Fallacies of the New Social Security Executive Order
The wild reduced payments claims are not there and probably go negative with the increased processing costs and lawsuits.
The new Executive Order proposes changes to two Social Security programs, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
Goal: Cut welfare spending
Reality: Huge hidden costs & swollen Federal bureaucracy
Net: Cost $20,000 more than payments per recipient
All are subject to medical review to see if the recipient still qualifies. Think Short, Medium, and Long time-periods between reviews.
The Order splits the Medium from “Medical Improvement Possible” to “Medical Improvement Possible” and “Medical Improvement Likely.”
The “Medical Improvement Likely” requires more reviews. The idea is to remove people from the payment rolls when they no longer qualify. That will save money by reducing total payments.
The Democrats quoted in The Philadelphia Inquirer article by Alfred Lubrano complained that it would cause extra hardships on recipients, thus causing them to give up and stop receiving benefits. A nice emotional argument, but not really relevant.
The real problem with the proposal:
The numbers don’t add up
The proponents are plagued by tunnel vision. They expect to save tons of money by reducing payments to a hoard of unqualified individuals.
They ignore the cost to the government of doing so
Also, I suspect that the hoard will not be as large as expected.
Throwing around numbers like 8.8 million implies that a large number will drop off. That turns out not to be the case.
Increased costs for the government
More meetings and interviews. The government will have to add personnel to handle the increased workload. They won’t just handle those that will drop off. They must handle all recipients coming up for review during the year.
More office space. The new workers will require more equipment, office space, and training.
Increased paperwork. Those employees will have to handle and store more paperwork. That will probably increase mail costs. Even though it’s the government charging the government, those increased costs should be allocated to Social Security and not borne by the Post Office.
Additional medical exams. Since the recipients are already on government aid, I suspect that the government is providing medical support, too. Doctors are expensive.
Computer system upgrades. Policy changes frequently require computer software upgrades. It may not be necessary in this case since the new category is fairly simple from a software point of view. It depends on how the systems are designed.
Computer storage. All of that additional paperwork has to be stored somewhere.
Lawsuits. Thanks to Sunshine Zombiegirl, who’s comment highlighted lawsuits against the government by people who were dropped. The legal fees and court costs are probably far higher than the medical exams.
I have no idea how much these new costs will be. They will be incurred by every recipient, but must be divided across only those that drop off.
Beware rose-colored glasses
I learned a lot by managing and building over 100 successful projects in my career. The biggest thing is that people are always overly optimistic with their estimates. Mine were always close. In fact, one was within 8 work hours on a 6-month project.
Based on my experience,
- Whatever the increased cost estimate is from the prior section, double it.
- Whatever the expected decrease in the SSI and SSII roles is, cut it in half.
Being the government, maybe we should quadruple the projected costs and cut the decrease in recipient count by 75 percent instead of half.
The real numbers
The numbers bandied around are 8.8 million, but the number removed from the rolls in 2018 is 147 thousand, or 1.7 percent. If you add the 163 thousand “failed to show” numbers, it is still only 3.5 percent.
That is the maximum number that could be removed from the rolls by checking earlier, assuming that very few get better and then have a relapse during the longer period.
The net savings for more frequent audits would be:
Net = Total Savings - Recipient Cost * Frequency Factor
Total Savings = the sum of payments not made between the date that the recipient is dropped from the rolls and the review date that would have been used under the old system.
Recipient Cost = the total cost in the prior section divided by the number of recipients audited that year.
Frequency Factor = the number representing the total reviewed related to the number dropped. For example, 1 in 5 where 5 is the frequency factor. Using the 3.5 percent above, the frequency factor is about 28.
For example, suppose that the payment is $1,000 per month and the review is 3 years earlier. Then assume that the Recipient Cost is $2,000 per person. If the person is dropped, then the Net is $36,000 - $2,000 * 28 for a
Total LOSS of $20,000 per recipient
It costs more to find someone who should not be a recipient than it does to keep the current system! If you use the average payment of $750 per month, instead of a thousand, the loss increases to $29,000 per recipient.
It gets worse. The example assumed that 100% of the recipients drop off. If only half drop off, the frequency factor gets larger and the loss is $38,000 per recipient.
I can’t imagine the government becoming so efficient that the Recipient Cost would drop below $1,000 per person, especially when you add in the lawsuits.
If you want to argue that the Executive Order is needed to keep those welfare cheats off of the rolls while imposing an additional hardship on those that should be there, go ahead and follow your Stereotypes and Prejudices.
Just don’t say that you are saving money.
SSI Annual Statistical Report, 2018
Since 1974, the Supplemental Security Income ( SSI) program has guaranteed a minimum level of income for needy aged…