The Canada Pension Plan Phase II Evaluation - CPP Disability Benefits - Their Effectiveness and Importance to Persons with Disabilities - September 1996

The Canada Pension Plan Phase II Evaluation - CPP Disability Benefits - Their Effectiveness and Importance to Persons with Disabilities

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• Introduction
• What was evaluated
• Highlights and Conclusions
• Background on CPP
• Methodology of Evaluation

Human Resources Development Canada (HRDC) is evaluating aspects of the Canada Pension Plan (CPP). The CPP is funded by compulsory contributions from wage earners. When they retire, become disabled or die, the CPP provides these workers and their families with a basic level of earnings. CPP is available to workers throughout Canada, except in Quebec, which has a program of its own — the Quebec Pension Plan (QPP). In September, 1996, an evaluation of the importance and effectiveness of the CPP disability pension was completed. This summary highlights the key findings.

The evaluation looked at several aspects of the CPP disability benefits program:

• the importance of the benefits to the incomes of persons with disabilities;
• the continuing need for a CPP disability pension;
• the reasons for recent caseload increases;
• consistency in the application of eligibility criteria and adjudication processes;
• the potential role for rehabilitation and re-assessment;
• insights from past program experience; and
• comparison with similar programs operated by Canada's major trading partners.

• The CPP disability pension is an important source of income for persons with disabilities.

CPP disability beneficiaries who were surveyed said the benefits made up 52% of their total annual incomes in 1994. In 1995, CPP disability benefits for single individuals would have had a maximum earnings replacement value of 29% (gross) and 43% (net) measured against the year's maximum pensionable earnings (or the average industrial wage). This exceeds the 1964 White Paper earnings replacement target of 25%.

• CPP disability beneficiaries often draw benefits from multiple sources; some stakeholders believe there are costly inefficiencies in the way programs interact, and they say there is a lack of interprovincial equity in the earnings replacement system.

Duplications and overlaps in public and private programs suggest there is a need to co-ordinate and harmonize CPP disability and complementary programs; e.g., by negotiating agreements with the provinces to create "single payer" arrangements, as in Quebec.

• The rise in CPP disability caseloads, especially from 1991 to 1994, was primarily due to economic fluctuations, expanded eligibility due to legislative changes, and referrals from provincial social assistance and private disability insurance plans.

The extent to which disability pensions may have been awarded to persons with mild or moderate disabilities for economic reasons, and as a 'bridge' to retirement, could not be determined from available data. Rapid increases in CPP disability caseloads in the early 1990s ended in 1993-94; caseloads growth is now dropping.

While the QPP Disability Program has a proportionately lower disability caseload, a higher percentage of persons with disabilities are receiving social assistance in Quebec than in other provinces.

• The administration of the CPP Disability Program has been relatively constant in its adjudication of applications for benefits.

The program has established new adjudication guidelines, undertaken reviews of the program's administrative decision-making, and launched initiatives in re-assessment and rehabilitation. There have also been changes to work incentives to facilitate workforce re-entry. CPP disability adjudication is less rigid and allows more scope for discretionary judgement than in some other countries, and under the QPP.

History indicates that more people, especially women, have been eligible for CPP disability than for QPP disability. Eligibility for CPP disability benefits was expanded in 1987 when Bill C-116 reduced the required number of years of contribution, and again in 1992, when Bill C-57 allowed for retroactive application for benefits. Until 1993, QPP disability applied stricter eligibility and adjudication criteria than CPP disability, and focused more on pre-retirement "bridging" by encouraging applications from 60-64-year-olds.

• Overall quality assurance in adjudication could be improved by the introduction of new guidelines/tools to improve administrative efficiency.

Modifications might include the development of baseline occupational demands, a structured scoring system to match claimants' residual capacities to specific occupational demands, and, greater use of independent medical examiners. The program might consider comprehensive, ongoing reviews of case/file information to aid in the adjudication process across regions.

• There is potential for significantly expanded rehabilitation efforts within the CPP.

CPP disability dedicates few resources to rehabilitation efforts despite the increase in younger beneficiaries. The 1995 Statistics Canada survey of CPP disability beneficiaries indicated that a significant proportion (about 10%) may have the potential for vocational rehabilitation and return to the workforce.

The National Vocational Rehabilitation Project successfully demonstrated that a permanent rehabilitation function within CPP would be practical, cost-effective and beneficial to society.

CPP rehabilitation services should be provided in partnership with other service providers where feasible.

• A significant expansion of reassessment efforts has considerable potential for ensuring that those who are capable once again take up gainful employment.

Since 1993, a special project has focused on assessing beneficiaries with a high potential for gainful employment. Expanded re-assessment and rehabilitation efforts would reduce program costs, ensure more efficient delivery of benefits, and produce positive outcomes for beneficiaries.

• International competitiveness goals are served by the fact that the CPP disability component is similar to programs operated by Canada's other trading partners.

CPP disability was compared to the programs of a number of Canada's major trading partners, including Australia, the Netherlands, Germany, New Zealand, Sweden, the United Kingdom, and the United States. It was concluded that the current CPP disability caseload is no higher than current caseloads in similar programs in these other countries. As well, CPP disability benefits are somewhat less generous than those in the US, Germany, the Netherlands and Sweden, and about the same as in the other countries.

The problems faced by the CPP Disability Program were similar to those facing comparable programs operated by Canada's major trading partners, and these problems have prompted extensive program reform in those countries.

• There is a continuing need for a CPP disability pension administered by the federal government.

The CPP disability pension provides virtually universal coverage to employees and the self-employed, and minimum protection for those who might not be able to afford private coverage. Stakeholders support the program and the federal administrative role. The number of recipients increased from about 90,000 in 1981 to approximately 300,000 in 1995.

The CPP Disability Program was created in 1966 as part of the Canada Pension Plan (CPP), which also includes a retirement pension and survivor benefits. The Disability Program provides protection against loss of earnings for claimants whose physical or mental disability is severe and prolonged; who are unable to work on a regular basis; and who have made contributions to CPP for at least two of the past three years, or five of the last ten years. There is also a CPP child benefit payable to the children of a disabled beneficiary. The CPP Disability Program has become one of the major sources of income for persons with disabilities in Canada.

The CPP Disability Program operates throughout Canada except in Quebec, where the Régie des Rentes du Québec runs the Quebec Pension Plan Disability Program.

Other public and private programs provide complementary benefits for persons with disabilities, including Workers' Compensation Boards, Provincial/Territorial Social Assistance, private long-term disability insurance and auto accident insurance. Persons with disabilities may receive benefits from more than one source.

The CPP disability benefits program pays out close to $3 billion annually to approximately 300,000 beneficiaries who receive an average of $250 a month.

The evaluation tapped several sources of information, including a 1995 Statistics Canada survey of CPP disability beneficiaries, estimation of earnings replacement rates, statistical studies and interviews with key stakeholder groups, including provincial social assistance departments, private insurers, Workers Compensation Boards, organizations representing employer and employee groups and persons with disabilities; officers of the Departments of Human Resources Development Canada and Finance.