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The Effect of State Workers' Compensation Program Changes on the Use of Federal Social Security Disability Insurance

Author

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  • Melissa P. McInerney
  • Kosali I. Simon

Abstract

In addition to traditional forms of private and public medical insurance, two other large programs help pay for costs associated with ill health. In 2007, Workers Compensation (WC) insurance provided $55.4 billion in medical care and cash benefits to employees who are injured at work or contract a work-related illness, and Social Security Disability Insurance (DI) provided $99 billion to individuals who suffer from permanent disabilities and are unable to engage in substantial gainful activity. During the 1990s, real DI outlays increased nearly 70 percent, whereas real WC cash benefit spending fell by 12 percent. There has been concern that part of this relationship between two of the nation's largest social insurance programs may be due to individuals substituting towards DI as state WC policies tightened. We test this hypothesis using a number of different WC and DI program parameters. We first show that this negative correlation between the national series does not hold over time within states, the level at which a causal relationship should operate. We then test how regulatory changes in state WC program parameters impact WC outcomes (intended effect) and DI outcomes (unintended effect). We find no compelling evidence of WC tightening causing DI rolls to increase, and conclude it is unlikely that state WC changes were a meaningful factor in explaining the rise in DI.

Suggested Citation

  • Melissa P. McInerney & Kosali I. Simon, 2010. "The Effect of State Workers' Compensation Program Changes on the Use of Federal Social Security Disability Insurance," NBER Working Papers 15895, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15895
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    Cited by:

    1. Johanna Catherine Maclean & Keshar M. Ghimire & Lauren Hersch Nicholas, 2017. "The Effect of State Medical Marijuana Laws on Social Security Disability Insurance and Workers' Compensation Claiming," NBER Working Papers 23862, National Bureau of Economic Research, Inc.
    2. Nick Buffie & Dean Baker, 2015. "Rising Disability Payments: Are Cuts to Workers’ Compensation Part of the Story?," CEPR Reports and Issue Briefs 2015-21, Center for Economic and Policy Research (CEPR).
    3. Johanna Catherine Maclean & Lauren Hersch Nicholas & Keshar M. Ghimire, 2017. "The Impact of State Medical Marijuana Laws on Social Security Disability Insurance and Workers' Compensation Benefit Claiming," Working Papers id:12111, eSocialSciences.

    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)

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