  This paper investigates the effects of introducing external medical review
for disability insurance (DI) in a system relying on treating physician
testimony for eligibility determination. Using a unique policy change and
administrative data from Switzerland, I show that medical review reduces DI
incidence by 23%. Incidence reductions are closely tied to
difficult-to-diagnose conditions, suggesting inaccurate assessments by treating
physicians. Due to a partial benefit system, reductions in full benefit awards
are partly offset by increases in partial benefits. More intense screening also
increases labor market participation. Existing benefit recipients are
downgraded and lose part of their benefit income when scheduled medical reviews
occur. Back-of-the-envelope calculations indicate that external medical review
is highly cost-effective. Under additional assumptions, the results provide a
lower bound of the effect on the false positive award error rate.

General Economics;Economics