Mental Illness, Work and Income Support Programs

Disability awards due to mental illness are on the rise. Between 1987 and 2005, the share of Supplemental Security Income's adult caseload disabled owing to a mental disorder rose from 24.1% to 35.9%. Since the 1984 Disability Benefits Reform Act, the number of Social Security Disability Insurance awards due to mental illness has also increased substantially: in 1978, awards for mental illness were less than 2% of new awards; in 2005 (1), people with mental illness represented almost 30% of all beneficiaries.

Income support programs can create a disincentive to work, called moral hazard, which presents a challenge to setting eligibility criteria (2). Some analysts contend that rising disability awards for mental illness reflect a "broken" system that provides benefits to those who should not receive them (3); others point out that income support makes it easier for persons with mental illness to live in the community (4). These conflicting conclusions reflect an ongoing debate over whether increasing awards for mental illness represent a policy success because they reach needy individuals or failure because the increased awards reflect moral hazard (5). In this article, we review evidence on the issue of moral hazard and demonstrate that it is insufficient to conclude whether rising awards for mental illness represent a policy success or failure.