Consequences of eliminating federal disability benefits for substance abusers

Using annual, repeated cross-sections from national household surveys, we estimate how the January 1997 termination of federal disability insurance, Supplemental Security Income (SSI), for those with Drug Addiction and Alcoholism affected labor market outcomes among individuals targeted by the legislation. We also examine whether the policy change affected health insurance, health care utilization, and arrests. We employ propensity-score methods to address differences in observed characteristics between likely substance users and others, and we used a difference-in-difference-in-difference approach to mitigate potential omitted variables bias. In the short-run (1997-1998), declines in SSI receipt accompanied appreciable increases in labor force participation and current employment. There was little measurable effect of the policy change on insurance and utilization, but we have limited power to detect effects on these outcomes. In the later period after the policy change (1999-2002), the rate of SSI receipt rose, and short-run gains in labor market outcomes diminished.