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					              SSDI State Work Incentive Policy Demonstration Projects:
                          Purposes, Principles, and Issues1

                                       Prepared by
         Allen Jensen (ihoacj@gwumc.edu) and Bobby Silverstein (Bobby@CSADP.org)
                                     October 23, 2002

BACKGROUND

The Social Security Disability Insurance program (SSDI) was originally designed in the 1950s
primarily as a program providing early retirement on the basis of disability. However, the
population now receiving SSDI includes many persons with an earlier onset of disability or who
were historically institutionalized e.g., persons with mental retardation and mental illness. In
addition, many persons with physically disabling conditions from an early age were considered
unable to work but now have long term services and supports such as personal assistance
services and assistive technology devices that enable them to work at some level.

Medicaid was designed as a health care program primarily for low-income families attached to
welfare programs and for long term care for the elderly. However, the scope of services has now
expanded to respond to the needs of non-elderly persons with disabilities enabling them to live
and work in the community. Continued Medicaid as earnings increase is now seen as essential to
sustain work even as these individual's incomes increase beyond poverty levels.

The change in public policy towards persons with disabilities can be described as moving from
an old paradigm that focuses on a person's "defects" and vulnerabilities (the medical model) to a
new socio-political paradigm that focuses on equality of opportunity, full participation in
decisions affecting their lives (e.g., self-determination, informed choice), independent living and
economic self-sufficiency.

Many persons on SSDI have a work history and have knowledge, skills, and experience that
(with ongoing supports and services) would make them valuable employees. Unfortunately, in
part due to the present policies that are not fully consistent with the new paradigm, a large
majority of these individuals make the very rational choice to refrain from employment. If they
do work, many maintain an earnings level below that considered Substantial Gainful Activity
(SGA). They choose to remain unemployed or grossly underemployed in order to avoid
jeopardizing their often hard won SSDI benefits. By keeping their earnings below SGA, they
believe that they can guarantee that their SSDI benefits will continue. These realities appear to be
the case even for many individuals participating in Medicaid Buy-In programs authorized by The


1This paper was funded by a grant from the National Institute on Disability and Rehabilitation Research of the U.S.
Department of Education supporting the Rehabilitation Research and Training Center on Workforce Investment and
Employment Policy for Persons with Disabilities at the University of Iowa College of Law. In addition, the paper
was supported by a grant from the Robert Wood Johnson Foundation. The opinions contained in this paper are those
of the authors and do not necessarily reflect those of the U.S. Department of Education, or the Robert Wood Johnson
Foundation.
Balanced Budget Act of 1997 (Public law 105-33) and the Ticket to Work and Work Incentives
Improvement Act of 1999 (Public Law 106-170) (TWWIIA).

At present, Social Security policies make receipt of SSDI benefits an all or nothing scenario.
Unlike SSI payments, which are reduced by approximately one-half of the amount of the
individual's earnings, SSDI benefits are either received in full or not received at all. Whether the
individual receives his/her benefit check is dependent on the amount of countable earnings after
an initial period of trial work -- if countable earnings are above SGA ($780/month in 2002), the
individual will not receive a benefit. This all or nothing situation is often referred to as the "cash
cliff."

The present policies also contain the Trial Work Period (TWP) and the Extended Period of
Eligibility (EPE) provisions. Under these provisions, an individual earning over SGA will
eventually lose their "disability" status. Even though his/her impairment has not changed, the
person no longer meets the definition of having a disability. These time-limited provisions are
viewed by many as barriers to employment. Individuals often feel that since it was so difficult to
be found to have a disability by SSA, they do not want to earn enough or demonstrate work
capacity that might jeopardize their disability status.

In an effort to address the potential disincentives to work resulting from the cash cliff and the
time limited nature of eligibility for the SSDI program, the Ticket to Work Incentives
Improvement Act (TWWIIA) authorizes the Social Security Administration to establish
demonstration projects. Among the demonstration projects allowed under TWWIIA are projects
to test alternatives to the current SSDI cash cliff. The assumption is that removing barriers and
encouraging persons with disabilities to work will be more effective than maintaining the status
quo.

TWWIIA also authorized the expedited reinstatement provisions, which allow for easier
reinstatement to SSDI and SSI benefits if a person ever works him or herself off benefits; the
Medicaid Buy-In programs that have been enacted in many states and which allow for ongoing
access to health coverage for people with disabilities who work; Medicaid Infrastructure grants
to support the development and refinement of Medicaid Buy-In programs and Personal
Assistance programs that support the employment of people with disabilities; and the benefits
counseling programs, which provide accurate benefits information so that people with disabilities
who use multiple services and supports can make informed choices about their employment.

In August 2002, The Social Security Administration (SSA) stated its intent to work with states to
develop work incentive demonstration projects to provide alternatives to the current SSDI cash
cliff.2 This creates the opportunity to take a new look at the full set of issues related to work and
the federal and state income assistance and health care programs, including using the insight
gained to date from the experience of states implementing Medicaid Buy-In programs.3

2In an August 9, 2002 letter from Martin Gerry, Deputy Commissioner of the Social Security Administration to the
State of Wisconsin's Secretary of Health and Family Services, it was stated: "After a thorough reevaluation of our
plans for this research, my office has concluded that a design which accommodates the different needs and
circumstances of individual states would be more realistic and effective in evaluating the impact of a DI benefit
offset."


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In summary, Congress adopted a comprehensive, person-centered approach for addressing the
multiplicity of barriers facing persons with significant disabilities. The demonstrations will
provide an opportunity to demonstrate different SSDI cash benefit policies in a policy
environment that better supports competitive employment for beneficiaries.

PURPOSES

The purpose of this project is to develop, implement, and evaluate policy options for making
work pay for beneficiaries in the national SSDI program. Under this demonstration, SSA,
working with the state, will explore methods to reduce the multiplicity of barriers to
employment, enhance the work effort and earnings of persons with significant disabilities
eligible for cash benefits under the SSDI program and to reduce (or at a minimum not increase)
the dependency of such individuals on federal and state programs.

Each demonstration project must:

     Allow the individual to have his/her SSDI benefit amount gradually rather than
      precipitously reduced,
     Ensure the continuation of disability status for employed persons with significant
      disabilities based on disability and not employment, and
     Include comprehensive, person-centered approaches that take into consideration the
      combined impact of various federal and state programs on an individual's decision to
      work and increase earnings, commensurate with their abilities.

Demonstrations must be flexible enough to address the fact that the population of persons with
significant disabilities is not homogeneous:

     Some persons with significant disabilities are unable to work
     Other persons with significant disabilities may only be able to work on an intermittent
      basis (unable to sustain earnings over an extended period of time because of disability)
      and
     Other persons with significant disabilities may only be able to work when they have
      access to health care (e.g., Medicaid to provide long term services and supports such as
      personal assistance services and assistive technology or provide "wrap-around" services
      if private insurance is unavailable or inadequate).

Demonstrations must provide information that enables policymakers to determine how to design
permanent changes in national SSDI law. The demonstrations must contain design elements that
could be transferable to the national SSDI program. These changes in law would target the
intended beneficiaries of the new policies to individuals needing ongoing attachment to the


3"Medicaid Buy-In Programs-Case Studies of Early Implementer States" (May 2002); "The Medicaid Buy-In
Program: Lessons Learned from Early Implementer States" (May 2002); and "Policy Frameworks for Designing
Medicaid Buy-In Programs and Related State Work Incentive Initiatives" (May 2002). These papers may be found
at www.medicaidbuyin.org and then go to "VIII. Lessons Learned and Data From Implementing States-2002".


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programs in order to reduce the risk of working and thus encourage them to work commensurate
with their potential and abilities.

In order for states to adequately develop these new programs, the Social Security Administration
will work with the state and other federal agencies, specifically the Centers for Medicare and
Medicaid Services (CMS), to establish a more global perspective of budgeting. It has been
recognized that, when developing new programs that reach across several agencies, there are
inherent difficulties when attempting to prove budget neutrality and savings. A new program
might show increased costs to a single budget even though it will show little or no costs to the
global federal budget. This elimination of silo budgeting should assist in the development of a
package of demonstrations and services. Furthermore, savings and costs at the state and federal
level are often different. Many work incentive reforms are hypothesized to save federal dollars
but incur costs in state dollars. The Project must consider efforts to also have savings realized by
states if significant federal savings are obtained.

Principles, Issues and Questions

I.     Defining Scope and Goals

       Principles

           1. Work should pay.

           2. The demonstration will preserve the national protections (safety net) provided by
              the SSDI, SSI, and Medicaid programs.

           3. The demonstration must provide information that enables policymakers to
              determine how to design permanent changes in national SSDI law.

           4. This demonstration will not modify the initial determination of eligibility (i.e., the
              definition of disability) under the SSDI program.

           5. Continued eligibility on the basis of disability in the SSDI program will be
              determined in the same manner as under current law except that engaging in work
              will not of itself disqualify the individual for participation in the SSDI gradual
              reduction demonstration.

           6. Demonstration designs will include comprehensive, person-centered state
              approaches that take into consideration the combined impact of multiple programs
              (i.e., at a minimum gradual reduction in SSDI benefits, a Medicaid Buy-In
              program and benefits counseling).

           7. The demonstration will balance the need to "keep it simple" with the need to
              target the program to the intended beneficiaries of the new policy.




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           8. Any demonstration will use methodologies, calculations and processes that treat
              all persons with disabilities equally, allowing for reasonable modifications that do
              not fundamentally alter the nature of the demonstration.

           9.    The development and implementation of these demonstrations will involve
                consumers with disabilities, advocates and family members.

      Possible Policy Development Topics and Questions

           1. Which employment support models should the state include in the demonstration
              in addition to the Medicaid Buy-In program and benefits counseling (for example,
              enhanced vocational rehabilitation, transportation)?

           2. Which state agencies and other entities should be involved, e.g., Medicaid
              agencies, Vocational Rehabilitation, financial institutions, Centers for
              Independent Living, employment departments, WIA One-Stops, etc.?

           3. How will the state develop an education, joint planning, and consensus building
              process that ensures that the viewpoints of all stakeholders, particularly persons
              with disabilities and their families, are considered in the design, implementation,
              and evaluation of the project?

II.   Providing Protections for Participants

      Principles

      1. Participation by the consumer in the demonstration will be completely voluntary. In
         other words, SSDI beneficiaries will have the choice to remain in the current SSDI
         program. There can be no consequences for the consumer if she/he chooses not to
         participate in the demonstration.

      2.    SSDI beneficiaries will be provided with sufficient information and access to person-
           centered planning and assistance to ensure informed decision making regarding
           participation in the demonstration.

      3. The demonstration must include mechanisms to enable participants to be held
         harmless i.e., they will not be worse off, in terms of ongoing access to benefits, if the
         demonstration ends or they withdraw from the demonstration.

      Possible Policy Development Topics and Questions

      1. How will the state and SSA provide for hold harmless protections to allow the
      consumer to transition back to his/her pre-demonstration eligibility status or allow the
      consumer to be "grand-fathered" into continued eligibility under the terms of the
      demonstration?




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       2. How will persons who leave the demonstration program prior to the end of the
       demonstration period be treated to enable them to be held harmless for participating in
       the demonstration?

       3. Should the current trial work period (TWP) and extended period of eligibility (EPE)
       provisions in SSDI law be continued and "frozen" under the SSDI demonstration or
       eliminated as in the case of the SSI work incentives?

III.   Creating New Options (Point and Rate of Reduction and Continued Attachment to
       SSDI Benefits)

       Principles

       1. Demonstrations will reduce the degree of uncertainty and risk affecting the choice
          made by the individual whether to work and the amount of earnings (gradual rather
          than precipitous loss of cash benefits and continued attachment to the program).

       2. Persons that have become eligible for SSDI and begin to work and have earnings
          above SGA will not have a higher risk of losing their disability status than those
          recipients that are not working.

       3. SSDI beneficiaries will be provided with sufficient information and access to person-
          centered planning and assistance to ensure informed decision making including
          tradeoffs as to the set of income assistance and health care financing programs that
          will best meet the individual's goals and needs.

       Possible Policy Development Topics and Questions

       In allocating the total cost of an SSDI gradual reduction program involving earned
       income disregards, what should be the relative weight applied (if any) to each of the
       following possible considerations or criteria taking into account the costs, the need to
       target the program, and to "keep it simple" as possible:

              1. Rewarding or favoring any or a minimal level of earnings with a high initial
              earned income disregard followed by a more rapid reduction in benefits for a
              dollar of earnings after the initial earned income disregard.

              2. Rewarding or favoring higher levels of earnings with a smaller initial earned
              income disregard but a small reduction in benefits for a dollar of earnings after the
              initial earned income disregard.

              3. Provide for degree of progressivity (The lower the earnings, the greater the
              cash benefits and payment of premiums and cost share for health care. As
              earnings increase, benefits decrease and premiums and cost shares increase).




                                                6
             4. Provide for an individualized earned income disregard based on the disability-
             related work expenses of the individual.

             5. Provide for an earned income disregard based on the individualized disability-
             related community or independent living costs of the individual.

             6. Provide for a uniform general-expenses-of-working earned income disregard to
             take into account non-disability related expenses of working (travel, uniforms,
             meals, and Social Security and Medicare tax on income).

             7. In determining the initial earned income disregard, consider:

                    The current SSI initial income disregard ($85) increased to reflect the
                     same percentage increase from the beginning (1974) Federal SSI standard
                     ($146) to the current SSI standard ($545 in 2002), which would be
                     approximately $317 in 2002.
                    The current SSDI Substantial Gainful Activity (SGA) test for initial
                     disability determination for SSI and SSDI recipients of $780.
                    The amount of the personal individual exemption of any income ($2900
                     annual ($242 monthly)) under Federal income tax law in determining
                     Adjusted Gross Income (AGI) in determining taxable income.


IV.   Making SSDI Demonstration Fit with SSI and Medicaid

      Principles

         1. Demonstrations will make work pay by ensuring that the reduction in SSDI
            benefits resulting from increased earnings combined with payment of premiums
            or cost sharing in a Medicaid Buy-In program or other state Medicaid eligibility
            categories does not create a severe loss of disposable income.

         2. For individuals eligible for both SSI and SSDI the reduction in benefits under
            both programs from earnings will not create a severe loss of disposable income.

         3. The design and administration of a new work incentive program for SSDI
            recipients and related health care services will, to the extent possible, provide ease
            of access to and understanding of the program.

      Possible Policy Development Topics and Questions

         1. What are the elements of an SSDI demonstration program and related changes in
            SSI and Medicaid that meet the range of needs and goals of all persons with
            significant disabilities?




                                               7
        2. Whether the demonstration should be coordinated with and be complemented by
           an SSI demonstration?

        3.    How will the demonstrations assess the degree of uncertainty and risk affecting
             the choice made by the individual whether to work, and the amount of earnings
             (i.e., continued attachment to the program--gradual rather than precipitous loss of
             cash benefits)?

        4.    How will the demonstrations assess the impact of various policy alternatives on
             making work pay--enabling persons with significant disabilities to maintain
             sufficient disposable income or earnings and savings for independent living?

        5. Will the state demonstrations consider alternatives that increase comparability
           between SSI and SSDI regarding maintaining connection/attachment with the
           program4 (no time limits, no earnings limits)?

        6. Whether the demonstration should address the need for a coordinated policy to
           begin the reduction in SSDI at the same income level as the starting point for
           Medicaid Buy-In premium?

        7. How will the design and administration of the demonstration provide for ease of
           access and understanding of the program?

        8. Whether the State demonstration will include specific means to improve data
           sharing between federal and state agencies?

        9. In a state with a Medicaid Buy-In program, whether the demonstration will treat
           persons participating in the Medicaid Buy-In program different from or the same
           as SSDI recipients not participating in the Medicaid Buy-In program?


V.   Making the SSDI Demonstration Fit with The Ticket to Work Program

     Principles

     1. Individuals participating in demonstration projects will maintain the choice to use
        their Ticket to Work under TWWIIA.
     2. Employment Networks will continue to have access to outcome payments. The
        outcome payments under the demonstrations will be structured in such a way as to
        provide incentives for Employment Networks to work with SSDI beneficiaries who
        choose to volunteer for the demonstration.
     3. Employment Networks are an additional resource for promoting work for SSDI
        beneficiaries at levels beyond Substantial Gainful Activity.




                                              8
      Possible Policy Development Topics and Questions

      1. State demonstration projects may use alternative payment structures for Employment
         Networks. Some possible options include:

           SSA and Employment Networks could share any savings that results from a
            reduction in benefits for a demonstration participant, with the percentage of
            payment sharing determined by the state.
           Employment Networks could be eligible for outcome payments when they assist
            SSDI beneficiaries to work beyond a specified threshold level (e.g., $200 above
            SGA), even if the individual is still receiving an SSDI cash benefit.

      2. The sharing of payments will need to consider the balance between rewarding
         Employment Networks and providing additional money for states implementing the
         demonstration.

VI. Evaluating Enrollment and Net Fiscal Impact

      A. Principles

          1. Evaluation activities will be consistent with the primary purposes of the SSDI
             Work Incentive Policy Demonstration Projects. Primary emphasis will be put on
             evaluating state level projects in order to collect and develop information that
             informs policy design, discussion, and implementation at both the national and
             state levels.

          2. State projects will collect specified data in a manner that will facilitate interstate
             comparisons and the development of national estimates of beneficiary
             participation, outcomes, and net costs. However, this goal must be implemented
             in a fashion that allows states enough flexibility to test any approach consistent
             with the overall project guidelines.

          3. Each state project will evaluate the project's impact on participant outcomes
             including, but not necessarily limited to, earnings, employment, disposable
             income, and access to health and support services.

          4. Each state project will track the characteristics of those entering the project and
             prematurely leaving the project. This information is needed to assess project
             impacts and to estimate potential usage and net costs of a permanent program.

          5. Each state project will evaluate the net fiscal impact of the project within the
             state. This evaluation will take into account savings and costs across SSDI, SSI,
             Medicare and Medicaid and other social insurance and entitlement programs, both
             federal and state. Thus, savings and costs in both State and Federal programs will
             be considered and compared.




                                                 9
          6. Each state project will conduct a process evaluation to assess activities around
             program implementation – such as activities around program start up,
             modifications to the program as originally designed, and external events which
             affect the program.

       B. Possible Policy Development Topics and Questions

          1. What level of flexibility should be provided for state demonstration projects for
             data collection and evaluation?

          2. How will the state develop the capacity and what resources (federal and state) are
             available to analyze and provide data to federal and state policymakers?

          3. What data is needed to determine cross-program savings from changes in SSDI
             and related programs?

          4. What role should the demonstration projects assume with respect to evaluating
             access to private health insurance?

          5. What efforts can be made to ensure the comparability of state level data
             (especially earnings and how those are gathered by the state)?


VII.   Designing Equitable Intergovernmental Sharing of Costs and Savings

       Principles

       1. The governmental costs and savings from reduced expenditures (possible reductions
          in SSDI and SSI payments, health care costs, food stamps, taxes paid, etc) should be
          allocated in an equitable manner among the Federal, State and local governments to
          reflect the joint role of these various levels of government in enabling and
          encouraging increased work efforts.

       Possible Policy Development Topics and Questions

       1. What will be the data collection needed to ensure accurate assessment of savings?

       2. States may explore alternative policies for sharing reductions in costs at federal, state,
          and local levels.




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