April 5, 2004

RALEIGH — State and federal programs directed at the disabled are costly and ineffective because they apply an “entitlement mentality” to problems that would be better addressed by promoting investment in job skills and self reliance, according to a new report released by a Raleigh-based think tank.

John Hood is president of the John Locke Foundation and author of its report, “From Entitlement to Investment: Rethinking U.S. Disability Policy for the 21st Century.” He observed that while most persons living with disabilities today have “an unprecedented quality of life,” largely as a product of medical and technological advances, they are also experiencing some “surprisingly negative” trends.

A key problem is employment. Hood reported that a smaller share of disabled Americans have jobs today than was true before the passage of the Americans with Disabilities Act, which was supposed to pry open the doors of economic opportunity. This decline in workforce participation was not a quirk in the data, and was present across a range of disabilities and severities, he found.

Potential explanations for the problem include employer fears of future employee lawsuits, the costs associated with legally mandated expenditures to assist disabled workers, and increases in spending and eligibility for public assistance programs for the disabled, Hood stated.

“While welfare reform more generally appears to have persuaded many able-bodied Americans to forgo long-term dependency in favor of work, we have not engineered a similar change in thinking for the disabled population,” he wrote, “and indeed in many ways their dependence on government seems to be growing rather than shrinking.”

Another public-policy dilemma posed by disability trends is the possibility of massive increases in taxpayer expenditures for long-term care through the Medicaid program. In North Carolina and many other states, Medicaid cost have already been rising rapidly, Hood pointed out, and the consensus estimate is that the aging of the population and increasing disability rates among the non-elderly population will create substantial fiscal pressures on states and the federal government to pay for nursing-home care and other services.

Hood estimated that the total cost of U.S. disability programs for working-aged adults in 2002 was about $263 billion, far more than the state and federal expenditure for able-bodied recipients of public assistance. It was a 58 percent increase over the total spending in 1995, this during a period in which overall government spending rose only 29 percent. The 2002 number represented between $13,350 and $14,600 dollars per disabled recipient.

“Some of the most controversial issues of the day — from education funding and health care inflation to economic growth and the future solvency of Social Security and Medicare — reflect the costs imposed on all of us by a flawed model for disability policy that focuses on rights and redistribution rather than responsibilities and the creation of wealth,” Hood wrote. “This ‘entitlement model’ for serving the nation’s disabled has smuggled concepts and principles from the civil rights era into an arena where they are largely inapplicable. It also treats too many disabled Americans as hapless and dependent wards of the state rather than as productive citizens whose value as human capital often remains untapped.”

Hood recommended that state and federal policymakers begin to implement substantial changes of all disability programs based on four principles:

• Redefining disability itself to target services to those who truly need them and separate clearly the responsibilities of the public and private sectors. The current definitions are mutually inconsistent, encourage long-term dependency, and help to disrupt what would otherwise be normal, private responses to individual hardships.

• Reforming entitlement programs such as Social Security, Medicare and Medicaid to build real financial and human capital and to promote self-sufficiency. The disabled would benefit from a system that allows them to redirect at least a portion of the payroll and income taxes they now pay into private savings accounts. In most such proposed systems, they would also be required to purchase private insurance for disability and long-term care.

• Reshaping the delivery of disability services to include real incentives to place the disabled in competitive employment and shorten their stays on public assistance while spending taxpayers’ dollars where they are likely to generate the greater return. The success of integrated case-management practices in the private disability insurance market and in overseas disability programs suggest that privatization would benefit both taxpayers and the disabled.

• Renewing American federalism to give states and localities more control over disabled programs and more room for creativity and innovation.

The full text of the paper can be found online.

For more information about JLF’s research on disability policy, call 919-828-3876.

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