The Supplemental Security Income (SSI) program provides cash benefits to nearly 8 million individuals with limited means and limited ability to work. Applicants must meet strict medical criteria to qualify, although no work history is required (unlike with Social Security Disability Insurance). Unfortunately, SSI has many long-running problems, including the fact that many recipients remain in poverty despite the support. While recent bipartisan efforts would help recipients by raising the program’s severe asset limits, the proposed legislation does not address another major problem: stingy benefit levels.
A primary reason SSI recipients are in poverty is that the largest benefit is below the federal poverty level. Increasing the maximum SSI benefit amount to the federal poverty level would theoretically solve the problem; it’s been proposed by Sen. Sherrod Brown of Ohio and is popular with voters. Every recipient would be at the annual poverty line, or higher when combining the raised benefit levels with their other income, if any. Yet even with the increased benefit sizes, normal income volatility would continue causing problems month to month. Recipients could experience temporary, episodic poverty spells because of how SSI payments are determined.
The administrative process
The Social Security Administration (SSA) has to collect and consider extensive information and documentation in order to means-test SSI benefits. Eligible individuals shown to have little or no income receive the maximum benefit. Once working recipients surpass $85 in monthly income, each additional dollar of earnings reduces the benefit size by 50 cents. Harsher rules apply to unearned income. After $20 in monthly income, each unearned dollar reduces one’s SSI benefit by a full dollar. The entire means-testing procedure is labor-intensive and inefficient, and it forces recipients to jump through complicated hoops. Notably, monthly benefits are based on income from two months prior.
Here’s how the SSA describes its method for calculating benefits:
…we usually base your SSI payment amount on your income from two months before. For example, a woman living in California gets a $500 Social Security widow’s payment and a $253 SSI payment. In June, she buys a lottery scratch off card, wins $200, and reports that to the Social Security office. That means in August, we’ll reduce her SSI payment…
Since the benefit determination process is retrospective, a lot of effort goes into playing catch up. The lag time causes overpayments and underpayments, which can hamper the anti-poverty effects of raising the maximum benefit.
The overpayment issue
In the SSA’s example, a woman ends up with more income in a month, so the SSI benefit is decreased two months later. The process seems simple enough but causes real harm to SSI recipients.
If a beneficiary does not realize there was an overpayment and spends the additional money, the subsequent payment reduction strains their monthly budget. Sometimes the consequences are more extreme. Overpayments commonly cause recipients to exceed SSI’s antiquated asset limits, resulting in the suspension or outright termination of their eligibility.
Raising the maximum benefit would ensure that recipients get more cash on average and would make a considerable dent in the amount of poverty they experience. However, overpayment issues would not be resolved by the larger overall payments. Income increases could still result in unexpected benefit deductions a couple of months later that would force recipients into a brief period of poverty.
The underpayment issue
The two-month calculation gap can also be immediately harmful when the benefit amount distributed is an underpayment. Underpayments can occur in various scenarios, like when SSI beneficiaries lose jobs (340,000 recipients were working pre-pandemic).
For instance, let’s say an SSI recipient earns $700/month from a job. According to current program rules, they are entitled to a $533.50 SSI benefit. The combined $1,233.50/month puts them above the poverty line. If the recipient abruptly loses their job and doesn’t get approved for unemployment insurance, their income falls to zero. But their SSI benefit will remain at $533.50 for two months. The recipient is now facing a stretch of poverty.
Sure, the SSI benefit will get corrected, but people with low income, low assets, and serious medical issues can’t wait two months for that correction. Elevating the maximum benefit size to the federal poverty line should ensure recipients are not in poverty, but the delay issue would remain. Sudden income losses could drop SSI recipients into poverty for a couple of months until the benefit levels were adjusted. With that risk looming over them, recipients might be reluctant to pursue a job even if they wanted one.
The answer is a bigger, universal benefit
The program can function differently. Mandating a universal benefit level equal to at least the individual federal poverty level could prevent recipients from ever falling into poverty and resolve a good deal of the administrative burden. The SSA would not need to consistently investigate recipients and means-test benefits (a process that amounts to a tax on recipients before payments are distributed). Instead, the necessary revenue to increase benefits could be generated with actual taxes, as is already done to fund SSI.
Monthly income fluctuations would not cause short-term poverty spells because SSI benefits would be sufficient regardless and not require retroactive adjustments. Eligibility for the new baseline benefit would be based on meeting the strict SSI medical criteria alone. Overpayments and underpayments would become nonissues. Any supplemental SSI benefits meant to complement that baseline could be determined on an annual basis.
Recipients would be more financially stable, would need to file less paperwork, and could pursue jobs without the risk associated with delayed benefit adjustments. Meanwhile, the SSA would have a simpler program to administer.
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