Does Stricter Disability Screening Lead to Improved Targeting on Long-term Health and Employment Outcomes?

While evidence points at potentially strong effects of stricter screening and tightening eligibility criteria for Disability Insurance (DI), little is known about their targeting effects: are screened-out workers also those with better future health and more ability to work? To shed light on this, we employ Regression-Discontinuity-in-Time regressions that compare the long-term outcomes of DI application cohorts just before and after a reform in the Netherlands. The reform led to stricter screening in the sickness period before DI application and reduced the number of applicants by 33\%. Up to 18 years after application, we find persistently lower survival rates and lower employment rates of post-reform cohorts. Using detailed information on the future chronic diseases of these cohorts and the application diagnoses, we next construct indices capturing long-term expected survival (a “Survival Health Index†, SHI) and long-term employment prospects (a “Work Ability Index†, WAI) for DI applicant cohorts in the years following application. These indices allow us to assess whether the reform primarily deterred applicants with health-related disabilities, work-related disabilities, or both. We find that the self-screening induced by the reform was stronger for applicants with work disabilities (low WAI scores compared to their SHI scores) than for health disabilities (low SHI scores compared to their WAI scores). This is largely due to a decline in applications of workers with mental and musculoskeletal health conditions that have high survival rates, but lower employment rates.