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 on this topic

BFI Working Paper·Jun 7, 2025

The Local Root of Wage Inequality

Hugo Lhuillier
Topics: Employment & Wages
BFI Working Paper·Jun 5, 2025

Firm Premia and Match Effects in Pay vs. Amenities

Anders Humlum, Mette Rasmussen, and Evan K. Rose
Topics: Employment & Wages
BFI Working Paper·May 19, 2025

Remote Work, Employee Mix, and Performance

Cevat Giray Aksoy, Nicholas Bloom, Steven Davis, Victoria Marino, and Cem Özgüzel
Topics: Employment & Wages