America’s oldest and best disability benefit system

As Americans prepare to celebrate the declaration of our nation’s independence, we should commemorate the disability benefits established in response. Although the Social Security Act of 1935 established the first substantive federal benefits available to the general public, there is an extensive history of U.S. policymakers approving monetary support for war veterans who suffered injuries during their service, starting with the American Revolution. The seamless establishment of these military benefits has led them to look quite different from the cash assistance eventually provided to disabled civilians.

What is particularly remarkable about veterans’ disability benefits, in addition to their early origins, is the strength and simplicity of their current structure. Today, veterans with service-related injuries receive disability ratings on a 0-to-100 scale, which then determines their benefit size. The system ensures that veterans with partial disabilities still receive support equal to the estimated earnings hit that their impairments cause. 

That design starkly contrasts with the civilian disability benefit programs, SSI and SSDI. Medical determinations for those two programs are all-or-nothing: they pay only for total disability, not partial. When Americans do meet the necessary medical criteria for SSI and SSDI and qualify, the average benefits received are far short of the $3,622/month provided to each veteran with a 100 percent disability rating. The support is especially meager in the case of SSI, which provides a maximum benefit of $914/month.

Veteran benefits stand out in another key way: there are no financial limitations imposed on beneficiaries. Disabled veterans can pursue post-service financial opportunities without fear of losing their benefits. Eligibility for the monthly payments, ranging from $166/month for 10 percent disability up to the $3,622/month for 100 percent disability, is solely determined by a medical evaluation. 

Meanwhile, SSI and SSDI have financial criteria that inhibit work and savings. Applicants must earn less than what is considered “substantial gainful activity”, $1470/month, to qualify. SSI beneficiaries are put in especially precarious positions, since they cannot hold more than $2,000 in assets. These requirements should be replaced with financial standards more in the direction of the veterans program.

Service-related disability benefits were not always so comprehensive. Assistance provided to veterans in the early 1800s was small in size and scope before being scaled up during the Civil War period. In addition to larger overall benefit levels, the policies enacted in the latter half of the 19th century included payments for a wider range of impairments and improved provisions for the dependents of deceased soldiers.

Veterans and their families needed this insurance expansion. After the Civil War, the percentage of the U.S. public that was either disabled or lost a household breadwinner peaked. Given the size of this population, which became an influential voting block, a considerable portion of congressional spending started getting directed their way. By the mid-1890s, nearly 40 percent of the federal budget went to military pensions.

The establishment of large-scale Veteran benefits did come with growing pains. They were administered locally and vulnerable to fraud, leading some to denounce the approval process. The true magnitude of deceitful claims has been difficult to determine in retrospect, but this problem left a bad taste in critics’ mouths.

Such shortcomings in program administration motivated policymakers to enact a separate benefit system for World War I. Wounded WWI soldiers received benefit compensation based on the extent the injuries hurt their earning capabilities and received additional support for having dependents. As with the preceding wars, benefit eligibility was not contingent on being low-income.

Veteran benefits ultimately underwent a century and a half of development before Congress passed cash assistance for disabled civilians. As Ari Ne’eman points out, civilian disability benefits, culminating in SSI and SSDI, faced distinct political hurdles. Those obstacles simply were not present with the service-related benefits (In fact, there were political advantages to promoting veteran benefit expansions). 

Yet, it would be a mistake to assume that only the general public has experienced weaker coverage for non-service disabilities. While service-related disability benefits pertaining to the first U.S. wars were enacted quickly, veterans waited extended periods before post-service injuries qualified for support. The earliest American veterans didn’t receive coverage for their non-service injuries until 40 to 50 years after the wars concluded.

Lawmakers became more efficient in enacting veterans’ non-service-connected disability payments following subsequent wars, but the benefits approved were less substantial than the service-connected disability compensation. The non-service disability compensation provided to WW1 veterans from early in the 1930s stands out in this regard. Individuals could only qualify with total, permanent disabilities and for smaller, means-tested benefits, thereby setting a precedent for future policy. It should be no surprise that federal policymakers insisted on similar requirements for the civilian disability benefits—SSI’s direct predecessors— approved soon after.

Although each disability program has been altered in the subsequent decades, veterans’ service-connected benefits continue to be the gold-standard. The benefit structure implemented during World War I largely remains. Former service members have their injuries assessed and rated, receive the corresponding benefit level, and can then progress to the next phase of their career without worrying about losing that assistance. 

The existence of such smooth, durable support leaves more to be desired from SSI and SSDI. Recipients have substantial impairments that will not resolve any time soon and cannot afford to lose their benefits. Many even need greater assistance. Yet, congressional efforts have too often focused on weakening that benefit support to incentivize work, with poor results.

Policymakers appear to be re-thinking that approach, aiming to give SSI recipients more flexibility to work and save without risk of forfeiting their benefits. The reforms receiving most bipartisan attention would raise SSI’s asset limits, and include bringing the individual asset cap from $2,000 to $10,000 and indexing the amount to inflation moving forward.

Nevertheless, Congress has failed to directly revise harsh rules, instead creating difficult-to-use supplemental programs. Political inertia has ensured that necessary support for civilian disabilities comes too little, too late, a trend seen since the founding of the nation.

Will Raderman is employment policy analyst at Niskanen.