Comments on economics, mystery fiction, drama, and art.

Friday, June 05, 2015

A comment on this: "Report: Social Security overpaid disability benefits by $17B": Context, folks, context

I don't mean to dismiss concerns like this:
Social Security overpaid disability beneficiaries by nearly $17 billion over the past decade, a government watchdog said Friday, raising alarms about the massive program just as it approaches the brink of insolvency.
Many payments went to people who earned too much money to qualify for benefits, or to those no longer disabled. Payments also went to people who had died or were in prison.  In all, nearly half of the 9 million people receiving disability payments were overpaid, according to the results of a 10-year study by the Social Security Administration's inspector general. 
Social Security was able to recoup about $8.1 billion, but it often took years to get the money back, the study said.
But let's look at it a little more closely.  After the recovery of $8.1 billion (and ignoring the administrative costs of that recovery), we're left with  $8.9 billion in excess payments, to 4.5 million people.  That's about $2,000 per over-payment case.  And disability benefits tend to be paid for multiple years; if the over-payments persisted for an average of 5 years per case, that's around $400 per year per case, or about $34 per month.  So it's pretty clear that no one was getting rich off of this, or even living all that well.

For context, in the 10-year period 2004-2013 (the most recent period for which I can find data), total disability payments were, um, $961 billion.  So the unrecovered overpayments amounted to, ah, 0.8% of the total disability payments made.*  (Note, as well, that this does not account for any under-payments that occurred.  And I'm sure there were some.)  A problem to address, to be sure.  But a significant cause of the financing problem faced by the disability system?  Probably not.

*I'd be interested in knowing the error rates for things like private health insurance plans.


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