The Effect of the Receipt of Disability Insurance Benefits on Health

It is well known that disability insurance (DI) participation is strongly related to health. But does DI participation itself have an effect on health? Initial receipt of DI typically follows the onset of a disability and is accompanied by the loss of a job, possibly financial hardship and perhaps the loss of employer-provided health insurance. These events suggest that subsequent health may decline. However, the receipt of DI cash benefits may help to alleviate economic hardship following the onset of a disability and, in particular, the supplemental income provided by DI benefits may afford improved access to health care. In the longer-run, DI recipients also qualify for Medicare 24 months after they are first entitled to receive benefits. Thus it is unclear how the receipt of DI benefits may affect subsequent health. The goal of this paper is to estimate the relationship between DI participation and the evolution of subsequent health. We first compare the trajectory of health before and after application for DI benefits and then compare health trajectories before and after the approval (or denial) of DI benefits for those who applied. A problem that arises when health profiles are compared is that mortality selection (less healthy persons are more likely to die and exit the sample) distorts observed profiles. WE discuss the effect of correcting for the effect of mortality selection on observed profiles of health.