Social Security Disability Insurance (DI) pays monthly benefits to workers who are no longer able to work due to a significant illness or impairment that is expected to last at least a year or to result in death within a year. It is part of the Social Security program that also pays retirement benefits to the vast majority of older Americans. Benefits are based on the disabled worker's past earnings and are paid to the disabled worker and to his or her dependent family members. To be eligible, a disabled worker must have worked in jobs covered by Social Security. In January 2013, 8.8 million disabled workers received benefits.

The disability benefit is linked through a formula to a worker's earnings before he or she became disabled. The following figures show how the disability insurance benefits compare to prior earnings for a worker who became eligible for benefits in 2012 at age 55.

The average benefit paid to disabled workers in January 2013 was $1,130 a month or about $13,560 a year.

Who Pays for Disability Insurance Benefits?
Workers and employers pay for the DI program with part of their Social Security taxes. Workers and employers each pay a Social Security tax that is 6.2 percent of workers' earnings up to a cap of $113,700 in 2013. The cap is adjusted each year to keep pace with average wages. Of the 6.2 percent, 5.3 percent goes to pay for Social Security retirement and survivor benefits and 0.9 percent pays for disability insurance. The combined tax paid by workers and employers for disability insurance is 1.8 percent of wages, while the combined tax for retirement and survivor benefits is 10.6 percent, for a total of 12.4 percent.

Who is eligible for DI benefits?
The Social Security test of disability is very strict. To be eligible for disability benefits, the Social Security law says that the applicant must be “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or is expected to last for a continuous period of at least 12 months.” Furthermore, the impairment or combination of impairments must be of such severity that the applicant is not only unable to do his or her previous work but cannot, considering his or her age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy (Social Security Act, section 223(d)).

A person is considered to be involved in substantial gainful activity if he or she earns more than a certain amount. If a non-blind individual earns more than $1,040 a month in 2013, he or she would not be eligible for disabled worker benefits. The amount is adjusted each year to keep up with average wages. (In some cases earnings can be reduced by the costs associated with work, such as paying for a wheelchair or services of an attendant. If deductible work expenses bring net earnings below $1,040 a month, the individual can be eligible for benefits.) The substantial gainful activity level for blind individuals in 2013 is $1,740 a month.

State agencies, operating under federal guidelines, make the medical and vocational determinations for the Social Security Administration about whether applicants meet the test of disability in the law. Medical records, work history, and the applicant's age and education are considered in making the determination.

There is a five-month waiting period after the onset of disability before payments begin. If someone suffered a disabling injury in January and met Social Security's disability definition, he or she would become eligible for the first disability payment for July.

Individuals who are drawing Social Security disability insurance (DI) become eligible for Medicare after receiving DI for two years. Low-income individuals who receive SSI are generally eligible for Medicaid immediately. Health coverage is critically important for those receiving disability benefits, because individual insurance policies are likely to be unaffordable or unavailable. According to the NASI report, Balancing Security and Opportunity: The Challenge of Income Disability Policy, "Many people with chronic health conditions or disabilities are at risk of very high health care costs. They often cannot gain coverage in the private insurance market, and even when they do have private coverage, it often does not cover the range of services and long-term supports that they need. Current gaps in health care coverage for people with disabilities limit their labor market options in several ways.”