trends among elderly adults is not good news. Based on prior findings of declining trends in disability among the elderly, policy makers had begun to expect that such reductions would continue. Had the declines continued, the effects of future growth of the elderly population on disability prevalence would have been at least partially offset by a reduced likelihood that a person of a given age would have a disability. The inevitable increase in the need for long-term services and supports, brought about by the aging of the baby boomers, would be moderated by the declining rate of need for help. Our findings indicate that such an ongoing moderating effect is less likely than hoped."

Social Security's Burden is Medicare's Problem

More than 5 million workers have qualified for disability since 2009, although it's difficult to tell how many of those enrollees were due to the sluggish economy. During recessions, it's been noted that those who are unemployed tend to apply for disability at higher rates than during better times.

"The main causes of this broader trend," according to economists David Autor and Mark Duggan, "are the loosening of eligibility rules by Congress in 1984, the rise in disability benefits relative to wages, and the fact that more women have entered the workforce, making them eligible for disability."

These economists suggest that when a recession hits, a larger number of unemployed workers who qualify for SSDI apply and are accepted into the program. They also may leave the program when the economy improves and they can find work.

Still, unless Congress finds a way to reduce the number of those qualifying for SSDI benefits, and thus for Medicare, cuts in the Medicare program may have be made and/or payroll taxes may have to be raised.

The Congressional Research Service reports that total spending on federal disability assistance reached approximately $190 billion in 2012. That’s more than ten times the $17 billion the federal government spent on Temporary Assistance to Needy Family (TANF) (welfare benefits), according to The National Review.

The NBER projects the trend forward to show how this expanding disability program will increasingly become a fiscal problem:

“The DI (disability insurance) program will continue to grow until its rolls include almost 7 percent of the non-elderly adult population, a 70 percent increase over today's enrollment rate. This increase would obviously strain the finances of Social Security and Medicare—the 1.8-percent payroll tax that now covers the DI program would be inadequate, leaving fewer funds available to pay other Social Security benefits, and DI recipients would claim an even bigger share of total Medicare expenditures than the 15 percent they do today.”

Is it reasonable to assume that baby boomers will continue to apply for disability and Medicare at ever-higher rates? Since the generation is 77 million strong, that's a possibility. Then again, it could be argued that many boomers are living healthier lifestyles by smoking less and exercising more.

If disability reform follows a parallel track to Medicare reform, Congress needs to examine ways in which the SSDI system may be abused, including reviewing qualification rules and judgments. The Social Security Administration needs more funding to better audit whether those who are younger than 65 should receive both SSDI and Medicare.

Then there's concept of adjusting economic incentives so that those needing health care while unemployed can afford a catastrophic policy, rather than applying for disability and Medicare. The Affordable Health Care may partially address this issue when health insurance exchanges are scheduled to go live in 2014. 

MedicareNewsGroup.com (MNG) original articles can be reprinted or republished with credit to The Medicare NewsGroup. To use our content, simply copy and paste text from the MNG website. Use of our content is done in compliance with our Terms and Conditions but does not extend to material from other sources that are subject to their copyright.