We begin with Figure 4.2 which presents nonparametric estimates of the
``delay distribution'' at various stages of
the DI application and appeal process.
Figure 4.2-a presents the distribution of time
between the reported onset of disability and the date of application for benefits.
Interestingly
most individuals do not apply for DI benefits immediately after
the reported onset date, perhaps due to the fact that they
initially expect to recover. The median duration of 8 months between
disability onset and application means that the majority of applicants who
attained
disability insured status already satisfied the five-month waiting period
at the time of application. The very long tail of the duration distribution indicates
that a significant fraction of individuals wait more than two years prior to filing.
However, a minority of ``disabled individuals'' (i.e., those who report having a
health limitation that prevents them from working) never apply for DI. In our
sample, 25% of the individuals who reported being disabled in wave one
and
15% of the individuals who reported being disabled in each of waves one, two,
and three did not apply for DI benefits over the period 1990 to 1996.
Many of these ``disabled non-applicants'' are ineligible for benefits.
A puzzling finding is the significant number of applicants whose reported date of onset of a disability precedes the reported date of application. There are several possible explanations for negative durations including: (a) measurement or recall errors in the dates of onset and application; (b) fraudulent DI applications; or (c) cases where an individual has a steadily deteriorating health condition, expects to become disabled, and files a DI application in anticipation of the delays in the award process.
Figure 4.2-b depicts the density of the elapsed time between the reported
application date and the date of appeal for individuals who were denied
benefits at the application stage. The mean delay of 8.7 months reflects the total time elapsed
between application and appeal, which we presume is mostly due to the
ALJ stage. This matches the administrative data in Figure 2.2 quite closely.
Note that the mean durations for initial DDS determination and reconsideration
are 5 and 2 months
respectively, and if an individual waits on average 30 days to file an appeal,
then the length of time between initial application and ALJ appeal is 9
months.
Figure 4.2-c depicts the densities of duration until the eventual receipt
of benefits for those who were awarded benefits at the first
stage, i.e., without having to appeal. The median delay is
only 3 months, which suggests that most of these ``first stage awardees''
have relatively severe conditions. However, we can see from
Figure 4.2-d that it is quite a different story for individuals
who obtained benefits only after one or more stages of appeal. The median
duration between application and receipt of benefits for these
individuals is 13.5 months. This long delay is likely to have a large deterrent
effect for many applicants who were denied at the first stage. Nevertheless,
it imposes a very large cost on truly
disabled individuals who have no other alternative than to appeal
an initial denial. The slowness of the appeals
process is probably not an intentional policy
designed to discourage rejected applicants from appealing, but
rather is likely an unintended consequence of the large
backlogs in DI appeals. In fact,
an offsetting incentive that encourages appeals is the fact that the
acceptance rate--particularly at the ALJ stage--is significantly
higher.