Vocational Rehabilitation:

Earnings Increased for Many SSA Beneficiaries after Completing VR Services, but Few Earned Enough to Leave SSA's Disability Rolls

GAO-07-332: Published: Mar 30, 2007. Publicly Released: Mar 30, 2007.

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In 2005, about 10 million working-age people with disabilities were beneficiaries of federal income support programs administered by the Social Security Administration (SSA)--namely the Disability Insurance (DI) program and the Supplemental Security Income (SSI) program. Both of these programs have grown dramatically over the past decade and the federal government's cost of providing these benefits was almost $101 billion in 2005. This growing cost and the need to redefine the relationship between impairments and the ability to work prompted us in 2003 to put federal disability programs on GAO's high-risk list. As we have previously reported, the percentage of SSA beneficiaries who could return to work is unknown. Some beneficiaries are unlikely to work because of the severity of their disabilities. Those who do return to the workforce may face additional challenges to their ability to leave the disability rolls. These include a potential loss of health care insurance coverage, lack of access to technologies, and transportation difficulties. Nevertheless, we have reported in the past that some beneficiaries who do participate in the workforce have credited vocational rehabilitation services, in part, for their return. Administered by the Department of Education (Education) since 1973, the Vocational Rehabilitation (VR) program provides funds to states to offer an array of employment services that range from treatment of impairments to job counseling and placement. In 2005, the 80 state VR agencies were provided $2.6 billion in federal funds. The program serves about 1.2 million people each year, and over a quarter of those who exit are SSA recipients. On average, participants stay in the VR program for approximately 2 years, and Education tracks employment and earnings outcomes for 3 months after they exit the program. GAO examined long-term outcomes for SSA beneficiaries who participate in VR, on (1) the extent to which SSA disability beneficiaries who exit VR programs engage in work at the substantial gainful activity (SGA) level5 and ultimately reduce or replace their benefits with earned income, (2) whether there are certain disability beneficiary characteristics associated with positive employment outcomes, and (3) whether some VR agencies have particular policies and approaches that can be associated with positive employment outcomes. GAO's Congressional brief of February 2, 2007 presented results on the first objective--namely, the number of SSA beneficiaries who gained employment or increased their earnings following VR, the extent to which their earnings were at the SGA level, whether they ultimately reduced or replaced their benefits with earned income, and whether they eventually left the rolls. This report formally conveys the information provided during that briefing, adjusted to reflect information provided by SSA in its review of our draft report.

Earnings outcomes were mixed in the year following VR and also over time. Approximately 40 percent of the over 303,500 SSA disability beneficiaries in our study increased their earnings compared to the year prior to VR services, while 32 percent did not have any earnings and another 28 percent had fewer earnings. In comparison to DI and concurrent beneficiaries, more SSI beneficiaries--42 percent versus 36 and 39 percent--increased their earnings in the year following VR. Of the disability beneficiaries who exited VR in fiscal year 2000, 33 percent sustained some level of earnings through 2004, although their median earnings decreased by 12 percent over this period. Most beneficiaries' annual earnings remained below annualized SGA in the year following VR. Because SSA did not collect monthly earnings for DI beneficiaries during the timeframe of our study, we used annualized earnings for both DI and SSI beneficiaries, thereby limiting our ability to determine the extent of "parking" on a monthly basis.18 For beneficiaries who had earned income in the year after VR, their median annual earnings were $4,476. Earnings were calculated using posted annual earnings in SSA's Master Earnings File (MEF). The MEF data had several limitations that made it difficult to estimate beneficiaries' earnings and earnings changes due to employment. The Supplemental Security Record (SSR) collects monthly data on SSI beneficiaries, however, when we compared the SSR with the MEF, we found that the values between the two data sources differed for our study population. Additionally, the most recent version of the SSR may not have been included in our TRF subfile. Some beneficiaries in our study earned enough to have their benefits reduced in the year after VR, resulting in decreased DI and SSI program expenses. Benefit reductions from DI and concurrent beneficiaries in our four cohorts who did not receive DI benefits for 1 or more months due to work in the year after VR resulted in an estimated reduction in DI benefit payments of over $106 million. The average annual reduction in DI benefits due to work was $26.6 million. Of the 70,302 SSI and concurrent beneficiaries in our study who had earnings gains from the year before VR to the year after VR, almost 50,000 (71 percent) had a reduction in their SSI benefits. However, we were unable to reliably estimate SSI benefit reductions for SSI and concurrent beneficiaries because SSI benefit amounts can be affected by other factors besides earnings increases (e.g., changes in unearned income, spouse's income, etc.), and, due to data limitations, we could not isolate the effect of beneficiaries' earnings increases on their SSI benefit levels. For the 2000 and 2001 exit cohorts, 10 percent of beneficiaries were able to leave the rolls at some point by 2005; however, about a quarter of those who left also returned for at least 1 month. While the SSI program saw the most departures, the lower rate of DI and concurrent beneficiaries leaving the rolls may be due to several factors. The median annual earned income for all beneficiaries leaving the rolls was $12,027. By way of comparison, the average annualized SGA was $9,618, and the average annualized disability benefit was $8,460 for the DI beneficiaries and $4,452 for the SSI beneficiaries in our study in the year after VR. Those who returned were off the rolls for an average of 16 months.

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