price_of_citizenship.jpg (9774 bytes) The Price of Citizenship

Chapter Eight

Chapter Eight: Increased Risks for the Injured, Disabled, and Unemployed

American social programs label those individuals they treat meanly or exclude as morally suspect or unworthy: the undeserving poor, the malingerer, the cheat, the lazy shirker, even, recently, the deceptive child and her dishonest parent.

Social insurance originated in Germany, Bismarck introduced sickness insurance in 1883, workers' compensation in 1884, and old age insurance in 1889. Germany's first unemployment insurance began in 1927. In contrast to Europe after World War II, where national social insurance programs developed into a relatively universal and unified system, America's social insurance structure remained rickety, incomplete, and poorly coordinated; it was part national and part state, and it left whole categories of individuals without guaranteed protection, dependent on private or public charity.

In insurance, 'moral hazard' (identified people "unusually susceptible" to the temptations created by insurance) provides an inadequate justification for dismantling the welfare state because it is based on faulty assumptions:

  • workers' compensation benefits = more workplace injury
  • disability insurance = malingering
  • unemployment insurance = temps people to leave their jobs
  • welfare = creates dependence.

A master narrative of policy reform:

  • crisis of numbers and costs (rising rolls) = the assignment of blame to morally suspect persons (the undeserving)
  • reduction of program size through controlling eligibility more than reducing benefits = reform
  • measurement of achievement by fewer beneficiaries = success
  • failure to track the fate of those denied help = willful ignorance.

Workers' Compensation and the New Conflict Between Business and Labor

From its beginning workers' compensation served the interests of labor, big business, and insurance companies.

  • Labor wanted protection for American workers, who experience the highest rates of accidents in the industrialized world.
  • Employers found the cost of litigated workers' accident claims an unpredictable and growing burden. They wanted to stabilize expenses and take decisions out of the hands of juries, who invariably showed more sympathy to workers than to their bosses.
  • Insurance companies were criticized for large premiums that seemed to pay for profits and overhead than for benefits to injured workers. And insurance companies remained dissatisfied because they could not predict the size of claims or awards.

Legislation that transformed workers' compensation from an adversarial process to an administrative procedure promised to resolve the issues confronting these competing interests.

Workers' compensation laws today retain the same fundamental structure as they had when first enacted. But because each state designs and runs its own program with almost no federal influence, benefits and regulations still vary widely.

Workers' compensation benefits and coverage changed relatively little until the 1990s.

By the 1990s, states on average adopted about 2/3s of a special commission's recommendations, and courts increasingly handed down decisions that liberalized workers' compensation. As a result, the total cost of workers' compensation benefits skyrocketed. A major part of the expense was soaring medical costs.

New common-law protections for injured workers, workplace antidiscrimination laws, and security against employer retaliation in state statues encouraged workers to claim their rights which had an end result of allegations of fraud. Most fraud did not reflect dishonesty among workers. Rather it was perpetuated by medical and legal "mills". High profile companies that focussed primarily on worker fraud helped persuade the public and government officials to accept reforms that reduced benefits to disabled workers.

Labor claims that workers' compensation reform constitutes nothing more than a smokescreen to reduce employers' costs and lower their insurance premiums. It's victories signal that as long as the economy remains strong and the labor market tight, further assaults on economic security will confront real resistance.

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Disability Insurance and the New Undeserving Poor

DI = Disability Insurance

  • covers those with some disabling condition (not a work injury)

SSI = Supplemental Security Income

  • serves only the poor, disabled men and women without work histories in the regular labor market.

Disability is not an unambiguous idea. Throughout the history of social insurance, employers, the state, and labor have all contested its meaning. Public policy, not objective standards, defines disability, and its definition is always in flux. "Disability" solves the problem of moral hazard with a justification for public support that does not undermine work. The problem has always been validation. In practice, what criteria identified incapacity and who applied them? Modern welfare programs replaced historic means of validation with "clinical judgement".

The burden of proving disability fell on medicine, which is suppose to render a clear, objective, and scientifically based decision. Physicians realized the subjectivity underlying determinations of disability and only reluctantly accepted the role of gatekeeper to the welfare state.

Disability remains not only a constructed category undermined by contradictions; it also has acquired three distinct meanings:

  1. Courts or workers' compensation programs
    - "disability means the damages that one person collects from another as a result of an insult or injury."
  2. Social Security Disability Insurance
    - "a condition that links ill health and unemployment."
  3. Civil Rights Laws
    - disability connotes "handicap".

The multiple meanings of 'disability' and the lack of consistent uses of key terms also block more rational policies toward injury and impairment.

In the late 1980s and early 1990s, revised medical criteria and advances in treatment influenced the composition and swelled the size of disability rolls. Mental disorders rose from 10% of the reasons for disability in 1981 to 25% in 1995.

Disability rolls also usually increase during recessions, when they act as a disguised form of unemployment insurance. Besides recessions and labor market displacement, cuts in public aid programs also moved people onto the disability rolls. The state, employers, legislators, disability program agencies, and rehabilitation agencies all benefit from having a disability category they can manipulate.

Nonetheless, a suspicion of malingering and fraud always hovers around the growth of the disability rolls. As the boundaries between work and need seem to dissolve, the undeserving poor appear to be raiding the public treasury, driving up taxes, undermining morals, and threatening labor markets. In the 1980s, an attempt was made by the Reagan administration to toss people off the disability rolls and in the 1990s, the number of SSI recipients was reduced, especially children, by redefining disability.

Between March 1981 and November 1983, state agencies, under federal pressure, carried out over a million disability reviews and concluded that the benefits of 470,000 persons should end. In 1982, administrative law judges restored benefits to 2/3s of those the SSA had wanted to drop from the rolls.

After a hard fight, the first round in the disability wars of the 1980s had gone to the disabled.

In March 1996, the 104th Congress declared people disabled because of drug or alcohol addiction ineligible for both Disability Insurance and SSI Disability. Losing their disability benefits also would sever their link to Medicare and Medicaid.

In 1990, the Social Security Administration expanded the number of children eligible by updating its listing of childhood mental disorders. In addition, the U.S. Supreme Court increased eligibility.

The 1996 welfare bill tightened the definition of child disability for both new applicants and existing beneficiaries. Losing SSI benefits promised hardship for low income families.

On February, 1997, the Social Security Administration announced that it would review 260,000 cases and probably end benefits for 135,000 children.

In a review it was found that the government improperly terminated disability benefits for many poor children, misinformed parents of their legal rights and actively discouraged parents from appealing its decisions.

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Uninsuring the Unemployed

In America, to be out of work is not necessarily to be considered unemployed, because "unemployment" requires a recent history of work at a regular job. the officially unemployed qualify for benefits under a social insurance program, those simply out of work can call on only public assistance. Even the officially unemployed often find difficulty claiming unemployment insurance, which pays benefits only to a decreasing minority of them.

As an entitlement contingent on work, not poverty, unemployment insurance in America has two purposes:

  1. the temporary and partial replacement of lost wages to involuntarily unemployed individuals with a prior attachment to the labor force.
  2. the stabilization of the economy during recessions.

In European countries, the idea of social obligation underpins unemployment insurance. In the United States a belief in individual responsibility shapes the design of the program. A fear of 'moral hazard' has restrained American spending and influenced the design of unemployment insurance to avoid creating dependence.

The Unemployment Insurance program was established by the Economic Security Act of 1935. The original legislation built the frame work of the unemployment system that persists to this day, even though the character of the labor market has changed radically.

The decline in the rate at which the unemployed successfully claimed insurance benefits accelerated in the 1980s with the actions of the Reagan administration.

Between 1981 and 1987, forty-four states raised work and earnings requirements for unemployment insurance and added for disqualification.

The percentage of the unemployed receiving benefits dropped from a peak of 75% in 1975 to a low of 32% in 1987 and 1988; in 1994, it was 37%.

Unemployment insurance also still disadvantages women, African Americans, and part-time and low-wage workers.

Employers found ways of keeping their taxes from rising by outsourcing the administration of unemployment insurance to firms that not only relieved them of the paperwork but successfully fought the claims of their former employees.

It's tougher to win cases today. Employers are doing a better job of knowing employment law. Claimants almost never do.

The major hope for those who wanted to reverse the trends of the last two decades lay in the labor movement and the vigorous efforts of the AFL-CIO to protect and improve unemployment insurance. "voluntary", "suitable", and "misconduct" were redefined sometimes annually by state governments - unemployment insurance found its own version of the undeserving poor, and state policies treated them accordingly.

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Chapter Summary

The past 20 years have seen increased risks for the injured, disabled and unemployed due to a faulty assumption based on 'moral hazard'. American social programs label those individuals they treat meanly or exclude as morally suspect or unworthy: the undeserving poor, the malingerer, the cheat, the lazy shirker, even, recently, the deceptive child and her dishonest parent. This inadequate justification has been used for dismantling the welfare state.

Back to Table of Contents/ . . .