14 March 2018

How the government slashed disability support pensions

Patients TheHill

The federal government expects to save nearly $5 billion a year on disability support pensions after a crackdown that took GPs out of the assessment process.

A new report from the Parliamentary Budget Office shows the government has successfully reversed growth in spending on the pension for people with disabilities that keep them out of the workforce.

The report also reveals a striking change in who is affected by the pension policy. In the early 2000s, men in their 50s were the most conspicuous group among new recipients, commonly with musculoskeletal conditions reflecting a lifetime of physical labour.

Now, men under 40 who have been diagnosed with psychological and intellectual conditions are prominent.

Musculoskeletal conditions accounted for 40% of new recipients in 2001, but only 11% last year.

“The main driver of the slowdown in disability support pension expenditure has been policy measures which have focused on stemming the flow of people onto the payment,” the budget office report says.

New recipients last year numbered just 32,000, down sharply from a peak of 89,000 in 2009-10.

Tougher compliance and assessment rules were adopted in 2012, excluding applicants deemed capable of 15 hours’ work a week (a reduction from 30 hours previously) and using assessments of “functionality” rather than medical diagnoses.

In 2014-15 came the decision to use government-contracted doctors reviewing “raw” medical information, rather than patients’ treating doctors supplying medical reports.

Despite opposition from the RACGP, the government argued that the system had been open to “doctor shopping” by claimants attracted by a payment substantially higher than unemployment benefits. Currently the difference is about $9000 a year.

A blow-out in disability pensions in the wake of the global financial crisis supported those suspicions. In the four years to 2012, the cost of the pensions soared by 8.7% a year on average, after nearly 20 years in the 3% range.

Since 2014-15, when GPs were removed from the process, the outlay has continued to fall. Last year the figure dipped nearly 10% to $16.3 billion, covering 760,000 recipients.

The Parliamentary Budget Office says tougher compliance measures, including ongoing medical reviews of 90,000 existing recipients over three years, will keep the lid on disability pension spending.

As a result, the office now calculates that pension expenditure in 2027-28 will fall short by $4.8 billion from the estimate released in last year’s budget.

The projection does not include the 2017 budget plan to strip disability support payments for recipients whose disability was the result of drug and alcohol abuse.

The measure, which Treasury estimated would shut out 450 people a year, was blocked in the Senate after an outcry by the medical community and social services.

“Many people hold the view that drug and alcohol addiction is self-inflicted and easy to overcome, but as doctors we know the reality is more complex,” RACP President Dr Catherine Yelland said.