What happens when the U.S. disability fund runs dry?

The U.S. disability fund has become a "secret welfare system," serving nearly 12 million Americans, and it's on track to run out of cash soon

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This week, Steve Kroft reported on the U.S. disability fund, which is on track to become the first government entitlement program to run out of cash.

When disability runs dry
A conversation with Steve Kroft and 60 Minutes producers about their story on massive fraud in the disability program.

Kroft and his team, 60 Minutes producers James Jacoby and Michael Karzis, found that the disability program has become a "secret welfare system."

"A lot of it is just people gaming the system," says Kroft. "If you're 50 years old and you've got a bad back, what are you going to do? Are you going to try and take a minimum wage job with no health insurance? Or are you going to try and get on disability?"

When it began back in the 1950s, the disability fund was a small program, intended only for people who were unable to work because of illness or injury. Today, the 60 Minutes team reported, the disability fund serves nearly 12 million people, up 20 percent in the last six years alone. But perhaps the most surprising figure in Kroft's story is the overall size of the program: The U.S. Disability Fund has a budget of $135 billion -- more than the government spent last year on the Department of Homeland Security, the Justice Department, and the Labor Department combined.

Why the sudden surge in disabled people in this country? Sen. Tom Coburn of Oklahoma, who is leading a Senate investigation of the disability program, tells millions of people are gaming the system:

TOM COBURN: Probably a third of everybody on disability, there's no way that they're disabled.

STEVE KROFT: They're scamming the system?

TOM COBURN: Yes--it's nauseating.

The 60 Minutes team reports that the surge in disability applicants can also be explained by the lingering effects of a bad economy. Many people who are unemployed and have exhausted their unemployment benefits appear to be using the disability program for a source of income until they're old enough to collect Social Security benefits.

The question is what happens when the disability fund runs dry? Coburn's investigation predicts that the program will run out of cash within approximately two to three years.

60 Minutes producer James Jacoby explained the tough choice facing the country. "When the trust fund runs out, the truly disabled will either see their benefits cut or every working American's will have to pay more in taxes."

"It's just simple math," says producer Michael Karzis. "If they don't increase the payroll tax, what the disability recipients are looking at is something like a 20 percent or 25 percent cut in what they receive each month.

The average disability check is about $1,100 per month.

"Look, a disability check is not a lot of money," adds Karzis. "I mean, nobody's getting rich on disability. And you take 20 percent, 25 percent of that out, that's a significant amount of money."

"The fact of the matter is we have to start making really tough choices in this country about what we're going to pay for," says Jacoby. "This is going to be the first entitlement program to run out of cash. Are we going to raise taxes on working Americans, are we going to cut benefits for the disabled? It's a sign of things to come."

Editor's Note: This segment was originally published Oct. 6, 2013