The Impact of the Affordable Care Act on Applications for Social Security Disability Benefits

The Social Security disability program provides cash benefits to individuals who are unable to work due to a disability. In addition, persons qualifying under the Supplemental Security Income (SSI) program gain Medicaid coverage while persons qualifying under the Social Security Disability Insurance (SSDI) program gain Medicare coverage after a wait-time of two years. Thus, health insurance may play an important role in the decision to apply for disability benefits. In this study, I examine the impact of the 2010 Affordable Care Act (ACA) on disability applications.

The ACA significantly increased access to affordable health insurance via several provisions such as the expansion of the Medicaid program and the introduction of insurance Marketplace. This increased access to health insurance may affect disability applications via four potential pathways. First, the ACA changes may allow SSDI beneficiaries to have insurance coverage during the 2-year wait-time before Medicare covers them. While SSI beneficiaries do not face a similar waiting period for Medicaid coverage, individuals must still wait until their application is reviewed and benefits are awarded. Thus, the ACA may increase applications from persons who might have been discouraged from applying in the past because they were unwilling to incur gaps in coverage. Second, the Medicaid expansion of the ACA may also increase awareness or information about other public programs leading to an increase in disability applications. Third, by increasing access to other sources of coverage, the ACA may deter applications among individuals who value the Social Security disability program because of the health insurance coverage that it provides. Fourth, access to insurance might allow individuals to better diagnose and document their health condition, making it easier to apply for disability insurance. Fifth, improvements in health due to the ACA related coverage increase may decrease the need for disability insurance. However, given that large improvements in health are unlikely to occur over the short term, this pathway is less likely to be important for this study. Overall, the net effect of the ACA on disability applications is theoretically ambiguous.

To identify the causal effect of the ACA, I use a difference-in-differences approach that exploits pre-ACA state variation in insurance rates. Event study models, placebo tests using child disability applications and various robustness checks provide support to the identifying assumptions. Using Social Security disability claims data from 2001 through 2015, I find that the ACA significantly reduced applications for Social Security disability benefits. The effects are concentrated in states that had below average insurance rates before the ACA became law and states that expanded their Medicaid program. Overall, the results suggest that health insurance is an important factor in the application decision and the ACA reduced the relative value of Social Security disability benefits by increasing access to health insurance coverage from other sources.