The Agenda

The Lessons of Dutch Disability Reform

Autor and Duggan based their SSDI reform proposal on a similar effort in The Netherlands, introduced between 1998 and 2004, which appears to have been successful along a number of dimensions, according to a 2011 paper by Jan-Maarten Van Sonsbeek and Raymond Gradus.

First, they discuss the specific reforms, e.g., experience rating:

Experience rating (1998). Until 1998 all employers paid a fixed premium rate for the disability scheme, regardless of the number of disability cases they had. Since 1998 two separate premium rates exist, one differentiated rate covering the first five years of disability and one fixed rate covering the cost of the later years. The differentiated premium is based upon the firm‐specific disability costs of year (t‐2). The experience rating system was introduced in five steps, increasing the average differentiated premium to its structural level in 20034. Meanwhile the experience rating has been extended to ten years but the permanently fully disabled are exempted. 

and the gatekeeper protocol:

Gatekeeper protocol (2002). This protocol, in force from April 2002, specifies the legal responsibilities of both the incapacitated employee and the employer. After eight weeks of absence, the employer and employee together should have made a vocational rehabilitation plan specifying the pathway to recovery (if possible). If later on a disability benefit is claimed, a rehabilitation report should be provided containing the original rehabilitation plan and the steps followed since. If reintegration efforts are considered insufficient the disability claim is dismissed. 

Both ideas are part of Autor and Duggan’s expansion of PDI.

The Dutch also introduced reexaminations of the disabled, and an initiative called WIA separates the profoundly disabled, who have little chance of recovery and aren’t subject to reexaminations, and the partially-disabled with some chance of recovery, who receive a less generous benefit and relatively frequent reexaminations. One potential problem is that widespread reexaminations might prove politically contentious, particularly in a slack labor market. Autor has documented how Reagan-era disability reform efforts, which built on Carter-era efforts, were stymied by fierce political resistance during the 1981-2 recession. The backlash led to a loosening of eligibility requirements that has shaped the SSDI program ever since, more dramatically over the past ten years as the labor market position of less-skilled men has continued to deteriorate.  

The Dutch reforms, taken together, appear to have had a significant impact on inflows into disability, but a much smaller impact on outflows:

Experience rating has reduced inflow into the WAO 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 WIA 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 WIA 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 of the 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 makes intuitive sense, as increasing outflows will entail disruption and considerably more political resistance, which makes reducing inflows all the more important.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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