Disability Insurance Applications near Retirement Ages

Hugo Benitez-Silva, Stony Brook University, State University of New York (SUNY)
Na Yin, Baruch College (CUNY) and CUNY Institute for Demographic Research (CIDR)

Literature estimating the effect of benefit levels on Social Security Disability Insurance (DI) application decisions has not been able to separate the effect of Medicare coverage provided by the program on application decisions from the effect of cash-benefits, and therefore previous estimates are likely to be overstated. In this research we compute the elasticity of DI applications with respect to cash benefit levels focusing on a special age window between Early and Normal Retirement Age in which Medicare incentives are virtually non-existent. This approach allows us to more accurately estimate the effect of cash benefits on the decision to file for disability benefits. We find that the benefit elasticity of DI applications at age ERA-NRA is much higher than that at younger ages. We also find some interesting dynamic effects, such as the changing age structure of applicants and the application timing shift when there are changes in policy variables.