Welfare - Disability Support Pension


Budget Review 2010-11 Index

Budget 2010–11: Welfare

Disability Support Pension

Peter Yeend

The Budget announced revised access procedures for some Disability Support Pension (DSP) claimants, to commence from 1 January 2012.[1] The changes to DSP entry for new claimants were described as follows:

Disability Support Pension claimants without sufficient evidence of a future work capacity of less than 15 hours per week may be referred to an alternative income support payment and offered employment assistance through Job Services Australia or Disability Employment Services. These services will assist in developing the skills of job seekers or building evidence of their future work capacity for subsequent claims which may be made at any time.[2]

DSP claimants, who are not considered to be self-evidently unable to work for at least 15 hours a week, will be asked to actually demonstrate they cannot work to this level by participating in employment assistance or rehabilitation.

Origins of the initiative

This initiative has its origins in the inexorable growth in the DSP population over the past 20 years and the limited impact on this growth of the Welfare to Work (WtW) reforms of the Howard Government, introduced in 2006.[3] The major change to the DSP qualification requirements with WtW was a reduction in the number of hours that a person was unable to work due to their disability, down from being unable to work for 30 hours a week to being unable to work for at least 15 hours a week.

Growth in the DSP population

In 1985, the DSP population was 259 162.[4] There has been a 43.5 per cent increase in the DSP population from 1997 to 2009.[5] Changes since 2001 are documented below.

Disability Support Pension population 2001–2009

Year

Total number of DSP recipients
(June)


% increase from previous year

2001

623,926

3.6

2002

658,913

5.6

2003

673,334

2.1

2004

696,742

3.5

2005

706,782

1.4

2006

712,163

0.7

2007

714,156

0.3

2008

732,367

2.5

2009

757,118

3.3

Source: Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), Department of Education, Employment and Workplace Relations (DEEWR), various annual reports.

No other income support program has seen this level of sustained increase. Several factors have contributed to this growth, including: the ageing of the population and corresponding ageing of the workforce aged population, increased levels of unemployment for the older working age persons, and the incentives associated with being on DSP compared with the other main income support payment for the working aged, the Newstart Allowance (NSA). The economic downturn is also likely to have been a contributing factor to some of this increase since 2008.

The comparative advantage of Disability Support Pension over Newstart Allowance

The main advantage of DSP over NSA is that DSP is paid at a much higher rate.[6] DSP is also tax free and has more generous pensions’ income and asset testing. DSP also provides access to the Pension Supplement[7] and the more generous concessions attached to the Pensioner Concession Card. Another major advantage for claimants is that DSP has no work search or mutual obligation requirements, as does the NSA.

Welfare to Work reforms

The main element of reform for the DSP program in the WtW reforms was the reduction in the work capacity test from 30 hours a week to 15 hours a week. This reform commenced from 1 July 2006 and made the work capacity test much tougher. However, as can be seen in the table above, its impact on DSP growth was only short-term and the DSP growth rates of pre-WtW have returned. Why did this occur? In brief, the work capacity test is essentially a subjective test and the decision is made by the delegate under the Social Security Act 1991 (SSA). Regardless of where the bar is set, claimants adjust their behaviour. Accordingly DSP claimants are likely now to present their claims as being unable to work for 15 hours a week with presumably their supporting medical evidence.

Granting DSP and assessing work capacity

There are two main streams through which a DSP claim is initially processed. Firstly, the claim is considered to see if it is ‘manifest’. Manifest means that the person is clearly and obviously medically qualified for DSP, based on the presentation of medical evidence. For example, if a claimant has a terminal illness, permanent blindness, requires nursing home level care, or has category 4 HIV/AIDS, this would be manifest. For a manifest claim, subject to other qualification requirements being met, the DSP claim can be granted. [8]

Where the claim is not manifest, then the impairment points level must be assessed against the DSP minimum 20 points requirement. Where 20 points impairment is not achieved, the claim can be rejected. Where 20 points are achieved, the next step is the continuing inability to work (CITW) assessment.[9] The CITW assessment is a matter for decision by the Centrelink officer who is the delegate under the SSA. The CITW assessment considers opinions and advice from the treating doctor, the Medibank Health Solutions doctor, and the Job Capacity Assessment (JCA) team,[10] but the delegate makes the decision. This CITW decision is the matter that generates most appeals against DSP claim rejections. Notwithstanding the significant aforementioned change in the CITW test with the WtW reforms, the figures above would suggest that many DSP claimants are succeeding in being assessed as unable to work for at least 15 hours a week, hence motivating the changes in this Budget.

2010–11 Budget initiative – DSP claimants will have to prove they have a CITW

The Budget initiative provides for non-manifest cases, (that is, where it is not clear that the person cannot work for more than 15 hours a week), to be referred to another income support payment, the NSA. This may not apply to all non-manifest cases. Considering that more than 50 per cent of current DSP claimants come from NSA, some may already have supporting evidence that they are unable to work for at least 15 hours a week from previous work search and work assistance attempts.[11]

The Government has provided no indication as to how many or what proportion of DSP claimants will be affected by this Budget measure. This is not surprising as this process has not been attempted before. Given that manifest grants of DSP are by far the minority of grants, there is the potential to place many DSP claimants on NSA for varying periods to actually test their CITW after they have received assistance and support. However, this process may not realise all that is hoped for it. So long as there continues a comparative and significant advantage of DSP over NSA there will be an incentive for claimants not to jeopardise any future DSP claim attempts by demonstrating improvements in their work capacity.

Assessing continued inability to work is problematic

Assessing CITW has been an element of DSP claims since DSP’s introduction in 1991 and, for that matter, also its predecessor, the Invalid Pension, which was introduced in 1908. However, CITW assessments are highly problematic for a number of reasons. For example, the same medical condition may affect individuals differently, depending on their age, their work history and skills, and their own attitude to the condition. While it is to be expected that DSP claimants would regard themselves as significantly affected by their condition, their actual work capacity may be quite different. It may be that they have an overly pessimistic view of the real impact and level of imposed restriction of their condition. In their turn, treating doctors, while expert in the diagnosis and treatment of a medical condition, may have no training or skills in work capacity assessments. Their role may involve them in serving conflicting interests. On the one hand patients may call on them to be an advocate and supporter of their claim. On the other hand they are required to provide unbiased objective advice about the impact of the condition and its effect on the person. The ongoing increase in the DSP numbers following the recent WtW changes would suggest that even where a radical change is made to the qualification requirements, the reality of the complexity and subjectivity of the assessment process can render changes ineffective.

Summary

This initiative is estimated to realise savings of $383.4 million over four years.[12] Given that this is not a large sum in the context of a program with estimated outlays of between $13 to $14 billion over the next four years,[13] this initiative may not now be viewed as the major reform to the DSP program that was envisaged when introduced with the WtW changes of 2006.

Successive governments have supported the view that persons of working age should, where they can, support themselves first, before calling on the support of the taxpayer by way of income support payments. However, a policy that places an emphasis on claimants presenting as unable to work would seem to be counterproductive when the emphasis should be on work capacity. This policy does aim to enhance work capacity through support and assistance, but its effectiveness may be limited as long as there remain perverse incentives.


[1].    Australian Government, Budget measures: budget paper no. 2: 2010–11, Commonwealth of Australia, Canberra, 2010, p. 139, viewed 12 May 2010, http://www.budget.gov.au/2010-11/content/bp2/html/index.htm

[2].    Ibid.

[3].    D Daniels and P Yeend, Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Bill 2005, Bills digest, no. 70, 2005–06, Parliamentary Library, Canberra, 2005, viewed 12 May 2010, http://www.aph.gov.au/library/pubs/bd/2005-06/06bd070.htm

[4].    Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), Income support customers: a statistical overview 2005, Statistical Paper, no. 4, FaHCSIA, Canberra, 2009, Table 6, p. 8, viewed 13 April 2010, http://www.fahcsia.gov.au/about/publicationsarticles/research/statistical/Pages/stp_4.aspx

[5].    Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), Department of Education, Employment and Workplace Relations (DEEWR), various annual reports.

[6].    Current single rate for DSP is $644.20 per fortnight (pf); for NSA it is $462.80 pf.

[7].    Pension supplement is currently $56.90 pf – single.

[8].    Age, residence, income and assets tests.

[9].    CITW means the person is unable to work for at least 15 hours per week at wages at or above the relevant minimum Australian wage, even if not within the person's locally accessible labour market. The person must be able to do this work independently of a program of support.

[10]. The JCA is an independent comprehensive exploration of the person's participation barriers and CITW. It also identifies any services that could improve their capacity to work. The assessment can include input from a range of medical and allied health professionals.

[11]. Lixin Cai, Ha Vu, R Wilkins, Melbourne University, Melbourne Institute, Working paper Series n. 18/06, Disability Support pension Recipients: Who gets Off (and stays off) Payments?, Melbourne, August 2006, p. 9, viewed 15 May 2010, http://www.melbourneinstitute.com/publications/working/wp2006.cfm

[12]. Budget measures: budget paper no. 2: 2010–11, op. cit., p. 139.

[13]. Australian Government, Portfolio budget statements 2010–11: budget related paper no. 1.8: Families, Housing, Community Services and Indigenous Affairs Portfolio, Commonwealth of Australia, Canberra, 2010, p. 99, viewed 15 May 2010, http://www.budget.gov.au/2010-11/content/pbs/html/index.htm


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