What Explains Variation in Disability Application Rates Across States?

Social Security Disability Insurance (SSDI) applica­tions and benefit receipts vary greatly by state, which has led to concerns about potential inconsistencies in the way that states apply disability standards. This possibility has prompted numerous Congressional hearings and reports, and led the Social Security Advisory Board to express concern about the Social Security Administration’s ability to disentangle the potential causes. This brief, using a longer time period and more comprehensive list of variables than other studies, explores the extent to which health, demographic, and employment characteristics – as well as state policies or politics – explain the variation across states. The discussion proceeds as follows. The first sec­tion describes an individual’s SSDI application deci­sion and factors that may influence state-level applica­tion rates. The second section presents variables used to determine the underlying causes of the state-level variation in application rates. The third section sum­marizes the results. The conclusion is that the health, demographic, and employment characteristics of each state explain the largest variations in SSDI application rates. Politics have little effect. Interestingly, states that require employers to provide temporary disability insurance have lower SSDI application rates.