Why Is Disability Expenditure Increasing?

NPR's Planet Money did a story about how disability rolls have been increasing and linking it to declining welfare rolls and rising unemployment.  There is some truth to this, but the bigger story is that demographics have had a bigger impact on the following graph.  NPR did not even adjust the graph for population growth nor our aging population which accounts for much of the increase. 

 
If you look at the red line on the graph in Figure 1 below, it doesn't look like the recession of 2008 caused disability rolls to spike upwards. Brad Plumer:

Three big demographic factors are at work [increasing disability rolls]. First, as the U.S. population ages, people are more likely to become physically disabled, especially if they’re working in manual labor. Second, Congress has hiked the retirement age for Social Security over the years — in fact, about 5 percent of current disability recipients would simply be on ordinary Social Security had Congress not changed the rules.
Third, many more women have been qualifying for disability insurance since the 1980s because there are many more women in the workforce, period.
If one controls for those three demographic factors, the rise looks somewhat more gradual, with the percentage of workers on disability going from 3.5 percent in 1995 to 4.6 percent in 2012:

And these three factors won’t continue forever: Ruffing writes that the disability program is currently at “its peak demographic stress,” with the rolls expected to shrink in the coming years as many current beneficiaries age into Social Security and Medicare.
That said, demographics aren’t the whole story. The program is still growing even after controlling for age and gender dynamics. In her recent testimony to Congress, Ruffing runs through some of the other possible factors. For instance, the changing economy has made it harder for older workers with less education to find jobs. (States with lower education levels tend to have far more workers on disability.) And the surging cost of health insurance over the years has pushed more people with ailments to seek out federal disability insurance in order to get care.
Interestingly, however, Ruffing is skeptical that the current recession created a surge of beneficiaries. “[E]conomists generally find that while a sour economy significantly boosts applications to the program, it has a much smaller effect on awards,” she notes. ”The implication is that economic downturns tend to attract more marginal, partially disabled applicants, but their applications are more likely to be denied.”
Now, that still leaves a pressing ...issue here. The disability insurance program is underfunded and is expected to exhaust its trust fund by 2016. At that point, benefits will get cut sharply unless Congress makes alterations. ...Ruffing, ...offers some recommendations for fixing disability insurance here.

 Brad Plumer has another graph: