An Empirical Analysis of the Social Security Disability Application,
Appeal, and Award Process 
Hugo Benítez-Silva
Yale University
Moshe Buchinsky
Brown University, NBER, and
CREST-INSEE
Hiu Man Chan
Yale University
John Rust 
Yale University and NBER
and
Sofia Sheidvasser
Yale University
Revised, June 29, 1998
8
This work was made possible by research support from NIH grant AG12985-02.
Rust's work was also supported by a previous grant from the Bradley Foundation.
Benitez-Silva is also grateful for the financial support of the ``la Caixa
Fellowship Program''. Buchinsky is grateful for the support from the Alfred
P. Sloan Research Fellowship. We benefited
from comments on an initial presentation of this paper at the
International Health and Retirement Surveys conference in Amsterdam
in August, 1997.
We extend special thanks to co-organizers Richard
Burkhauser and Jules Theeuwes and other members of the
conference including Robin Lumsdaine, Michael Hurd,
Thomas Juster, Regina Riphahn, Richard Suzman, and Robert Willis.
We are also benefited from comments from two anonymous referees and participants at seminars
at several American and European universities,
with particular thanks to
Burt Barnow, Mike Boozer, John Bound, Peter Diamond, Debra Dwyer,
Martin Feldstein, Brent Kreider, Kajal Lahiri, François Laisney,
Robert Moffitt, Ariel Pakes, Paul Schultz, Eric Slade, and Steven
Stern. We also received helpful comments from David Stapleton of the
Lewin Group, Joachim Winter of the University of Mannheim and
Pere Miret of Caixa d'Estalvis i Pensions de Barcelona.
Finally, we thank Joe Heckendorn, Dave Howell, Cathy Leibowitz
and other members of the staff of the University of Michigan Survey Research
Center (SRC) and the Health and Retirement Survey staff for answering
numerous questions about the data and providing us with data from the
wave three alpha version of the HRS.
8Corresponding author: John Rust,
Department of Economics, Yale University, 37 Hillhouse Avenue,
New Haven CT 06520-8264, phone: (203) 432-3569, fax: (203) 432-6323,
e-mail: jrust@gemini.econ.yale.edu
This paper provides an empirical analysis of the Social Security disability application, award, and appeal process using a sample of 12,652 men and women from the first three waves of the Health and Retirement Survey (HRS). We estimate separate discrete choice models of the individual's decision to apply for benefits, the government's decision to award benefits, the individual's decision whether to appeal an initial denial, and the government's decision whether to award benefits on appeal. Our specification includes as a submodel the five stage sequential disability determination procedure used by the Disability Determination Services (DDS) to more efficiently screen initial disability insurance (DI) applications. We show that the option to appeal or reapply increases the chances of being awarded disability benefits by nearly 50%. However, this increased award rate come at the cost of significant delays: the mean duration between application and award for the ``first stage awardees'' is only one third as long as the delay experienced by those who received benefits after one or more stages of appeal. Our empirical results reveal the important role of self-selection in application and appeal decisions. In particular, an individual's private information--as measured by self-assessed disability status--emerges as one of the most powerful predictors of application and appeal decisions. Although Social Security does not have access to this private information, our results also indicate that individuals who are ``truly disabled'' (i.e. who report having a health limitation that prevents them from working) are also significantly more likely to be awarded disability benefits at either the first stage or on appeal. Finally, we show that even though we do not have access to Social Security administrative data, we can make accurate inferences about the structure of the DDS' sequential disability determination procedure using self-reported data from the HRS and a marginal likelihood that ``integrates out'' the (unobserved) basis for award or denial.
Keywords: Social Security, Disability, Health and
Retirement Survey, private information, marginal likelihood.
JEL classification: H5