Representative compensation and disability claimant outcomes

Abstract

Many claimants of Social Security Disability Insurance (SSDI) retain legal representation to help with the approval process. The Social Security Administration imposes strict rules on representative compensation. Representatives are only paid if claimants are awarded disability, and they are paid the lesser of 25 percent of the claimant’s past due benefits or a pre-specified maximum fee ($7,200 since 2022). 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 the representative fees past the fee ceiling. We use difference-in-differences to evaluate how these incentives impact SSDI claimant wait times. After the fee ceiling increased in 2002, average wait times increased by 0.85 months among claimants for whom the fee threshold is more binding, implying a 2.6–5.6 month increase for claimants with representatives. This indicates that the structure of representative compensation does matter for case outcomes, and highlights the importance of interactions with auxiliary agents so common in modern social programs.