Professor Malcolm Harrington, the man appointed by the Government to review the Work Capability Assessment, told BBC's Panorama that as a result people who are genuinely unable to work will suffer.
Prof Harrington said: "There are certainly areas where it's still not working and I am sorry there are people going through a system which I think still needs improvement."
The programme, which airs on Monday night, features the story of one man who suffered from heart failure and died 39 days after being declared fit for work.
Stephen Hill was sent to his first Work Capability Assessment in 2010 when he gave up his job as a sandwich delivery man after being referred for tests on his heart. His wife Denise, who was with him at the assessment, said: "She checked him out. She did his blood pressure and his heart and said to see a doctor as soon as possible."
Despite the assessor telling Mr Hill to seek urgent medical advice, he was still found fit for work. In the meantime doctors had diagnosed him with heart failure. He won his appeal but he was ordered to attend another assessment.
The assessments are carried out by Atos Healthcare on behalf of the Department of Work and Pensions. According to the programme, two-and-a-half million people in the UK take the test because they are too ill to work. But more than 176,000 cases go to appeal tribunals each year, costing the taxpayer an additional £50 million.
"The Work Capability Assessment was introduced by the last government and we have made real efforts to improve it," said Minister for Employment Chris Grayling. "The reason why we reassess people who are on sickness benefits is that all the evidence is that a substantial proportion can return to some form of work.
"We have no financial targets for this. We simply believe that people who can work are better off being helped to do so, even if it can be a difficult and stressful process, rather than simply being abandoned on benefits for the rest of their lives. It's about saving lives, not saving money."
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