Long-Term Programs in Selected Countries by Ilene R. Zeitzer and Laurel E. Beedon*

In 1985, the Social Security Administration commis- sioned an 18-month research project to study disability in eight industrialized countries: Austria, Canada, Finland, the Federal Republic of Germany, Israel, the Netherlands, Sweden, and the United Kingdom. The study focused on three key areas: (1) the initial determination of disability, (2) the methods of monitoring disability, and (3) the incen- tives to return to work. Although the study revealed great variations among the countries in the definition of long- term disability, the approach followed in providing benefits, and the organization and features of the pro- grams, some basic similiarities were also found. Among the similarities are: (1) most countries have several income- maintenance programs to protect workers in the event that they are disabled, and (2) the disability test to determine whether a person is eligible for a disability benefit is am- biguous in that the various programs each have different eligibility criteria, different definitions of disability, differ- ent considerations given to labor-market conditions, and so forth. This article examines the diversity among the coun- tries and attempts to highlight unique approaches to ad- judicating disability, providing linkages to rehabilitation, and creating incentives for returning to work.

This article compares key features of social security Overview long-term disability programs in eight industrialized countries.’ The countries whose program features are Most of the countries in the study have three public surveyed are: Austria, Canada, Finland, the Federal income-maintenance programs to protect workers in Republic of Germany, Israel, the Netherlands, case of disability. The three programs, generally ad- Sweden, and the United Kingdom. These countries ministered on the basis of different legislation and have long-term disability programs that provide exam- criteria, and sometimes including different definitions ples of the major forms of this protection worldwide. of disability, are: (1) cash-sickness benefits for short- A chart highlighting the chief characteristics in the term illness or injury, (2) disability for long- countries studied is included as Appendix I. term illness or injury,2 and (3) work-injury benefits for illness or injury that either occurs at the work- place or during a normal workday or is a result of *Ms. Zeitzer is with the Office of International Policy, Office of the work environment. The Dutch eliminated the Policy, Social Security Administration. Ms. Beedon was formerly work-injury program, and thus make no distinction with the External Liaison Staff, Office of Governmental Affairs, between an injury or illness that is work related and Social Security Administration. ‘The information in this article is based on the findings that one that is not work related. Income loss caused by resulted from a Social Security Administration funded research injury or illness is covered by the cash sickness or project conducted by Rehabilitation International in 1985-86. Coun- try experts obtained the questionnaire responses; the Bureau of Economic Research, Rutgers University, computerized the data and completed the analysis under the direction of Dr. Monroe *In most foreign social security programs, the term “invalidity Berkowitz. ” is used instead of “long-term disability pension!’

8 Social Security Bulletin, September 19870’01. 50, No. 9 long-term disability pension programs in the the countries that have universal programs, a portion Netherlands. of the funding for the program comes from employ- Furthermore, most countries also provide means- ers’ contributions, although, in most cases, the major tested benefits to disabled persons, whether or not part of the funding comes from general revenues. they are in covered employment, when individual or Earnings-related systems base eligibility for a disa- family resources are determined administratively to be bility pension directly or indirectly on length of inadequate to meet subsistence or . In covered employment; the amount of the pension is addition to the three national income-maintenance usually related to periods of covered employment as programs for those with , separate systems well as to the level of the worker’s earnings before on- may exist for specialized occupations such as mining, set of illness or injury. These programs are financed seafaring, railroading, public employment, agriculture, primarily from compulsory payroll contributions-by and to cover the self-employed. These separate sys- employers, workers, or both. tems may provide protection based on each system’s In most of the countries studied, the government definitions and criteria for evaluating incapacity. This also contributes toward financing the disability pen- article does not deal with these means-tested or work- sion program. In some cases, this government contri- injury programs or with special systems, but instead bution is a specific percentage of program costs; in concentrates on the programs that provide long-term others, the government makes up any program deficit; for the majority of the populations. and, in still others, it pays for coverage of specific In addition to the disability pensions themselves, population groups who otherwise would not be most of the eight countries studied also provide a insured. range of supplementary benefits and allowances to The countries included in this study exemplify the enable a disabled or handicapped individual to cope following approaches: more easily with everyday life. The nature of these supplementary benefits varies greatly from country to l Universal disability pension programs with country, as do the requirements for eligibility. Often, earnings-related components (Finland, the however, entitlement to these benefits or allowances is Netherlands, and Sweden).

determined regardless of the individual’s eligibility for l Earnings-related disability pension programs a disability pension. In other words, the effect of the (Austria, Canada, Israel, the Federal Republic of disabling condition on the individual’s ability to func- Germany, and the United Kingdom). tion is assessedapart from the question of capacity to earn. Some of these additional benefits are explored Concepts of disability vary greatly from country to in more detail where appropriate, but some examples country and even within a country, depending on the include mobility benefits, attendance allowances, and specific programs. Because several of the countries benefits for disabled children. have more than one disability program applicable to different segments of their population or for different degrees of disablement, a brief description is provided Types of Long-Term Disability below concerning the programs discussed in this Pension Coverage study. For the most part, however, the analyses in this study are limited to disability that results from In terms of disability pension coverage, two broad nonwork-connected impairments (except for the approaches are identifiable among the various Netherlands, where no distinction is made) covered methods used to provide cash benefits during periods under the country’s general earnings-related social of long-term illness or injury. The first approach-a security system. (In countries with a two-tiered pro- universal program-provides a disability benefit to all gram, the first-tier data are also given where ap- qualified residents and supplements to their dependents propriate.) regardless of employment status. The second approach-an earnings-related social insurance Austria program-provides a disability benefit to qualified workers and supplements to their dependents. Under The pension insurance system in Austria is divided both types of programs, those qualified can claim into two programs. The first provides Occupational benefits as a matter of right. Typically, social security Incapacity benefits to “white-collar” employees, and systems with a universal disability pension program the second provides Invalidity Pensions to “blue- also have a second-tier earnings-related program. collar” workers. The two programs are essentially Universal programs provide flat-rate cash benefits parallel in that the person’s ability to earn must be to qualified disabled residents or citizens without reduced to less than half that of a nondisabled person respect to income, employment, or assets. In some of with similar training, knowledge, and capabilities.

Social Security Bulletin, September 1987/Vol. 50, No. 9 Canada disability. The benefit (paid in addition to the flat- The Canada Pension Plan is the national social rate benefit to those who qualify) is income-related security program (except in the province of Quebec, and based on previous earnings and degree of disabil- which provides benefits under the comparable Quebec ity. For both the GDIA and the DIA, the degree of Pension Plan) that covers all previously employed in- disability is determined by the individual’s reduced dividuals aged 18-65 who become totally incapable of earnings capacity. work because of a disability that is likely to be of long duration or result in death. Sweden In Sweden, a basic (flat-rate) benefit is payable on Finland a universal basis to persons aged 16-64 whose work In Finland, The National Invalidity Pension pro- capacity has been reduced at least 50 percent, regard- gram provides a minimum flat-rate pension to men less of their financial need or previous attachment to and women aged 18-65 who, because of an illness, the labor force. A supplementary pension pays an handicap, or injury, are unable to support themselves earnings-related disability benefit (in addition to the through their usual work or any other kind of work. basic benefit) to disabled workers with sufficient con- The Employment Pensions and Disability Pensions tributions. These supplementary benefits are awarded programs also provide wage- or earnings-related pen- for varying degrees of disability (that is, for 50-per- sions to employees in the public or private sectors cent, 66.6-percent, and lOO-percent disability). who, because of an illness, handicap, or injury that is expected to last at least 1 year, become incapable of United Kingdom work. In the United Kingdom, an Invalidity Benefit is payable to employed (including self-employed) in- Federal Republic of Germany dividuals with sufficient contributions who are aged In West Germany, an Occupational Incapacity 16-69 (64 for women) whose illness or disability has (semi-disablement) pension is paid to insured persons made them continuously incapable of work for 28 whose ability to earn at their own or any other suita- weeks, The benefit consists of a flat amount plus an ble job is reduced to half that of a nondisabled in- earnings-related component depending on previous sured person with similar training, knowledge, and contributions. In addition, a Severe Disablement Al- abilities. An Earnings Incapacity (total disability) pen- lowance is payable, regardless of need, to those with sion is paid to insured persons of any age who, due insufficient or no contributions whose illness or dis- to physical or mental illness or disablement, are una- ablement has also made them continuously incapable ble to achieve any earnings at all or only at very low of work for 28 weeks. For those who become incapa- levels. ble of work before age 20, the benefit is paid on the basis of their incapacity alone. Those who become in- capable of work after age 20 must be at least 80- Israel percent disabled (measured on the industrial injuries scale of loss of faculty). Israel’s National Insurance Institute pays general disability benefits to individuals aged 18-65 (age 60 for women) who meet all of the following criteria: (1) their earnings capacity has been reduced by at least Disability Stages 50 percent because of illness or disablement, (2) their In most industrialized countries, long-term disabili- medical disability is at least 40 percent, and (3) their ty benefits begin only after illness or injury has functional disability is at least 50 percent. (There are prevented the insured from working for a prescribed special criteria for disabled children and housewives.) period of temporary, or initial, incapacity. Long-term disability benefits typically terminate upon: (1) recov- The Netherlands ery, (2) death, or (3) attainment of statutory pension- In the Netherlands, the General Disablement Insur- able age-whichever occurs first. ance Act (GDIA) covers all disabled persons under Most industrialized countries also have cash sick- age 65 with at least a 25-percent disability who have ness insurance programs that provide income replace- previously been in paid employment or who became ment during a short-term or temporary illness or disabled before age 17. The benefit is payable at a injury. Such programs provide cash benefits, usually flat rate based on the degree of disability. The Dis- for the first 26 or 52 weeks of illness, until the claim- ablement Insurance Act (DIA) covers employed work- ant is cured, determined permanently disabled, or ers aged 15-64 who have at least a 15-percent dies.

10 Social Security Bulletin, September 1987/Vol. 50, No. 9 In national systems that distinguish between short- Financing term and long-term incapacity, the definition and In six of the countries studied, disability pensions evaluation of disability are interrelated in the two pro- are funded by contributions from both employers and grams. In other words, the determining body that employees to the old-age, disability, and survivors awards a disability pension is usually involved from the early stages in the evaluation of temporary inca- (OASDI) branches of the social security programs: pacity and, consequently, becomes familiar with the Austria, Canada, West Germany, Israel, the Nether- claim from the onset of the incapacity. Furthermore, lands, and the United Kingdom all use this method. this same organization may itself be responsible for In some countries that use the combined OASDI con- instituting rehabilitation or for referral to rehabilita- tribution approach, the percentage of the total tax tion programs directed at preventing long-term disa- used to finance the disability program is not identi- bility at an early stage. fied separately. Only in Israel and the Netherlands is there a single identifiable tax for the disability program. Earnings-Related Long-Term The six countries also vary in the way that contri- Disability Programs butions are assessed.In Canada and West Germany, the employer/employee contributions are equal; in the Coverage other four countries, there are various combinations (see Appendix II for percentages). The right to, or opportunity for, coverage differs Only Finland has a system of earnings-related disa- from country to country and even from program to bility pensions financed entirely from premiums paid program. For example, in countries with a two-tiered by employers, with no contributions from employees system, disabled individuals with insufficient or no or the government. The Finnish earnings-related pen- previous work history (such as those disabled from sions are administered by private insurance compa- birth or housewives) would usually not be eligible for nies, funds, and foundations with government the earnings-related disability benefit, but would still supervision to ensure solvency and adherence to the receive the basic flat-rate benefit. pension laws. On the other hand, the self-employed are treated The Swedish disability program is two-tiered. Tier differently from one country to another with respect one, which provides universal disability pensions to to disability coverage. Canada, Finland, Israel, citizens and aliens aged 16-64 who are disabled and Sweden, and the United Kingdom have compulsory who fulfill certain residence requirements, is financed coverage, not only for wage and salary earners but by employers and the self-employed-who contribute also for self-employed workers. In Austria, the self- 9.45 percent of payroll and assessableincome, employed and those who wish to continue coverage respectively-as well as by a government subsidy of after employment has ceased may voluntarily pay into about 25 percent. Employees do not contribute. Tier the system. Similarly, in West Germany, the self- two, which provides an earnings-related disability employed as well as others exempt from the program, benefit, is also financed by employers and the self- such as housewives, may voluntarily contribute to the employed, who contribute 10 percent each. Again, system. employees do not contribute. The Swedish government By contrast, in the Netherlands the self-employed makes no contribution to the earnings-related disabili- are not eligible for the supplementary system of addi- ty pension program. tional benefits under the earnings-related program. The financing provisions for the disability programs However, the self-employed as wel! as those disabled in the countries studied are shown in greater detail in since birth are covered under the basic program. Dis- Appendix II. With the exception of Israel and the abled housewives, although not eligible for cash Netherlands, the contribution rates cover more than benefits under either Dutch program, nevertheless just the disability pension program. receive rehabilitation and in-kind benefits under the basic program. In Israel, the criterion for disability coverage is Early Identification of the residency, not employment. Therefore, in addition to Long-Term Disabled paying disability benefits to previously employed in- As indicated earlier, the typical sequence of dividuals, the National Insurance also pays both cash income-maintenance benefits for the disabled is: (1) a and in-kind benefits to severely disabled housewives short-term cash sickness benefit, followed by (2) a and disabled children aged 3-18. However, the defini- long-term disability pension, followed by (3) an tion of disability is more strict (that is, a greater old-age benefit. Each of the eight countries studied degree of disability is required) for a housewife than has some form of cash-sickness benefit that spans the for someone with a work history. time from the onset of illness (usually with a short

Social Security Bulletin, September 1987/Vol. 50, No. 9 11 waiting period that ranges from 1 day to 2 weeks, de- often the rehabilitation process begins while the in- pending on the country and program) to recovery or dividual is receiving cash-sickness benefits. In this qualification as a disability pensioner. Israel is the case, the health insurance fund typically would be only country of the eight that does not provide such aware that a person had been in receipt of sickness a benefit as part of its social security program; benefits for a given period (generally about 2 months) however, employers are statutorily required to provide and would investigate whether any rehabilitation a maximum of 90 days’ paid sick leave. In the United measures would be appropriate at that point. Depend- Kingdom and West Germany, employers provide cash ing on the particular country, the sickness fund itself sickness benefits initially, followed by cash sickness may provide the rehabilitation or refer the claimant to benefits under the social insurance program. a rehabilitation provider. This is the usual procedure The following tabulation shows the period for in Austria, Finland, West Germany, the Netherlands, which cash sickness benefits are payable by the social and Sweden. security program in the eight countries surveyed. Although sickness benefits are not provided as part of the social insurance program in Israel, the Maximumduration of cash great majority of the population is insured through Country sickness benefits the Labor Federation and, therefore, the opportunity for early identification exists through a similar Austria 78 weeks mechanism. In countries where there is close linkage between Canada...... 15 weeks (paid under unemployment insurance) the agency or program that pays cash sickness benefits and that which awards disability benefits, the Finland 52 weeks rehabilitation process is usually begun early and voca- Federal Republic of tional rehabilitation may be integrated with medical Germany. ‘84 weeks rehabilitation as soon as feasible. In such countries, medical rehabilitation is usually provided first, with Israel ‘None the goal of enabling the client to function as indepen- Netherlands . 52 weeks dently as possible. Depending on the outcome of the medical rehabilitation, the individual may or may not Sweden ‘90 days be offered vocational rehabilitation services. United Kingdom. “28 weeks An example of this emphasis on rehabilitation oc- curs in Israel, where the disabled person is offered re- ‘Employer pays first 6 weeks; social security program provides habilitation services if there is as little as a 20-percent for next 78 weeks within 3 consecutive years. *Employer pays 90 days. medical disability, even though eligibility for a disabil- ‘Technically, there is no limit; however, the regulations state that ity pension per se requires at least a 40-percent medi- if workers have been in receipt of a cash sickness benefit for 90 cal disability and a 50-percent loss of earnings consecutive days, insurance offices are to consider them for re- habilitation. capacity. (See table 2 in the “Qualifying “Employer pays first 8 weeks; social security program provides Conditions-Medical” section.) for the next 20 weeks. West Germany puts great emphasis on providing re- habilitation as early as possible. Rehabilitation is part of the West German social security system’s national Rehabilitation health insurance program and is provided through its various sickness funds as part of the patient’s treat- Great variation exists in the delivery of rehabilita- ment. The claimant is usually required to undergo tion services among the countries studied. For exam- medical rehabilitation and, if indicated, vocational re- ple, rehabilitation may be: (1) provided directly by the habilitation before a decision to award a disability social security institution through its sickness fund, pension is made. The operative principle in West Ger- (2) provide‘d indirectly by the sickness fund in its many is, “rehabilitation takes priority over the grant- referral of a client to a rehabilitation provider, (3) ing of a pension? The client is expected to cooperate provided by a different government agency, such as a in the vocational rehabilitation program although he local government component, (4) coordinated between or she cannot be forced to do so. The health insur- the social security institution and another government ance program also cooperates with the local employ- body, such as the labor department, or (5) left to the ment offices in determining vocational rehabilitation individual to obtain independently through private strategies. West German program experts believe that, medical insurance or other means. in 90 percent of all cases referred for rehabilitation If the country has incorporated a cash sickness while in cash-sickness benefit status, this early medi- benefit program into its social security system, then cal rehabilitation makes it possible for individuals

12 Social Security Bulletin, September 19871Vol. 50, No. 9 threatened with disability to return either to their there is no formal connection with the Department of former job or to a new position elsewhere within the Health and Social Security, which administers the dis- same company. ability pension program. Referral to vocational re- Countries vary greatly as to whether all claimants habilitation is not automatic in the United Kingdom are referred automatically to vocational rehabilitation but instead depends on the assumption that the in- or whether only those believed likely to succeed are dividual will be capable of work after training. There- referred. In some of the countries studied, vocational fore, if an individual is referred for vocational rehabilitation services are available but not automatic, rehabilitation, there is a presumption of capacity to depending on a variety of factors such as the claim- work and, thus, refusal to cooperate could result in ant’s medical condition, age, education, and the cessation of an unemployment benefit, but not a dis- likelihood of reintegration into the workforce. In ability benefit. Sweden, vocational rehabilitation is offered automat- ically to all disability benefit recipients, but the gener- al criterion used by the assessing agency in referring Concurrent Work-Injury individuals for vocational rehabilitation is that the Benefits recipient, after vocational retraining, should be able to earn at least half of what he or she earned before Except for the Netherlands, all the countries becoming disabled. studied have a work-injury benefit program in addi- In Austria and the Netherlands, a separate claim tion to their general disability program. A person may must be filed for vocational rehabilitation services. In qualify for more than one program in Finland, Finland, vocational rehabilitation is granted “only af- Sweden, West Germany, the United Kingdom, and Is- ter consideration”-that is, after an evaluation of the rael; however, in most cases in these five countries, an claimant’s likelihood for successful reintegration into offset provision prevents a person from receiving full the workforce based on the factors mentioned above. benefits from both programs if they are paid for the As indicated, the eight countries differ not only in same occupational illness or disease. On the other the linkages between medical and vocational rehabili- hand, in Austria, a person entitled to receive benefits tation but also in the linkage between those rehabili- under more than one program receives full compensa- tation services and entitlement to a disability pension. tion from each. In most of the Canadian provinces, Even among countries where close linkages exist, Canada Pension Plan (CPP) benefits are not offset practices differ concerning whether failure to cooper- against work-injury benefits provided under provin- ate in vocational rehabilitation will result in denial or cially operated programs. In a few provinces, however, cancellation of disability benefit entitlement. Usually, where work-injury benefits represent a higher however, the person is expected to cooperate in the earnings-replacement rate, CPP benefits are subject to vocational rehabilitation program. Cooperation is re- offset. quired to ensure continuation of disability benefits in Finland, West Germany, Israel, and Sweden, unless there is good cause for not participating. In Austria, Qualifying Conditions- the payment of benefits does not depend on the in- dividual cooperating with vocational rehabilitation Nonmedical measures. In the Netherlands, provisions exist for re- Before evaluating or applying the definition of dis- quiring such cooperation, but, in practice, they are not often used. ability, most social insurance systems typically require that the person meet an insurance requirement as well In a few countries, little or no linkage exists be- as an age requirement. Once it has been determined cause the providers of vocational rehabilitation are that the claimant satisfies the nonmedical criteria, dis- different from those who determine eligibility for dis- ability assessmentbegins. ability benefits. In Canada, for example, there is no social security linkage per se since the Canada Pen- sion Plan does not provide or sponsor rehabilitation Time and Recency of Work services. However, vocational rehabilitation is available To be considered for a disability pension, most on the provincial level, with the federal government countries first require the claimant to have had a sharing the cost. minimum period of work and/or insurance contribu- The situation is similar in the United Kingdom, tions. Also, in some of the countries surveyed, that where vocational rehabilitation is administered, fund- period must be closely linked to the onset of illness ed, and usually provided by the Manpower Services or injury (recency of work). Specific work, or insur- Commission, a nongovernmental body that reports to ance requirements, applicable in the countries sur- the Secretary of State for Employment. Therefore, veyed are shown in table I.

Social Security Bulletin, September 1987/Vol. 50, No. 9 13 Table l.-Time and recency of work countries. West Germany, Israel, and the Netherlands use the term “incapable of earning,” while Austria, country Period of contribution Recency of work Finland, the United Kingdom, and Sweden use the Austria . 240 months 60 of last 120 months term “incapable of work?’ Canada uses a phrase simi- lar to that used by the Social Security programs in the Canada. l/3 of the years 5 of last 10 years United States: “incapable regularly of pursuing any ,elapsing since affilation substantiallly’ gainful occupationY Regardless of the ter- Federal Republic 36 months within 5 minology, all the definitions imply the question, “Can of Germany. ,60 months years before disability onset the worker adequately support himself or herself?” While each of these eight countries specifies inca- Finland. None 1 to 4 months, depend- ing on program pacity for work, Canada, West Germany, Israel, the Netherlands, Sweden, and the United Kingdom refer Israel. !None None directly to the requirement for mental or physical ill- ness, or impairment in statute. In contrast, Austria Netherlands. 1Contributions paid Contributions paid at at time of disability time of disability onset and Finland make no direct reference in statute to ,onset physical or mental disability-it is assumed or implied. Sweden None None Benefit claims are provided for in statutes as follows: United Kingdom. ,Contributions in any Contributions at a Itax year at a specific specific minimum Austria. Under the General Social Insurance Act, Iminimum amount amount in year preced- “a person is entitled to an invalidity or incapacity to ing disability onset work pension, if the general prerequisites are met, and if the person is suffering from temporary or per- manent invalidity or incapacity to work? Age Factor Canada. Under the Canada Pension Plan, “the per- Most countries impose an upper age limit for son must suffer from a severe and prolonged mental receipt of a disability benefit. This age limit cor- or physical disability, and be incapable regularly of responds to the normal retirement age when a claim- pursuing any substantially gainful occupation? ant qualifies for an old-age pension. (For discussion Finland. Under the Employment-Related Disability of conversion from a disability to old-age pension at Pension Program, “any employee or self-employed retirement, see the “Conversion of Benefits” section person whose working (earning) capacity is impaired at the end of this article.) A few of the countries by at least 2/5 (partial) or 315 (full) for a continuous studied (Austria, Israel, and Sweden) require that the year? person reach a mimimum age before disability West Germany. For a pension award due to earnings benefits can be paid. incapacity, the program “presupposes that an insured Those disabled in childhood or before reaching person, due to an illness, can for an unforseeable working age are eligible for some type of benefit in period of time engage in gainful activity only irregu- five of the eight countries. Israel pays disability larly, or achieve only insubstantial income from it? benefits to disabled children aged 3-18 under the Israel. Under the General Disability Benefit pro- general disability program; Finland, the Netherlands, gram, “a person who, as a result of a physical, men- and Sweden pay disabled young people under the tal, or intellectual impairment, fulfills one of the universal tier of their disability programs. In the following conditions: (1) the individual is unable to support himself or herself from work and to earn a United Kingdom, those incapable of work before age sum equivalent to 25 percent of the average wage; or 20 with at least 10 years of residency are entitled to a (2) a person’s capacity to earn a living from work, as Severe Disablement Allowance. well as any actual earnings, are reduced by 50 percent or more as a result of an impairment? Qualifying Conditions-Medical The Netherlands. Under the Disablement Insurance Program, an individual who, “as a consequence of ill- Statutory Definition of Disability ness or impairment is entirely or partially incapable of achieving earnings from performing work calculat- The statutory definitions of disability are broadly ed on the basis of his/her powers and skills and phrased in each of the eight countries studied and which, in light of education and former profession, provide minimum guidance for determining disability the person can in fairness be expected to perform, status. The primary criterion for approval of disabili- either at his/her old job or at a nearby location at ty claims, as worded in statute, is similar in all eight the prevailing wage?

14 Social Security Bulletin, September 1987/Vol. 50, No. 9 Sweden. For the disability pension, “on account of similar education and earnings, and who works in the illness or other reduction of physical and mental ca- same approximate geographic location, to compare pacity, there is a reduction of work capacity? with the disabled person. The United Kingdom. For the disability pension, “a Six countries (Austria, Finland, West Germany, Is- person must be incapable of work by reason of some rael, Sweden, and the Netherlands) accept less than a specific disease or bodily or mental disablement? loo-percent loss of earnings in their qualifying condi- tions for a disability pension. The remaining two Prescribed Medical countries studied, Canada and the United Kingdom, Criteria require a total (loo-percent) inability to earn for pay- Prescribed medical criteria for specific diagnostic ment of a disability pension. Austria and West categories (similar to the medical listings used by the Germany require a 50-percent or greater loss of earnings U.S. Social Security Disability Insurance program in capacity for payment of a disability pension; those the United States) are used only by Israel and Cana- disabled with less than a 50-percent earnings loss da. In Israel, the Book of Statutes includes a detailed receive no disability pension. list of various medical conditions or impairments, The West German system pays a partial disability subdivided by severity of condition and the subse- pension to those who suffer a 50-percent or greater quent percentage of medical disability to be allocated earnings loss, and a full pension to those incapable of for those conditions or impairments. Thus, these achieving any or only extremely low earnings. Both medical criteria act as a threshold that must be pensions can be granted either indefinitely or as limit- crossed before evaluation for functional disability. ed pensions. A limited pension is granted for up to 3 (See page 17 ‘for explanation of functional disability.) years (with extensions for a further 3 years under cer- In Canada, the Guidelines used are based on the tain circumstances) if the loss of fitness for gainful International Classification of Diseases, a World employment can be considered of a temporary nature. Health Organization functional rating system used to The amount of the pension in Austria depends on determine incapacity. The Guidelines relate medical several factors, including the worker’s average income criteria to each functional category. during a certain time frame (called the calculation ba- Although only Israel and Canada identify specific sis), the number of months of insurance coverage, the categories of illness or impairment, all of the coun- claimant’s age, and any entitlement for the birth of tries studied require the presence of a physical or children or for having supplementary insurance. Disa- mental causal factor affecting the claimant’s ability to bility benefits in Austria can also be awarded for a work. The way these medical factors affect the deci- limited period if it is assumed that the incapacity is sion to award a disability pension varies considerably of a temporary nature. from country to country. For example, in the United Among the countries surveyed, Finland, Israel, Kingdom, the only medical criterion for payment of a Sweden, and the Netherlands provide a range of disability pension is “incapacity for work”that is, earnings-loss percentages, representing partial through the physician must certify that the medical condition total disability, and a related range of pension-benefit prevents the claimant from being able to perform his amounts. The Netherlands has the broadest range-a or her normal work. However, under the British sys- 15-percent loss of earnings capacity to qualify for a tem, disabled persons who are deemed capable of minimum partial pension and an go-percent loss for a work may still be entitled to an array of other full pension (table 2). .Finland’s range is much benefits, each with specific qualifying criteria. In the narrower-a 40-percent loss for a partial pension and Netherlands, the Joint Medical Service, an indepen- a 60-percent loss for a full pension. Israel and dent body, determines the consequences of an impair- Sweden both use loss of earnings of 50 percent as the ment or illness on an individual claimant’s capacity to initial level for a partial pension. Israel, however, re- work. quires a 75-percent loss for a full disability pension benefit, and Sweden an 84-percent loss. Loss of Earnings Criteria Vocational Once medical eligibility has been established, the next step is to evaluate inability to work or earn. Ina- Criteria bility to work or earn has been quantified by each of Vocational as well as medical criteria are used in the countries surveyed as a percentage of lost earnings the assessmentprocess in all of the countries studied. ability. This percentage is derived by comparing, in The countries vary greatly, however, both in how the West Germans’ words, “a healthy insurant’s ca- these vocational criteria are used in the assessment pacity” to that of the disabled person. The Dutch process and in the weight given to them in the final de- use a physically and mentally healthy person who has cision on whether or not to grant a full or partial dis-

Social Security Bulletin, September 1987/Vol. 50, No. 9 15 Table 2 .-Income loss levels for partial and full disa- ment, consideration is given to the actual “availability bility pensions of employment appropriate to the individual’s usual type of work? The following examples show how Total disability as Partial disability as these various factors are applied in some of the coun- percent of earnings lowest percent of tries surveyed. Country incapacity earnings incapacity In Austria, the vocational criteria are applied Austria . . . 19.5 50 differently to salaried employees (white-collar em- ployees) than they are to wage earners (blue-collar Canada...... 100 (‘) workers). Employees are entitled to benefits in Austria Finland. . . 60 40 if, because of illness or incapacity, they are not capa- ble of employment in their “category of occupation” Federal Republic of even though they could still find work in the general Germany. . 100 50 labor market. The evaluation of working capacity for Israel. . 15 50 employees in Austria is based on the claimant’s last occupation, and incorporates all jobs that require Netherlands 80 15 similar training, knowledge, and skills. Furthermore, Sweden . . 84 50 the claimant who is unable to work in his or her oc- cupational category because of iliness or injury is not United Kingdom. . 100 (7 expected “to take up another employment if doing so would constitute a step down in the social scale!’ For ‘Not applicable. the Austrian blue-collar worker, the range of occupa- ability pension. For example, the vocational tions to which he or she can be referred covers all assessmentof disabled claimants may include con- those previously performed before the onset of disa- sideration of whether or not they could still be ex- bility. For both employees and workers in Austria, it pected to perform any job that exists in reasonable is relevant only that there be jobs in the labor market numbers in the economy, or any job that is the same in sufficient number that the claimant could be ex- or similar to work they have ever done, or only their pected to perform, not that actual vacancies or offers last job before onset of disability. of employment exist. Other factors enter into the vocational assessment In their disability assessments,both West Germany process and vary from country to country (and even and the Netherlands use a combination approach that within the same country depending on the particular ties the individual capabilities of the claimants to a program). For example, a requirement may stipulate general vocational grid. In both countries, the residu- that there be an actual vacancy versus the existence of al functional capacity of each claimant is assessed jobs in sufficient numbers in the economy. If so, the and compared with a functional analysis of the determination may consider the geographic area-the specific skills needed to perform defined occupations. entire country, a regional area, or only the local area. However, the two countries differ in the way they use Countries also vary in their requirements as to this information. whether claimants are expected to move to take a job The West Germans use this functional assessment and, if so, whether consideration is given to the im- in conjunction with age, education, skills, and other pact of such a move on home ownership, the spouse’s factors to develop a profile. The profile then indicates job, children in school, and the like. For example, which jobs the claimant could still be expected to per- Finland is not likely to require a married disability form. If these jobs exist in sufficient number in the claimant who has a family and owns a home to relo- locale, the claimant is not eligible for a disability pen- cate to another city to find suitable work, but a sin- sion. Thus, in West Germany, it is not necessary that gle person who rents might be expected to move. In there be actual vacancies or offers of employment in Sweden, consideration is given to whether a move these occupations. However, in recent years, rulings of might adversely affect a spouse’s current employment. the appeals courts have instead taken into account the Finally, differences exist among the countries con- actual labor-market situation. Therefore, the West cerning whether all claimants are measured against German courts have granted full disability pensions to the same vocational standards or whether different claimants who meet eligibility only for partial disabil- criteria are applied depending on the claimant’s age, ity benefits but who cannot find jobs. education, skills, and even social class. The Dutch take current labor-market conditions For example, the Canada Pension Plan applies its into account in their vocational assessmentprocess. vocational criteria with greater latitude for those aged Thus, in the Netherlands, the information about the 55 or older. Thus, for a person in that age category claimant’s remaining abilities and skills is matched who is unemployed and has a “significant” impair- against actual vacancies for jobs that require those

Social Security Bulletin, September 19870’01. 50, No. 9 specific skills. Then, the Dutch adjudicators work use a formula for benefit calculation that is tied to with local vocational experts to place the claimant. If the worker’s past earnings. That is to say, what a (1) there is no job available that the claimant can do, worker has earned is, in some way, correlated to the and (2) provided that the disablement is over 15 per- benefit. Israel uses a percentage of average wages for cent and the individual has not returned to work, the all Israeli workers for the calculation and adjustment person may be adjudged fully disabled. In recent of benefits. In the United Kingdom, the benefit for- years, this process, coupled with high unemployment mula begins with a flat rate that can be increased by in the Netherlands, has resulted in a high incidence of increments. In addition, all of the countries make disability pension awards. some kind of adjustment to benefits to account for In the United Kingdom, the vocational criteria have inflation. a somewhat delayed significance in the assessment Furthermore, two of the countries-Austria and the process. As previously stated, it is a relatively easy United Kingdom-give consideration to the age of the procedure to establish eligibility for a disability worker in calculating the benefit, under the assump- benefit in the United Kingdom. The claimant’s own tion that the younger the worker at the onset of disa- physician certifies that, due to a physical or mental bility the longer the disability could adversely affect condition, the claimant cannot do his or her job. The potential earnings. Each of the countries has a differ- application of vocational criteria really comes later ent method of calculation. on, after the claimant has been receiving disability Austria uses hypothetical credits for younger workers benefits for some time. Then, the social security so that the period from age of qualification to authorities-while considering the claimant’s age, edu- age 50 is added at a rate of 1.9 percent per year to cation, and work experience-may nevertheless con- increase the pension, up to a maximum of 50 percent clude that: (1) it is reasonable for the claimant to seek of earnings. The United Kingdom uses pension sup- alternative employment and that (2) there is employ- plements added to the basic flat-rate benefit in incre- ment that exists within the claimant’s physical or ments,. depending on the worker’s age. mental capabilities. It is not necessary that there be actual vacancies or that they be in the claimant’s lo- Disability-Related Benefits cal area. Most of the countries studied offer a variety of In recent years, the high unemployment rate in the auxiliary social security cash and/or in-kind benefits United Kingdom (about 12 percent in 1986) has im- to disabled persons to help them live and function in pacted adversely on disabled claimants’ ability to find society. The countries vary as to whether or not they work. Nevertheless, the burden of proof is on the require the person needing the auxiliary benefits to be British claimant to show that there is absolutely no in receipt of a disability pension, work-injury benefit, work he or she can do. Therefore, an increasing num- or incapable of work to qualify for these additional ber of denied disability claimants in the United King- benefits. In addition to the cash and in-kind benefits dom have based their appeals on the difficulty of per se, countries often have many other programs to finding work in times of very high unemployment. help the .disabled become better integrated into socie- Sweden, Finland, and Israel apply vocational criter- ty. These disability-related programs include low-cost ia on an individual basis. An examination of the housing and car loans and employment quota and in- vocational assessmentprocess in Israel best illustrates centive programs. how such individual decisions are made. After meet- Some examples of supplemental cash benefits in- ing the medical criteria, the claimant is assessedon clude: attendant care (or constant attendance) al- an individual functional basis. For example, a concert lowances payable to disabled persons who require the violinist who loses the use of his fifth finger (a minor care of another person (payable in all countries medical disability) might still be entitled to a full studied except Canada), and mobility allowances, benefit in terms of a functional disability. Conversely, which are payable to persons with impaired mobility a totally blind clinical psychologist (with a to assist them with their transportation costs. loo-percent medical disability due to blindness) may Attendant care allowances provide cash benefits to not receive a benefit if his or her capacity to earn as noninstitutionalized individuals needing full- or part- a clinical psychologist is good or remains unchanged. time assistance from another person. These payments enable the individual to receive at-home assistance with activities of daily living or personal care. The Benefits qualifying conditions for this assistance vary from country to country depending on: (1) severity of the Pension Formula disablement, (2) application of a means test, (3) rela- Six of the countries studied-Austria, Canada, Fin- tionship of the attendant to the disabled person, (4) land, West Germany, the Netherlands, and Sweden- age requirements, and (5) benefit amounts. Regardless

Social Security Bulletin, September 1987/Vol. 50, No. 9 17 of the specific requirements in the individual coun- month) for each unfilled workplace. Penalties paid by tries, the purpose of these benefits is, at least in part, West German employers for not complying go into a to contain the spiraling cost of long-term hospitaliza- fund to help defray the costs of rehabilitation and tion or nursing home care by providing at-home care job-site adaption for disabled persons. The require- when possible. ment is similar in Austria, except that it is applicable Mobility allowance is a broad term that includes a to companies employing 25 or more employees. Also, variety of transportation benefits for the disabled. in Austria, the fines are paid to special funds ear- The types of benefits and the requirements for eligi- marked for use by the disabled for loans and/or sub- bility differ from country to country. For example, in sidies. In addition, Austria pays incentive cash awards the United Kingdom, a mobility allowance (currently to companies that exceed the prescribed quota. about $30 per week) is paid to disabled persons be- The United Kingdom’s quota system requires em- tween the ages of 5 and 65 (but once awarded, the al- ployers with 20 or more employees to have 3 percent lowance remains payable until age 75) with “inability registered disabled workers. No fines are imposed on or virtual inability to walk, including those for whom employers for being below quota. However, the em- the exertion to walk would constitute a danger to life ployer may not hire a nondisabled person to fill any or health? Thus, the criterion for payment of the vacancy without obtaining a special permit from the mobility allowance in the United Kingdom is the per- Manpower Services Commission. son’s physical condition and not necessarily the need In the Netherlands, legislation enacted in July 1986 for work-related transportation. requires employers and unions to fill between 3 per- On the other hand, West Germany pays a “travel- cent and 7 percent of all positions with disabled in- to-work allowance” to qualified disabled individuals. dividuals. The provisions cover all private and public In Israel, the majority of the mobility benefits and sector companies regardless of workforce size, with forms of assistance available are related to helping the the percentages varying according to the type of work disabled purchase their own vehicles because public performed. The lower rate of 3 percent applies to in- transportation is generally not accessible to the han- dustries such as construction, where physical abilities dicapped. A disabled person who works receives dou- are paramount, and the higher 7-percent rate applies ble the monthly mobility pension of a nonworker. to sedentary work (such as clerical jobs). Penalties are This larger amount is considered a strong work incen- assessedfor failure to meet fixed quotas, with the tive in Israel. money used to pay grants to companies that exceed Except for Israel, all of the countries studied their quotas. have national health insurance programs as Other incentives to hiring the disabled include: part of their social security systems. As well as salary subsidies for limited periods (Austria), payment providing full medical and hospitalization coverage, of full salary during training periods (Israel), and per- these programs also provide such in-kind benefits as mission to pay lower wages than those normally re- wheelchairs, prostheses, examinations, laboratory tests, quired in certain trades for limited periods (the pharmaceuticals, and treatment-related transportation. Netherlands). The Israeli Labor Federation sickness fund provides similar protection for approximately 90 percent of the Conversion of Disability Pension population. to Old-Age Pension In addition, many countries provide aid to the disa- bled through various other means, such as low-cost As previously mentioned, in the majority of the loans for the purchase of an automobile (Israel), sub- countries studied the disability pension is viewed as a sidies for the adaption of a home and/or automobile continuum between the sickness benefit stage and the or for rent (Austria), and tax credits for housing ex- eventual old-age pension. Thus, in Austria, Canada, penses (the Netherlands). West Germany, the Netherlands, and Israel, the disa- For the disabled who work or return to work, pay- bility pension is automatically converted to an old-age ment is made for adaption of the worksite and for pension at age 65 (age 60 for women in Israel). In job aids in all countries except Canada and Finland. Finland, the disability pension converts to an old-age Furthermore, in Austria and West Germany, private pension from age 60 to age 67, depending on the employers are encouraged to hire the disabled through retirement age of the particular program. Sweden the use of quota systems that specify the percentage does not use age as the conversion point, but rather of jobs to be filled by disabled individuals. In West years of pension coverage (when the individual has 30 Germany, both private and public employers with 16 years of pension coverage, the benefit converts). or more employees must fill 6 percent of the jobs In the United Kingdom, women aged 60-64 and with severely disabled employees. Failure to meet this men aged 65-69 may choose the type of benefit they quota results in a fine (currently about $75 per wish to receive. In general, it may be more financially

18 ‘Social Security Bulletin, September 19871Vol. 50, No. 9 advantageous to disabled individuals in those age Federal Republic of Germany ranges to continue receiving disability pensions in- Dr. Rudolf Kolb and Hubertus Stroebel, The Social stead of converting to retirement pensions. The basic Security System in the Federal Republic of Germany, disability benefit is not taxable as income (although monograph, 42 pages; questionnaire, 53 pages. any additional earnings-related component is taxable) while the entire old-age benefit is subject to such tax- Finland ation. However, the choice of which pension to receive would depend on the individual’s particular Risto Seppalainen, Rehabilitation International circumstances, such as age at onset of disability, num- Study of Social Security Benefits for Disabled People, ber of years of contributions, and eligibility for the monograph, 27 pages; questionnaire, 23 pages. earnings-related additional component. At age 65 for women and age 70 for men, the disability benefit au- Israel tomatically converts to an old-age pension. Dr. E. Chigier, Rehabilitation International Cross- Study of Social Security Benefits for Disabled People, monograph, 81 pages; questionnaire, 53 pages. Country Monographs Netherlands Copies of the individual country monographs and Tjeerd P.M. Hulsman, An Overview of the Dutch questionnaires are available to individuals in the Social Security System and the Major Social Insur- United States from Rehabilitation International, ance Programmes, combined monograph and ques- 25 East 21st Street, New York, NY 10010. The price tionnaire, 132 pages. is $5 for each set to cover costs. Sweden Austria Tor Eriksen, Rehabilitation International Cross- Johann Kaiser, Social Security Disability Benefit National Study of Social Security Benefits for Disa- Program: Austrian Monograph, monograph, 19 pages; bled People, monograph, 20 pages; questionnaire, 41 questionnaire, 82 pages. pages.

Canada United Kingdom Jack R. Sarney and Heather Ney, Rehabilitation In- Peter Mitchell, Rehabilitation International Cross- ternational Cross-Study of Social Security Benefits National Study of Social Security Benefits for Disa- for Disabled People-Canada, monograph, 30 pages; bled People, monograph, 22 pages; questionnaire, 42 questionnaire, 34 pages. pages.

Social Security Bulletin, September 1987/Vol. 50, No. 9 19 Appendix I.-Features of long-term disability pension programs, selected countries

Disability status Prescribed by percent of medical Converts to earnings capacity criteria old-age lost _ for diag- pension Contribution Recency of nostic automa- country pekd work Coverage Full Partial categories tically

Austria. Earnings Employer, 78 weeks or 240 months 60 months Employed, 19.5 50 No Age 65 related employee, until pension of last 120 certain self- self-employed, granted months employed and general workers, and revenue funds voluntary contributors

Canada..... Earnings Employer, 15 weeks (as % of total 5 years of Employed related employee, unemployment contributory last 10 years and 100 None Yes Age 65 self-employed, insurance) period self-employed and general revenue funds

Federal Earnings Employer, 84 weeks total 60 months of 36 months Employed, 100 50 No Age 65 Republic related employee, (1st 6 weeks covered within 5 self-em- of Germany self-employed, employer paid; employment years ployed, non- and general then, 78 weeks prior to workers who revenue funds cash sickness disability contribute, within 3 con- onset and others secutive years) designated by statute

Finland Earnings Employer-paid 1 year None 1-4 months, Employed 60 40 No Retirement related + premiums, depending on and self- age of the universal self-employed program employed particular program- ages 60-67

Israel. Earnings Employer, 90 days None None Employed, 75 50 Yes Age 60 for related employee, employer-paid self-em- women, self-employed, sick leave ployed; and age 65 for and general housewives, men revenue funds and disabled children under special pro- visions

Netherlands. Earnings Employer, 52 weeks Requires Currently Employed 80 15 No Age 65 related+ employee, currently insured status and unem- universal and general insured status at time of ployed revenue funds disability onset

Sweden. Earnings Employer, 90 days None None Employed 84 50 No Comple- related + self-employed, and self- tion of universal and general employed 30 years revenue funds of pension coverage

United Earnings Employer, 28 weeks total Contributions in Contributions Employed, 100 None No Age 65 for Kingdom related employee, (1st 8 weeks em- any tax year at at a specific insured self- women, self-employed, player paid; then, specific minimum minimum employed, age 70 for and general 20 weeks cash amount amount in and unem- men revenue funds sickness) year preced- ployed ing disability I onset

20 Social Security Bulletin, September 1987/Vol. 50, No. 9 Appendix II.-Pension program financing

Contributions as percent of covered earnings Government Country Employer Employee Self-employed contribution Benefits

Austria ...... 12.45 10.25 13.00 Any program Old-age, deficits disability, and death

Canada...... 1.80 1.80 3.60 ’ 85 percent Old-age, of total program disability, costs and death

Federal Republic of Germany...... 9.35 9.35 18.70 15 percent of Old-age, total program disability, costs and death

Finland ...... 11.50 None 2 11.20 None Old-age, disability, and death

Israel...... I5 .I5 1.50 Cost of income Disability support; cost for uninsured; 75 percent of cost for those disabled before 1970

Netherlands ...... 6.20 16.00 NA Any deficit; those disabled since childhood; exempted low- income persons

Sweden: Tier 1 ...... ’ 9.45 ’ None ’ 9.45 ’ 25 percent of Old-age, program costs disability, and death Tier 2 ...... 4 10.00 ’ None 4 10.00 ’ None

United Kingdom ...... 10.45 9.00 Flat rate 13 percent of Old-age, plus 6.30 total program disability, cost death, medical, cash sickness, maternity, work injury, and

‘Includes entire cost of universal old-age benefit and income- levels. tested benefit. ‘Contribution to universal benefit, Tier 1. ‘Rate can decline gradually to 4.48 percent for very low income ‘Contribution to earnings-related benefit, Tier 2.

4 Social Security Bulletin, September 1987/Vol. 50, No. 9 21