TALLINN, 4 November 2010 - The National Audit Office found in its recently completed audit that the current system for supporting disabled people and persons receiving pension for incapacity for work does not function reasonably – it does not guarantee comprehensive assistance that reaches those who actually need it. The state, however, spends more than three billion kroons per year on disability benefits and pensions for incapacity for work.

The National Audit Office finds that the main shortcomings in the system for supporting disabled people are the state’s inability to assess the additional expenses arising from the disabilities of people from all angles, which means that actual assistance in the form of medicines and technical aids remains unavailable for some when support is paid.

Support is not paid for expenses already incurred but as cover for additional expenses disabled people are anticipated to incur, which means that people may use the money for other purposes than the ones intended by the state. For example, people may spend the money on other necessities instead of medicines or technical aids.

It is understandable that assessment of the additional expenses arising from a disability is difficult for the state, as the state of health and needs of people are vastly different. The additional expenses incurred by different people may relate to special transport, various technical aids, personal assistance and monitoring, and many other needs. Additional expenses may often arise from combinations of various needs. It is not easy to say how much assistance the state should offer and how it should do so. The pressure on determining the severity of a disability and receiving benefits for the purposes of subsistence is excessively high.

The National Audit Office investigated whether or not disabled people had bought prescription medicines and technical aids. Particular attention was paid to working-age people, as the existence of various additional expenses is assessed in their case. The National Audit Office assumed that a more accurate system for identifying additional expenses also guarantees that people actually incur the expenses they are supposed to incur.

However, the audit indicated that almost one-third of working-age people one of whose additional expenses was assumed to be the expense of medicines had not bought any prescription medicine in almost a year. Only 15.4% of the disabled people one of whose additional expenses arising from their disability was assumed to be the expense of acquisition or use of a technical aid had actually purchased technical aids.

As disabled people do spend more on medicines and technical aids, the National Audit Office advised the Minister of Social Affairs to change the system for compensation of medicines and technical aids in such a manner that the state would allow disabled people to buy the medicines and technical aids they need at lower prices. The National Audit Office also advised the Minister of Social Affairs to analyse the system for supporting other age groups (children and old-age pensioners) and compensating other additional expenses, and to consider terminating payment of monthly support for anticipated additional expenses to disabled people.

There are currently 120,000 disabled people (incl. children) in Estonia. The number of disabled people has increased 38% in the last nine years. The state’s expenditure on supporting disabled people has also increased: 716 million was spend on all social welfare benefits paid to disabled people in 2009 whilst the amount spent on these benefits a year before was 662 million. The number of disabled children has remained stable over the years. The number of disabled people has increased on account of retirement-age people and it will increase further due to our aging population and the increase in the share of elderly people. The methods used to determine disabilities also promote an increase in the number of elderly recipients of social welfare benefits, as it is highly likely that all people aged 65 and over could be deemed to have a moderate disability according to them.

Auditor General Mihkel Oviir said: “We have to consider whether continuing to pay these tiny benefits, which are often not used for their actual purpose or the expenses relating to a disability is reasonable or whether we should use this money, which is a very large amount in total, for the provision of services needed by disabled people nationwide."

In the opinion of the National Audit Office the main shortcoming in the system for supporting persons receiving pension for incapacity for work is that the system does not motivate people who have lost the capacity for work to return to the labour market, as they are not offered any rehabilitating labour and health services, and the state assesses a person's incapacity for work rather than their capacity to do different work or learn a new trade. The state also pays the pension for incapacity for work to people whose income is not small and who can successfully support themselves with work.

The audit conducted by the National Audit Office indicated that 60% of all persons receiving pension for incapacity for work did not earn any other income at the same time – the state was basically supporting them. Only 35% of all persons receiving pension for incapacity for work who had lost part of their capacity for work (40-90%) were earning wages. 5% of people who had fully lost their capacity for work had earned income at the same time.

The National Audit Office applauds the fact that 40% of persons receiving pension for incapacity for work were earning income at the time when they were receiving the pension. Earning income is natural in the event of partial loss of the capacity for work, because the pension for incapacity for work should compensate the person for the income they do not earn as a result of the loss of capacity for work. Even though the income earned by the majority of persons receiving pension for incapacity for work who were also earning income was small, usually around a couple of thousands of kroons, the earnings of 10% of such people increased the average in Estonia. The highest salary (gross) earned by a person during the time they were receiving pension for incapacity for work in the first 11 months of 2009 was slightly over one million kroons.

The National Audit Office advised the Minister of Social Affairs to change the system for assessment of permanent incapacity for work in such a manner that the person’s capacity for work rather than the loss thereof is assessed first and foremost. Without abandoning the principle that as many persons receiving pension for incapacity for work as possible could be working, the National Audit Office believes that payment of the pension for incapacity for work should be tied to the income earned by the person at the same time. It requires the establishment of the maximum income a person can earn without losing the right to their pension for incapacity for work. The state should also create a work-related rehabilitation programme, which would give people the opportunity to retrain and create the preconditions for their return to the labour market.

The National Audit Office is pleased that the Minister of Social Affairs has promised to review the process of determining permanent incapacity for work in the next few years and to change it in such a manner that a person's capacity for work is assessed instead of their incapacity for work. The Minister also promised to assess the conditions under which people receive pension for incapacity for work.

The number of people who have lost their capacity for work has increased from approximately 44,000 people (in 2001) to approximately 78,000 people (in 2010) or 75% and they now comprise 5,7% of the population. The state’s expenditure has also increased: the amount spent on persons receiving pension for incapacity for work in 2000 was 663 million, but it had increased to 2.5 billion kroons in 2009.

In the course of its audit the National Audit Office assessed whether the system for supporting disabled people and persons receiving pension for incapacity for work is economical and guarantees that support is only given to the people whose additional expenses arising from a disability need to be covered or who are unable to work for a living.
Background of the system

The system used since October 2008 stipulates that disability is ascertained and support is granted on the basis of whether the person is a child or an old-age pension, or a working-age person. The amount of the support granted to working-age persons is determined on the basis of the additional expenses arising for their disability, which are identified in the course of the expert assessment where the person’s disability is determined. The larger the person’s anticipated additional expenses, the bigger the amount of support paid to them. The maximum amount of monthly support is 840 kroons. The amount of support paid to disabled retirement-age people depends on the severity of their disability and remains between 200 to 640 kroons. The amount of the additional expenses arising from a disability is not determined for determination of the amount of support.

Permanent incapacity for work is a condition where a person has lost the capacity for work fully or partially due to a permanent health disorder and cannot earn a living by working, or by working in the same extent as before. The loss of capacity for work is determined in the course of an expert assessment of permanent incapacity for work. It may be determined that a person has lost 0 to 100% of their capacity for work. The right to receive pension for incapacity for work emerges when 40% of the capacity for work is lost, and the amount of the pension depends on the extent of the loss of capacity for work, the amount of social tax paid, the person’s age and pension qualifying period, and the purpose of the pension is to compensate the person for the income lost due to incapacity for work. Pension for incapacity for work has increased since 2004. The average pension for incapacity for work (40 to 100% of capacity lost) in 2009 was 2703 kroons.

Toomas Mattson
Head of Communication Service
National Audit Office
Telephone: +372 640 0777
Mobile: +372 51 34 900
E-mail: [email protected]

• Posted: 11/4/2010 9:16 AM
• Last Update: 8/21/2015 2:00 PM
• Last Review: 8/21/2015 2:00 PM