October 21, 2013
In the 1980s and 1990s, disability benefit rates in the Netherlands were among the highest in the world. In 2002 the number of disability benefit recipients approached the political sensitive level of one million, 800,000 of which in the employees’ scheme. When the inflow rates at that time would have been continued into the future, the number of disability benefit recipients would have risen to 1.2 million or 17% of the working population by 2040 in the employees’ scheme. At the moment, the Netherlands is considered one of the prime examples of effective policy reform in the disability scheme. The yearly inflow into the scheme has dropped to 40 percent the level that was common until 2001 and the long term estimate of the number of disability benefits in 2040 currently amounts to 370,000.
Between 1998 and 2006 a series of reforms have taken place in the Netherlands. In a recent paper in Oxford Economic Papers, Jan Maarten van Sonsbeek and I investigate the effects of these reforms on disability in- and outflow by using administrative datasets of all disability benefit recipients from 1999-2010. It is shown that the combined policy measures have reduced inflow in persons by 63 percentage points. Experience rating has reduced inflow into the employees’ scheme by 13 percentage points, the introduction of the gatekeeper protocol has reduced inflow by 25 percentage points and the tightening of the eligibility criteria has further reduced inflow by 4 percentage points. The additional effect of the new disability scheme for new claimants with especially lower benefits for partially disabled is large as well, resulting in a decrease of inflow by 21 percentage points. Interestingly, whereas the effect of the gatekeeper protocol seems to increase over time, the effect of the new disability scheme is decreasing over time.
All these effective policy measures have one thing in common: they focus on preventing inflow. Indeed, prevention is the best way in the long run of keeping claimant numbers low. Only the re-examinations against the new eligibility criteria of the existing disability stock from 2004 to 2009 caused a significant increase in disability outflow. However, at the same time the re-examinations boosted outflow, the recovery rates of the population not affected by the re-examinations decreased sharply, possibly due to the change in the re-examination periodicity.
This research can be helpful for other countries as well. Especially, in Australia and USA there is currently debate about disability inflow (see Burkhauser, Daly and Lucking (2013)). In the US, between 2007 and 2012 the number of applicants for disability shot up from 11,2 per 1,000 working-age people to 14 and similar increasing disability support figures appear for Australia. Therefore, Burkhauser et al. suggest that the Dutch reform contains some powerful lessons for these and other countries in an ageing society.