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Surge in Disability Claims Is Gold Mine for Law Firms

August 23, 2013 in Economics

By Tad DeHaven

Tad DeHaven

Hoosiers watching television during the day might have noticed the numerous commercials from law firms advertising their ability to help clients obtain government disability benefits. That’s because the process for seeking disability benefits has become a boon to legal firms that specialize in disability claims.

The federal government’s two main disability programs have experienced rising enrollment and soaring spending in recent years. Combined outlays on Social Security Disability Insurance and Supplemental Security Income have roughly doubled over the last decade and will cost taxpayers almost $200 billion this year. The complex and often subjective disability determination process, which is essentially the same for both programs, has created an opportunity for specialty law firms to grab a piece of the action.

The process can be very cumbersome and costly. A rejected disability applicant can first ask the Social Security Administration for a “reconsideration” of his or her claim. If rejected again, the applicant can request a hearing before an administrative law judge. These hearings do not include a government representative to question the claim on behalf of taxpayers. Meanwhile, the vast majority of applicants who appeal a denial of benefits to an administrative judge have legal representation. For some impairments — back disorders, for example — representation can exceed 90 percent.

An applicant whose appeal is successful is awarded payments dating back to the onset of the disability. The lawyer typically receives 25 percent or up to $6,000 of this “back pay.” While that amount may not be enticing to general law firms, firms specializing in disability claims can make millions of dollars based on a high volume of cases and knowing how to work the system. According to Social Security Administration data obtained by the Wall Street Journal, fees paid to lawyers and other representatives of disability applicants went from $425 million in 2001 to $1.4 billion in 2011.

[pullquote]Reining in federal disability programs would not only save taxpayer money, it would also give marginally disabled people who have valuable skills an incentive to reenter the workforce.[/pullquote]

While the majority of applicants for disability benefits are denied (often for technical reasons), the opposite is the case for those who appeal to their claim to administrative judges. Judges are largely independent and possess broad discretion to award or deny benefits. Legal firms are aware of which judges are more likely to award benefits and try to steer their clients accordingly. For example, one judge approved …read more

Source: OP-EDS

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