1-in-10 Michigan workers now collecting disability

Michigan has a high number of workers on federal disability (courtesy photo)

About half the 310,000 Michigan residents who left the labor force in the past decade may have landed in a federal assistance program for disabled adults — meaning many are unlikely to return to work even if the economy continues to improve.

Just under 514,000 people — one of every 12 adults aged 18-64 statewide, and one of every 10 people in Michigan's current labor force — collects either Social Security Disability Insurance, Supplemental Security Income or both, according to the most recent data from the Social Security Administration.

In fact, Michigan has the seventh-largest population of such beneficiaries and had the fifth-largest increase in recipients for the 10-year period ending December 2013. And that's even though it's only the 10th most populous state — and the only state whose total population fell during that period.

RELATED: Expanding benefit rolls drains federal trust fund reserves

Experts say much of the uptick in benefit claims is attributable to the state's demographics. Manufacturing and construction employees have more physical work demands and are more vulnerable in recessions, which is also when benefit applications tend to climb. But critics of the program say some growth is fueled by lenient administrative law judges, outdated or expansive government criteria, claims due to fraud — and a growth industry of attorneys handling claim appeals.

Data show that states with a more native-born workforce and a smaller immigrant population tend to create more disability claims — simply due to the work history requirements under the federal program. About 77 percent of Michigan residents in 2012, or 7.5 million people, were born in the state, more than any other state but Louisiana, according to U.S. Census Bureau microdata compiled by the University of Minnesota Population Center.

But whatever the reasons individual workers qualify for benefits, the program tends to become a permanent exit from the workforce. Disability insurance recipients are almost 15 times as likely to leave the program by reaching retirement age, and shifting into another benefit program, than by finding gainful new employment, according to Social Security data.

The trends may be hastening a bleak result. A new trustees report released last week shows that, without corrective action, the federal Disability Insurance Trust Fund will run out of assets in late 2016.

Disability Insurance Trust Fund (performance history, in millions of dollars)

Outdated standards?

Mark Warshawsky, visiting scholar at the Mercatus Center at George Mason University and co-author of an April paper on the disability crisis, said the program faces administrative problems as much as demographic ones.

Warshawsky contends federal criteria in recent years give too much weight to age, English language proficiency, education and other nonmedical criteria. Even its medical criteria for disability are not updated enough to account for improved medical technology or labor force trends, he said.

"When some of these criteria were created years ago, there was a level of rigidity in the workforce then, little fluidity between jobs. And not speaking English well could create a huge disadvantage," he said.

"Everything has changed in those years, people are working later in life, more languages are spoken, and there is not the same rigidity. If we had the money in the program, maybe we could weather the effects of these changes. But we don't."

But other experts say the peculiarities of Michigan's work-age population make for more claims.

"There is a good deal of research that suggests once you get onto those benefit programs, very few get off," said Donald Grimes, senior research associate at the University of Michigan Institute for Research on Labor, Employment and the Economy, which tracks economic and employment data.

"But another big factor here was the big population of baby boomers in their 50s and 60s — that's the prime age cohort that applies for disability. You also have a tremendous decline in the labor participation rate by 16-24 year-olds, and brain drain among young workers," which skews workforce percentages toward more disability-prone older people, he said.

Ages and ailments

The benefits surge has been a long time coming, experts said. It may be a combination of recent changes both in workforce demographics, and in how benefits get awarded.

Paul Morris, 59, of Pontiac, has been collecting disability for over a year after losing a mailroom job at The Palace of Auburn Hills over two years ago. Morris said he suffers hypertension and heart problems as well as sleep apnea.

"I had a CPAP machine for my apnea that was covered by my wife's insurance, but when she passed they wouldn't cover it anymore," he said. "She left a nice life insurance policy, and that helped me get through her funeral, but after that is when the stress started."

Morris said that on the advice of a doctor he started working with an advocate's help in late 2013 and it took only about seven months to get his benefits approved. Since early 2014, he has received both a $1,073 monthly benefit, along with a $173 widower's benefit for his wife, Regina, who died in 2009.

The benefits have covered most monthly expenses, he said, although he has a steep co-payment on a Medicaid HMO plan and recently had to leave a home he was renting with two roommates who were no longer there to split the payment with him.

Morris' short turnaround time for getting benefits isn't typical, but nearly 235,000 people, or nearly 27 percent of all new disability insurance beneficiaries, were in his age range, 55-59.

A decade of data reveals that Social Security Disability Insurance, the monthly benefit program for the long-term disabled who were once gainfully employed, added more than 135,000 adults in Michigan between December 2003 and December 2013.

That's not to be confused with Supplemental Security Income, or SSI, which uses similar medical criteria but is based on economic status, not employment history.

Experts said many people will continue to work even after developing an illness or injury that makes them eligible for disability, but later fall victim to layoffs and then have difficulty re-entering the workforce with their impairments.

"People have different tolerances for the injuries they receive," said Scott Imberman, associate professor of economics at Michigan State University and co-author of a recent report on the disability program.

"If they have a good job, they may try to stay on and work through it. But once they lose that job in a downturn, then they might decide whether their chances are better at applying for disability versus retraining or getting hired somewhere else."

Top 10 states (total disability recipient population growth, 2003-2013)

How bad is it?

Disability insurance grew by 538,000 beneficiaries in 2010, the biggest single year-over-year growth in the program. Considering the average wait time to get a benefit decision from an administrative law judge was nearly two years, most of those new recipients likely applied during the last recession.

Some experts said the role of recessions can be overstated, though. Clifford Weisberg, president of Southfield-based Weisberg & Walkon PC who has practiced SSI and disability law for more than 30 years, said the aging workforce and several economic and demographic trends have all been converging. "It's a tsunami of all these things happening at one time," he said. "The baby boomers thing alone is just a part of it. You also have diabetes and obesity, where Michigan ranks as one of the worse among states. That goes to hypertension, cardiovascular disease and other things that qualify you."

Weisberg also said he is not convinced the rate of cash burn from new benefits is a real threat to the disability trust fund.

"Due to the economy, at times the disability insurance fund is short, and routinely (federal officials) will borrow from one fund to adjust the other fund. ... It's actually pretty routine — only in this Congress nothing is routine anymore."

Said Gerald Freedman, one of the administrative law judges handling claims in Michigan: "Historically, you'll see if Congress is packed with Republicans there's an effort to do away with overly generous entitlements and have accountability.

"Then, when the other side is in power, then there's an outcry about long delays in getting decisions, applicants dying before their cases get heard and the country not paying attention to the disabled," he said. "The truth about what should be done is probably in the middle."

Tackling fraud

Both sides of the debate over disability agree the system has abuses. Michigan already has saved $1 million during six months of ramped-up scrutiny of disability and related safety net programs, as one of the newcomers to a joint state-federal initiative to crack down on disability fraud.

Social Security's federal Office of Inspector General and the Michigan Department of Human Services last fall launched a Cooperative Disability Investigations unit in Detroit to investigate suspicious claims in Michigan. The Detroit unit was the 26th of 28 such offices launched in 24 states and Puerto Rico, since the program's inception in 1997.

"We are getting plenty of tips, because the state is a great partner and we get plenty of referrals," said Brad Martin, special agent for OIG and team leader of the new unit. "So even though we're new, we have no lack of work."

As of February, six months after it was formed, the Detroit office had opened 26 new investigations and saved about $370,000 to Social Security in disability program payments, denying or ending benefits in nine of the 10 cases it had closed, according to an OIG report. The same investigations yielded another $640,000 in savings to Medicaid, since SSI claimants are also Medicaid-eligible.

Martin, a 15-year OIG veteran before the team leader appointment last summer, said the investigations unit typically gets requests from examiners within the Disability Determination Services in the state's Human Services department, for individual claims that seem suspicious.

But the team is also focusing on third-party representatives like doctors, attorneys or claims representatives for possible attempts to manufacture documents supporting claims. Whether offenders will be criminally prosecuted in Michigan, as some have in other states, may come down to scale and cost. Martin said may investigations conclude with denying or canceling benefits.

Judicial priorities

Initially, Social Security refers claims for disability or SSI income to the state Disability Determination Services office, or other states' equivalent agencies, for an examiner to collect records and make an initial determination of eligibility.

In recent years, only about 35 percent of those decisions nationwide were in the applicant's favor (in Michigan it's averaged around 32 percent, according to the Social Security OIG) — but applicants can fare much better if they appeal.

Once claims reached an administrative law judge, according to Social Security data, about 64 percent of decisions nationwide favored the claimant.

For Southeast Michigan, some 59.9 percent of the nearly 79,000 decisions reached by about 40 judges in Detroit, Oak Park or Livonia since late 2009 were either partially or fully favorable.
But results vary dramatically by judge, with individual award rates ranging from under 30 percent to more than 80 percent.

"I would probably classify myself as more liberal in my interpretation of the (disability criteria) among my colleagues," said Freedman, who had the highest payment approval rate of any judge in Metro Detroit, at more than 85 percent between 2010 and his retirement last August.

"Some of my dearest friends who heard cases at the same offices had a payment rate closer to 30 percent. It was sometimes a matter of personal philosophy, although there are a lot of other factors too."

Those include speed or the rate at which judges hear and decide cases each month, he said, or how heavily a judge relies upon medical documentation.

Generating medical records often requires insurance to cover the repeated medical visits necessary to diagnose some conditions — so better educated and better insured applicants have a better chance of getting benefits, even if they are likely to be less dependent on them.

Judicial discretion

Among the bench of administrative law judges, 20 of the 30 who carried a statistically meaningful number of cases in Southeast Michigan had an approval or claim payment rate within 10 percentage points of the regional average of 60 percent.

But Judges Dennis Matulewicz and Mary Connolly in the Livonia office both consistently averaged around 80 percent approval of their cases since fiscal 2010, while fellow judges Ethel Revels and Oksana Xenos in Detroit averaged 36 percent and 28 percent approval, respectively.

"It's function of personality, somewhat," said Stuart Johnson, partner at Ball Johnson PC doing business as Disability Attorneys of Michigan in Warren. "You might get an administrative law judge who has a sister with a mental illness and identifies with a certain condition very personally — or someone else with no family history and no empathy."

Xenos, Connolly, and Matulewicz did not respond to voicemail or email messages seeking comment. A report in November from the Social Security OIG to the House Committee on Oversight and Government reform indicated that 44 judges nationwide were "outliers" who reached more than 700 case decisions per year and allowed claims in 85 percent or more of them for two fiscal years since 2007.

Collectively, the report indicates, those judges likely awarded an estimated 24,900 claims improperly, creating "questionable costs" of $2 billion over the period, based on a sampling of cases the OIG reviewed.

"About 500 cases a year (reaching a decision) is the most can we expect of a judge to do a good job, and be fair to the workload climate," Warshawsky said.

Warshawsky said term limits for administrative law judges, who get lifetime appointments, might also help curb the disability cash burn.

"It does seem from some research that the longer a judge is in office, the more lenient they tend to get, and that can be addressed with a time limit in office," he said.

The OIG report doesn't identify the outlier judges, but none appear to be in Southeast Michigan. Only two judges here even occasionally approached the 700-ruling benchmark, since 2010. Freedman, the only judge who regularly exceeded 85 percent allowances, never exceeded 490 decisions per year.

Longevity risk

Of course, the longer people remain employed, before they retire, the greater chance they have of encountering an illness or injury that makes them disability eligible.

Total new awards to disabled workers nationwide has declined each year since a peak of just over 1 million in 2010, but the percentage of those awards to beneficiaries 55 and older has increased over that period as well, according to Social Security data.

In 2011 nearly 21 percent of those in civilian employment were 55 or older, compared with less than 14 percent a decade earlier, according to an analysis of Bureau of Labor Statistics data by the Conference Board.

Charles Ballard, a professor of tax policy and public economics at Michigan State University, also said cyclical recessions can give laid off disabled workers a serious choice to make for the future.

"In the aftermath of the great recession especially, disability became something like a segue into retirement. If you're 58, disabled and displaced in a recession, and someone tells you there's a demand for medical technician and health care jobs if you retrain, you might ask yourself: 'Is that really going to happen with so many other people laid off, or is there another way?'"

Law judge approvals

Approval rates of relevant, current SSA administrative law judges who have carried a statistically significant local docket for at least three years during FY 2010 to 2015 and who still preside.

Relevant, but not current judges (retired or moved away)