Research / BFI Working PaperJun 03, 2021

Beyond Health: Non-Health Risk and the Value of Disability Insurance

Manasi Deshpande, Lee Lockwood

The public debate over disability insurance has centered on concerns about individuals without severe health conditions receiving benefits. We go beyond health risk alone to quantify the overall insurance value of U.S. disability programs, including value from insuring non-health risk. We find that disability recipients, especially those with less-severe health conditions, are much more likely to have experienced a wide variety of non-health shocks than non-recipients. Selection into disability receipt on the basis of non-health shocks is so strong among individuals with less-severe health conditions that by many measures less-severe recipients are worse off than more-severe recipients. As a result, under baseline assumptions, benefits to less-severe recipients have an annual surplus value (insurance benefit less efficiency cost) over cost-equivalent tax cuts of $7,700 per recipient, about three-fourths that of benefits to more-severe recipients ($9,900). Insurance against non-health risk accounts for about one-half of the value of U.S. disability programs.

More Research From These Scholars

BFI Working Paper Mar 4, 2019

Disability and Distress: The Effect of Disability Programs on Financial Outcomes

Manasi Deshpande, Tal Gross, Yalun Su
Topics:  Economic Mobility & Poverty, Employment & Wages
BFI Working Paper Nov 8, 2018

Who Is Screened Out? Application Costs and the Targeting of Disability Programs

Manasi Deshpande, Yue Li
Topics:  Uncategorized