The Impact of Claimant Representation Fee Schedules on the Disability Applicant Process and Recipient Outcomes

Many applicants to Social Security Disability Insurance (SSDI) retain representation to help with the approval process. The Social Security Administration imposes strict rules on representative compensation. Representatives are paid only if claimants are awarded disability, and are paid the lesser of 25 percent of claimant’s past due benefits or a pre-specified maximum fee dollar amount ($6,000 since 2009). Because past due benefits are a function of the number of months claimants wait to be awarded, representatives face incentives to delay case resolution until past due benefits push representative fees past the maximum fee threshold. This paper uses difference-in-differences and bunching strategies to evaluate how these incentives impact SSDI applicant wait times. To do this, we use information on claimant characteristics and wait times constructed from the Disability Analysis File Public Use File (DAF PUF). Difference-in-differences estimation show that after changes in the maximum fee threshold, average wait times increase by 0.4-0.7 months among applicants for whom the fee threshold is more binding. We also observe bunching in the wait time distribution around the fee threshold kink in years after the policy change relative to the preceding years. Although both policy changes occur in years associated with economic recessions (2002 and 2009), we provide suggestive evidence that the increase in wait times is not driven by secular economic trends. Key limitations of this paper are data availability issues in the DAF PUF. In the DAF PUF, we are unable to observe who retains representations, so we can only observe the reduced form impacts of representative fee schedules on claimant outcomes. With more complete information on the claimant application and appeal process, we could more effectively probe the types of impacts that representation have on case outcomes and the sensitivity of the results to secular economic trends