Do Residual Benefits Induce Disability Support Pension Leavers to Return to Income Support?

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This study looks at whether the residual benefits retained by former Disability Support Pension (DSP) recipients induce them to return to income support before the benefits expire. DSP recipients who leave the payment to work retain access to pensioner concession cards, including bulk-billing for doctors’ appointments and concessionary treatment for other health services, along with pharmaceutical benefits and access to valuable state government concessions for 12 months after leaving the DSP. They also enjoy an administratively ‘smoother’ return to the payment, if required, since their payment is only suspended rather than cancelled, for up to 24 months after leaving the DSP. This paper looks at whether former DSP recipients tend to return to the DSP just prior to the expiry of these benefits. It uses government administrative data on income support receipt, the Longitudinal Data Set (LDS), to assess whether there are any spikes in the rate of return to income support among DSP leavers just before the one and two-year anniversaries of their leaving the DSP. There are really two issues to consider in analysing this issue: whether any observed spike in returns is statistically significant and whether any observed spike is economically significant. Such a spike may be the former but not the latter. The economic significance of any such behaviour appears to be quite small. Administrative data suggest that about two-thirds of those who return to the DSP have done so within six months of leaving it, as do about half of those who return to another income support payment. If most people who return to income support do so well before the critical anniversaries of leaving the DSP, it seems unlikely that these thresholds can be economically important in inducing people to return to the DSP. There is no evidence of a statistically significant spike either. An analysis of the time people spend off benefits before returning to income support does not point to any spikes in the return rates just prior to the 12 or 24-month mark. Consequently, it seems unlikely that the existence of the residual benefits retained after DSP recipients leave the payment has a significant impact on whether people return to income support. Rather, real factors like the state of the labour market and the attachment of individuals to work, as evidenced by whether they were employed when initially on the DSP, are more influential in determining whether those who leave the DSP can remain off it. Other factors that influence whether those who leave the DSP remain off this or other forms of income support are noted below: •Individuals aged 55 to 64 when they originally commenced on the DSP were more likely to have returned to income support by June 2007, but to the age pension rather than the DSP. •Individuals aged 35 to 44 years when they originally commenced on the DSP originally were no more likely to have returned to welfare than younger workers, but those who did returned to the DSP rather than other payments. •Females, married people and those with non-labour income were more likely to return to income support other than the DSP. •Those living in remote areas were more likely to return to the DSP.