Ivan Suvorov

Job market paper

All or Nothing: Health and the U.S. Social Security Disability Insurance Program

Social Security Disability Insurance (SSDI) policy evaluates applicants’ health as a binary outcome and creates incentives to exaggerate or even exacerbate one’s health problems to acquire eligibility. This paper is the first to develop and estimate an individual decision-making model that permits the evaluation of the health effects of changes to SSDI design. Specifically, I focus on a modification that allows partial benefits for the partially disabled. Simulations show this reform can decrease the mortality rate. This decrease varies with age and reaches a maximum of 0.1 p.p for 60-year-olds. Back-of-the-envelope calculations show that thanks to the reform, ∼30,000 Americans will extend their lives by 5 years, ∼20,000 Americans - by 15 years, and ∼10,000 Americans - by 20 years. This increase in longevity will come with an increase in the total sum of the benefits and with an increase in labor supply and income taxes. After accounting for increased taxes, the investment required to prolong the life of one person by one year is around $17,000.