by Christopher C. Wagner, Carolyn E. Danczyk-Hawley, Kathryn Mulholland, and Bruce G. Flynn*
People with medical conditions that limit their ability to work tend to receive short-term disability benefits initially and may then move to long-term and eventually to permanent disability benefits. The progression of older workers (those aged 55 to 64) along that continuum of benefits is documented here with data from a large disability insurance company. The data show that older workers who receive short-term medical disability benefits are three times as likely as younger workers to progress to receipt of Social Security Disability Insurance (SSDI) benefits, although a slight reversal of that trend occurs as workers pass age 62.
Musculoskeletal conditions are the most frequent basis of short-term disability claims among older workers, with circulatory conditions running a close second. Furthermore, although all medical conditions are more likely to lead to SSDI benefits among older workers, circulatory conditions do so most frequently.
This article discusses industry standards for the management of disability claims at each level of severity. It also addresses common and emerging disability management practices that may reduce the likelihood of impaired workers developing long-term or permanent financial dependence on disability benefits programs.
Since the early 1970s, employers have encountered steadily rising health care, workers' compensation, and other disability-related expenditures (Galvin 1986). Current estimates from the Census Bureau indicate that the direct costs of disability have reached an alltime high of $340 billion (U.S. Census Bureau 2000). When indirect costs such as overtime, low productivity, and lost customer service are taken into account, that figure could more than double (Block 1999).
The trend toward increased costs is not expected to abate. In fact, with the aging of the baby-boom generation, a rise in nonoccupational disability costs is imminent. Because both the likelihood of disability and the duration of any given disability incident increase with age, the costs of lost work time will continue to be a significant management issue. Further, the U.S. labor force is growing more slowly today than it has in the previous three decades. According to Labor Department statistics, the growth rate of the labor force was consistently around 2 percent a year from the 1960s through the 1980s. In the 1990s, that growth dropped to about 1 percent annually. Thus, the overall aging of today's workers is coupled with fewer young people entering the workplace (Block 1999).
A Disability Policy Panel convened by the National Academy of Social Insurance attributes growth in the SSDI program to a number of additional trends (Social Security Policy Panel 1996). First, the economic recession in 1990-1991 fueled an increase in applications for benefits among older workers who lost their jobs because of corporate downsizing and other organizational changes. Yelin (1998) hypothesizes that many of the applications approved during cyclical economic downturns would not have been approved during good times.
Second, the eligible population is larger. Baby boomers are entering the age 35-50 range, in which the risk of disability rises, and many more women in the baby-boom generation have sufficient work experience to be insured for Social Security Disability Insurance (SSDI) benefits.
Third, baby boomers who enter the SSDI program because of impairments associated with middle age, such as musculoskeletal disorders (Stapleton and others 1998), are expected to remain beneficiaries for many years (Rupp and Stapleton 1998).
Fourth, cost-containment measures in the privately insured short-term disability, long-term disability, and workers' compensation benefit systems direct workers to the SSDI program in cases where claimants meet the initial SSDI eligibility criteria. …