SUPPLEMENTAL SECURITY INCOME (SSI):YESTERDAY, TODAY AND TOMORROW

Why Supplemental Security Income (SSI)?

Before 1972, there were three means-testedpoverty programs for the aged, blind, anddisabled—Old Age Assistance, Aid to theBlind, and Aid to the Permanently and TotallyDisabled. This state-operated, federallyassisted system of welfare programs,comprising over 1,300 individualadministrative jurisdictions across the states,was often criticized for its widely differingeligibility requirements and payment levels.

The Supplemental Security Income (SSI)program was a response to that criticism.Enacted in 1972, SSI established a moreequitable and adequate system of incomeassistance for the aged, blind, and disabledthrough a federally unified program. Theprogram was designed so that the federalgovernment provided a basic benefit to allrecipients. Each state could increase thatamount with supplemental benefits responsiveto the needs of its own residents.

Since 1974, when benefits began, SSI hasgrown and evolved. What follows is adescription of the program from 1974 through1999—its administration, its financing, itsrecipient population, benefit levels anddistribution, and a brief review of the SocialSecurity actuaries’ long-term SSI projections.

Administering SSI

When Congress deliberated in the early1970s about who should administer its newlydesigned federal welfare program, SSI, itturned to the Social Security Administration(SSA). By adding SSI to SSA’s administrativestructure, Congress assured that the SSIprogram could take advantage of a structurethe agency already had in place—a nationwidenetwork of offices and a mechanism for payingmonthly benefits to large numbers of people.Since 1974, SSI has been administered bySSA. However, it remains administrativelyand financially separate and distinct fromSocial Security.1

Financing SSI

Management of the SSI program by SSAhas led to the misperception that SocialSecurity trust fund dollars are used to pay SSIbenefits. Federal SSI benefits are paid fromfederal general revenues. SSI statesupplements are paid from state revenues. SSIhas never been financed from the SocialSecurity trust funds.

Total SSI federal benefit payments haveincreased significantly over time. The firstyear total was just over $3.8 billion—$1.7billion for the aged, and $2.1 billion for theblind and disabled. (See Figure 1.)

For 1999, total federal SSI payments totaled$28.6 billion, nearly seven times the program’sfirst year amount. Payments in 1999 were $3.7billion for the aged, $25 billion for the blindand disabled.

Figure 1.Federal SSI Benefit Payments by

Beneficiary Category

0

5

10

15

20

25

30

1974 1975 1980 1985 1990 1995 1999Year

Dol

lars

(in

bill

ions

) AgedBlind & DisabledTotal

Source: Social Security Bulletin, Annual Statistical Supplement, 1998, p. 288& 1999 SSI Annual Report.

The increase in total benefit dollars from1974 through 1999 shows notable programgrowth. These expenditures viewed inisolation, however, exaggerate their magnitudeby not adjusting for the growth of the economyover the same period.

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A more meaningful comparison of budgetdata over a long time period calculates annualSSI outlays as a percentage of Gross DomesticProduct (GDP). The actuaries observe in the1998 SSI Annual Report, “In addition toproviding an inflation-independent measure ofthe cost of the SSI program, the GDPcomparison provides a useful perspective onthe proportion of the total output of the USeconomy needed to provide federal SSIbenefits.”

In 1974, SSI represented 0.26 percent ofGDP. By 1999 that share had increased to0.32. Clearly, SSI costs grew over the 25years from 1974-1999. However, the economygrew as well and was able to absorb a portionof the growth in costs of SSI. (See Figure 2.)

The actuaries project in the 1999 SSIAnnual Report that SSI’s cost as a percent ofGDP will decline gradually to 0.26 percent in2023.

SSI Recipient Population: 1974-1999

Size and Distribution. The federal SSIrecipient population2 has increased by 50percent since 1974—from almost 4 million in1974 to over 6 million in 1999.

Not only did the population grow, itscomposition changed. In the early years of theprogram, the aged comprised more than half(58 percent) of recipients, while the disabledand blind represented less than half (42percent). By 1999, a notable reversal in the

proportion of aged and disabled and blindrecipients had taken place—only 19 percentwere aged, while the number of disabled andblind had almost doubled to 81 percent. (SeeFigure 3.) Automatic cost-of-living adjustmentsapplied to Social Security benefits beginning in1974 were at least partially responsible for the

Figure 3.Federal SSI Recipients by Benefit Category

01234567

1974 1975 1980 1985 1990 1995 1997 1999

Year

Rec

ipie

nts

(in

mill

ions

) AgedBlind & DisabledTotal

Source: Social Security Bulletin, Annual Statistical Supplement, 1998, p. 287& 1999 SSI Annual Report.

significant decrease in the number of olderpersons falling into poverty, which in turnresulted in the lack of growth in the SSI agedpopulation.

Disability Recipients. The number ofdisability awards to those under age 18increased dramatically and remained

Figure 2.Federal SSI Costs as a Percent of GDP

0.000.050.100.150.200.250.300.35

1974 1975 1980 1985 1990 1995 1999

Year

Per

cent

of

GD

P

Source: Social Security Bulletin, Annual Statistical Supplement, 1998, p. 288 &1999 SSI Annual Report.

Figure 4.Persons Awarded SSI Based on

Disability and Blindness

0100200300400500600700

1974 1975 1980 1985 1990 1995 1999

Year

Rec

ipie

nts

(in

thou

sand

s)

ChildrenAdults

Source: Social Security Bulletin, Annual Statistical Supplement, 1998, p. 290 &1999 SSI Annual Report.

disproportionately high in the six-year periodfrom 1991-1996, due primarily to the 1990Supreme Court decision Zebley vs. Sullivan3.(See Figure 4.)

Zebley vs. Sullivan changed the SSIregulations for assessing eligibility,4 and thenumber of children awarded federally

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administered SSI, based on a disability, grewfrom 49,000 and in 1974 to a peak of 226,000in 1993. The corresponding numbers of awardsto adults with disabilities were 362 million in1974 and 576 million in 1993.

The Personal Responsibility and WorkOpportunity Reconciliation Act (PRWORA)of 1996 (Public Law 104-193) reduced the SSIchild population by establishing a morestringent definition of disability and requiring areview of all current beneficiaries who mightbe affected by the new rules. Of theapproximately 1 million children receiving SSIdisability benefits in 1996, some 264,000 werereviewed and about 100,000 were foundineligible. In 1997 only 116,000 children wereawarded benefits.

The impact of the PRWORA on childrenwas eased somewhat by legislation5 enacted in1997. However, the actuaries’ 25-yearprojections show that awards to children willnot come close to the numbers reached in theearly 1990s. Awards are estimated to growslowly from 135,000 in 1998 to 141,000 in2023.

SSI Benefit Levels: 1974-1997

The U.S. Senate Finance CommitteeReport that accompanied the legislation in1972 described SSI as “…designed to providea positive assurance that the nation’s aged,blind and disabled people would no longer haveto subsist on below-poverty incomes.” Thearchitects of the program assumed that SSIrecipients would also receive benefits fromother programs such as Social Security andFood Stamps. Moreover, they assumed thatindividual states would provide supplementsthat, together with the base SSI benefit, wouldbring the total benefit package up to thepoverty threshold.6 Consequently, the SSIfederal base benefit has, at no time in itshistory, brought recipients up to that threshold.

In 1974, the annual federal benefit wasapproximately 67% of the poverty thresholdfor those individuals age 16-64 and 73% of thethreshold for those individuals age 65 and over.In 1997, the federal SSI benefit equaled 72

percent of poverty for those under age 65. Forthose age 65 and over, the SSI benefit wasequal to 78 percent of poverty. (See Figure 5.)

Figure 5.SSI Federal Base Benefits Are Below

the Poverty Threshold

$0

$2,000

$4,000

$6,000

$8,000

1974 1975 1980 1985 1990 1995 1997Year

Federal SSI BenefitPoverty Threshold (65+)Poverty Threshold (Under 65)

Source: U.S. Census Bureau & Social Security Bulletin, Annual Statistical Supplement,1998, p. 289

While SSI benefit levels are oftencompared with the poverty threshold, SSIbenefit adjustments are not calculated basedupon the poverty measure. SSI benefits areadjusted every January based on the annualincrease in the Consumer Price Index (CPI).These adjustments are made at the same timeand at the same percentage as the SocialSecurity cost-of-living adjustments.

The maximum monthly federal SSI benefitin January 1974 for an individual was $140.Beginning in January 1999, the maximummonthly benefit for an individual was $500.

The average SSI benefit amount in 1974was $88.01. By 1997 the average amount was$327.53. When broken out by category, theaged have consistently had the lowest averagebenefit, followed by the blind. The disabled,on the other hand, have consistently had thehighest average benefit amount. (See Figure6.)

Almost two out of three aged SSIrecipients are also Social Securitybeneficiaries, and one out of five has a smallamount of additional income. These otherincome sources, including Social Security, off-set, on a dollar-for-dollar basis, the federal SSIbenefit.7 Thus, many SSI recipients do notreceive the maximum federal SSI benefitamount.

legislation, and court decisions. The factremains that SSI provides the most vulnerableaged, blind, and disabled people with the cashto buy basic necessities of food, clothing, andshelter. 1 To assure that SSI was not confused with the SocialSecurity programs (Old Age, Survivors, andDisability Insurance, known as OASDI), Congressstipulated that SSI and OASDI be kept distinct andidentifiable as separate entities within the agency.2 This number includes all persons receiving a federalSSI payment, whether a federal payment only or botha federal payment and a state supplement.

Figure 6.Average SSI Monthly Federal Benefits Are

Below the Full Federal Benefit Amount

$0

$100

$200

$300

$400

$500

1975 1980 1985 1990 1995 1997

AgedBlindDisabledFederal Base Benefit

Source: Social Security Bulletin, Annual Statistical Supplement, 1998, p. 289

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The Future of SSI

Prior to 1996, estimates of SSI programexpenditures were prepared in conjunction withthe president's annual budget submission andthus were short-term. The PRWORA changedthat by requiring the Commissioner of SSA toreport annually to the President and theCongress about the long-term (25 years) statusof SSI.8

The 1999 SSI Annual Report providedactuarial projections of program participationand costs for the next 25 years: 9

• Growth in the SSI rolls, slowed bylegislation enacted in 1996, is expected toresume primarily due to the growth in theU.S. population.

• The federal SSI recipient population willbe close to 7.3 million individuals by2023 (about 2.2 percent of thepopulation).

• Growth in federal SSI program outlaysover the next 25 years is projected toremain relatively modest—roughlytracking overall growth in the U.S.population. Expressed in constant 1999dollars, the cost of the program isprojected to increase to $34.1 billion in2023 from the 1999 level of $28.6 billion.

• When taken as a portion of the GrossDomestic Product, federal SSIexpenditures are projected to decline overtime, from the current level of 0.32percent of GDP in 1999 to 0.26 percent ofGDP by 2023.

The SSI program has undergone significantchanges as a result of population growth,

3 Zebley v. Sullivan, 493 U.S. 521 (1990).4 The Court held that the government, since 1980, wasviolating the law by paying SSI benefits only to poorchildren who met specific medical criteria likedeafness and severe retardation. The Court found thatchildren with other disabilities such as Downsyndrome, AIDS, and chronic illnesses were beingunfairly excluded because SSA was not properlyassessing their disabilities.5 For example, P.L. 104-193 changed the rules forreviews of low birth weight babies.6 The poverty threshold is calculated and used by theBureau of the Census to prepare its statisticalestimates of the number of persons and families inpoverty. The Census calculation is different from thepoverty guidelines used by the Department of Healthand Human Services. The guidelines are usedprimarily as an administrative tool, i.e., to determinewhether a person is eligible for public assistance,whereas the thresholds are used as a statistical tool.The guidelines do not distinguish between those overage 65 and those under. The Census thresholds haveseparate figures for those over age 65 and those under.7 For example, an individual who qualifies for the$500 federal SSI benefit in 1999 and also receives a$300 Social Security retirement benefit will onlyreceive $200 in SSI benefits to bring the total benefitamount to $500.8 The SSI Annual Report is separate from The AnnualReport of the Board of Trustees of the Federal Old-Age and Survivors Insurance and DisabilityInsurance Trust Funds. The 1999 report was the 59th

for OASDI. The 1999 report was the third for SSI.9 These projections assume no change in law.

Written by Laurel BeedonFigures by Charles FordPublic Policy Institute, Research Group, February 2000© 2000, AARP.AARP, 601 E Street NW, Washington, DC 20049http://research.aarp.orgReprinting with permission only.