Looking beyond disability insurance

365. Even the targeted 20% decline of the disability benefit inflow, were it to be achieved on a sustainable path, would not suffice to reduce the rapidly growing deficit of the disability insurance. Therefore, the fifth revision is almost certainly going to be supplemented by revenue-side measures: an increase in the contribution rate to the disability insurance from 1.4% to 1.5%, and – more importantly in terms of its effect – a targeted increase in value-added tax in the order of 0.8%. While the latter is scheduled to be temporary and be withdrawn once the deficit has come under control, estimates suggest that it will certainly have to be maintained for a period of around 20 years or so. Given the many responsibilities of the disability insurance, revenue-side measures are indeed justified and necessary. 366. In addition to the planned and already implemented revisions of the disability insurance act, which predominantly focus on the role of the CDO in keeping people in work and away from benefit, it is increasingly recognised that some of the problems are related to the lack of coordination and cooperation between and across different parts of the social protection scheme. This recognition is reflected in the recent emphasis on inter-institutional cooperation of two kinds: IIZ, focusing on cooperation between the CDO, the PES and the social assistance authorities so to avoid carrousel effects; and IIZ PLUS, focusing

56. Compared with an inflow into disability benefits of around 25 000 in 2003-04, and an estimated number of around 200 000 people who have sickness absences of more than 4 weeks.

on cooperation between the CDO, the sickness benefit insurers and the work injury and accident insurers (Chapter 5). While IIZ has been further stimulated with the implementation of the fourth revision, IIZ PLUS will become crucial in the course of implementation of the fifth revision.

4. The impact of recent and ongoing reform

367. Reforms to the sickness and disability policy approach undertaken in the past 20 years as well as the lack of a particular type of reform are essential explanatory factors for the current outcomes in each country. OECD (2003a) developed two indices of policy – one on integration policy and the other on compensation policy – in order to illustrate and compare countries’ policy stances and to assess broad trends in policy development (Box 6.6).

Box 6.6. Illustration of countries’ policy stances and trends

So many different dimensions of policy matter when assessing the overall stance of a system that it is easy to got swamped in details. This is particularly the case when looking at trends over time. In order to get a reasonable overview of what is happening in policy both over time and across countries, an index of the various policy parameters can be useful.

Indices in two dimensions have been developed in OECD (2003a). The first is the level of compensation. The index of compensation takes into account 10 policy parameters: i) coverage of the benefit system; ii) the minimum disability level; iii) the disability level needed to get a full disability benefit; iv) the maximum benefit level at average earnings; v) the permanence of benefits; vi) the medical assessment; vii) the vocational assessment; viii) the sickness benefit level; ix) the sickness benefit duration; and x) the unemployment benefit level and duration in comparison with disability benefits. Each country is ranked on a scale of zero to five on each of these categories. No attempt is made to assess which of these categories is most important; all have equal weight. A country which has a high total score in the compensation dimension is ‘generous’ in supporting people with disabilities who are not working.

The second dimension is that of integration. Again, ten sub-dimensions are taken into account:

i) access to different programmes; ii) the consistency of the assessment structure; iii) employer responsibility; iv) supported employment programmes; v) subsidised employment programmes;

vi) the sheltered employment sector; vii) vocational rehabilitation programmes; viii) the timing of rehabilitation; ix) benefit suspension regulations; and x) work incentives. As with the compensation dimension, each of these sub-dimensions is rated from zero to five and assigned equal weight. A country which has a higher integration score is one which has a more active policy in ensuring that people with disabilities can find work. [Details of the points attached to each aspect of policy and the policy stance of 20 OECD countries in 1985 and 2000 can be found in OECD (2003a)].

368. According to this policy typology, compared with the OECD average in the year 2000, all three countries covered in this review were characterised by a relatively generous and accessible disability benefit system (Figure 6.1, right-hand side). At the same time, Norway also stood out as one of the countries with a particularly strong integration policy focus, similar to other Nordic countries, while Poland and Switzerland were found slightly below average on this account.

369. Throughout the OECD, integration policy elements have been strengthened, sometimes considerably, with a strong convergence in policy objectives. On average across twenty countries, OECD (2003a) estimated a 10-point increase on the 50-point integration policy dimension over the fifteen-year period from 1985-2000 (Figure 6.1, left-hand side). This change contrasts with a relative lack of reform on the compensation policy dimension; benefit programmes have remained virtually unchanged in most cases. In theory, there is nothing wrong with a policy stance which increases the integration focus of disability policy, without substantially changing the compensation package. In practice, however, there are dangers in following such an approach. Other benefits – such as unemployment, social assistance, early retirement

– have often become less generous (more often by restricting access rather than by reducing benefit levels). The near absence of any such reforms in disability benefit schemes bears the risk that the latter stands out all the more as being the last-resort benefit, to which gravitate those who do not wish to work or those who benefit officers despair of activating. This undermines the more positive work focus which governments have been trying to follow and which is in the interests of the majority of those on the benefit.

Figure 6.1. Comparing sickness and disability policies across time and countries

Left-hand side: Disability policy typology in the three countries around 1985, 2000 and 2006 Right-hand side: Disability policy typology in 20 OECD countries around 2000

Norway 1985 2000 2006 Poland 1985 2000 2006 Switzerland 1985 2000 2006 OECD 1985 2000 0 25 50 0 25 50

Compensation policy component

In te gra ti on pol ic y c o m pone nt

Norway Poland Switzerland OECD

Compensation policy focus Integration policy focus OECD 20 US UK Turkey Switzerland Sweden Spain Portugal Poland Norway Netherlands Mexico Korea Italy Germany France Denmark Canada Belgium Austria _Australia 0 25 50 0 25 50

Compensation policy component

In te gra ti on pol ic y c o m pone nt Integration policy focus Compensation policy focus

Source: Secretariat update based on OECD (2003a), Transforming Disability into Ability.

370. Norway, Poland and Switzerland are no exception to this general trend in the period 1985-2000, even though Switzerland had hardly gone through any reform in that period. However, continued policy change in the past few years in all three countries, taking ongoing reform into account, suggests that the situation is changing. First, the work focus has continued to spread since 2000 (Figure 6.1, left-hand side). In this relatively short period, the shift was strongest in Switzerland and least pronounced in Poland, implying that the overall change during the last 20 years had been similar (10-15 points on the 50-point scale). Secondly, all three countries have also seen a tightening in their sickness and disability benefit schemes (mostly a tightening in access), resulting in a 3-4 point decline on the compensation policy scale. This could help improve the effectiveness of the integration approach.

371. Relative to the OECD average in 2000, nevertheless all three countries still appear to be having relatively generous and accessible sickness and disability benefit schemes. Furthermore, despite reform, Poland and Switzerland still have a much less developed integration policy focus when compared to Norway – noting that this typology of policies says nothing about the implementation and the effectiveness of policies. This suggests that there is room for further change, and also that any such change should take both the integration and the compensation side of the sickness and disability policy package into account. In the next and final chapter of this report, more detailed recommendations are made as to the direction and particulars of further promising reform steps.