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The Impact of Private Participation on Disability Costs: Evidence from Chile
by Estelle James, Alejandra Cox Edwards and Augusto Iglesias Palau
WP 2007-161
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- The public disability insurance system in Chile differs from the traditional one in that it is largely pre-funded and the disability assessment procedure includes participation by private pension funds and insurance companies, who finance the benefit and have an interest in controlling costs.
- We hypothesize that these procedures and incentives will keep system costs low, by cutting the incidence of successful disability claims.
- Disability hazard rates are only 20-35% as high in the new system as in the old. Mortality rates among disabled pensioners suggest that the new system has accurately targeted those with more severe medical problems.
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