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Disability and Fraud: Is It What It Seems?

May 15, 2012 | Comments: 0 | Views: 212

In an economic time where most of the world is talking about austerity and our own government is going deeper in debt, entitlement programs seem to be a hot topic and a major concern. The first thing discussed is cutting out the waste in the spending, primarily fraud. Disability fraud is one of the first entitlements to be put under a microscope but is it what it seems?

To lump all payments to the disabled as entitlements would be less than honest.

Disability payments can result from injuries where a private insurance is responsible or possibly a worker compensation claim. Even auto accidents can result in disability payments. All of those payments result from an insurance policy.

Social Security Disability Income (SSDI) was "sold" as an insurance policy for the American worker, and so it is. All workers, along with their employers, pay their "policy" through payroll taxes. If a disability claim is made and approved, the worker is paid based on their contributions into the program; just as an insurance program would work.

What is an entitlement program is Social Security Income (SSI), which is paid through the general tax system. Filing for this benefit is not an insurance claim, and has income/asset rules for qualifying. Disability condition does not need to be as severe or as well documented as it does for the SSDI. SSI is managed by the Social Security Administration (SSA) but is not funded by the Social Security Trust Fund (SSTF).

There is logic to fraud, where there is easy money in sufficient amounts, you will find fraud. Insurance has always had problems with fraudulent claims, always will. There will always be people who are willing to steal lots of money rather that work for money commiserate with their production.

With regards to disability, is fraud the same across every type of program or is it different? It is different, very different.

Typically injury claims have a lot of front end fraud. Injury claims can have big money attached to them which means having a good lawyer and the right doctor along with being consistent on the symptoms can lead to big money. Throw in a little depression and get more money for pain and suffering. In short, it is very hard to quantify a person's complaint of pain.

SSDI though is a very different animal. Most claimants are filing because they have no other choice. There is no big settlement upfront (though arrearages can add up quickly) and monthly benefits average about $1,150/month. Approvals for disability claims are nearly 35% ( ) and are based on strict rules

That is not to say there isn't fraud. The biggest problem is when a claimant wants or needs to get off the monthly benefit. Going from a time where they are not working to getting sufficient income to survive can be difficult for the disabled. It is in this period where double dipping is a possibility, which fraud occurs. You can not work and collect this benefit. Sadly, a few people will not ever tell SSA that they are back working as evidence last year when SSA crossed referenced federal employees and found several hundred claimants working.

SSI is not comparable to the two previous programs discussed. Its basis is need based, both from a financial position and health. It is a complicated program to manage as the benefit amounts changed monthly based on financial changes of the claimant. The maximum benefit amount for a single person is $637/month.

Fraud occurs because it is, at least it appears to be, easy to fill out the forms, submit and be paid. It is easy to hide assets and income. One example; have one bank account at a local bank with a low balance and get income paid under the table. Verification is difficult and costly thus relying on the honor of the applicant.

Consider that Social Security handles a budget (includes retirees) of over $660 billion per year. Of that SSI accounted for just over $43 billion. An article in USA Today ( ) stated that in 2009 SSA had $6.5 billion in fraud for the year. Of that SSI had $4.5 billion of the losses.

That means, SSA managed over 55 million claimants (including retirees) and $615 billion dollars and lost $2.5 billion under the Social Security Trust Fund. Some of those losses came from retiree's not only from the disabled. I can't think of a better managed program by our government and most public corporations. Not perfect for sure and that is a huge amount of money lost, yet SSDI is looking well managed.

SSI, not so much; SSI had over 7.5 million claimants and lost $4 billion dollars, where the average benefit is $478/month. SSI is an entitlement program; it is costly and hard to manage which makes it easier pickings for fraudsters.

We constantly are being told that disability claims are causing lots of fraud for the Social Security program. Yes it is causing problems for the Social Security Administration as they have to manage both programs. It is not a huge problem for the Social Security Trust Fund, but rather for a government entitlement that is conveniently tied up with for political reasons.

I have no suggestions on government policy; I can say that before you automatically assume your disabled neighbor is committing fraud, I would first ask what program they are working with. It might help you to keep or make a friend.

Source: EzineArticles
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Article Tags:

Social Security


Disability Claims


Fraud Occurs


Entitlement Program


Disability Payments



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