A shake-up of the benefits system which could see one million sick or disabled people being helped into employment could save up to £7bn each year.
There are 2.7m people claiming incapacity benefit
The plans will end incapacity benefit and pave the way for an employment and support allowance from 2008.
Claimants assessed as able to work would have to receive help to get jobs.
Anyone refusing to take part would have their benefits cut, but the most severely disabled would be exempt and entitled to receive more money.
Ministers insist there has been widespread consultation on the reforms but one critic branded the proposals a "deeply flawed package".
Age Concern's Gordon Lishman said: "It will do nothing for millions of people already out of work and risks doing little for the hundreds of thousands who will apply for the new benefit after their 50th birthday.
"We agree with supporting people to get back to work, but the evidence shows that existing pilots are not working for people over 50."
Bert Massie, chairman of the Disability Rights Commission, said ministers needed to do their bit to encourage employers to do their bit.
"Three out of five employers say they wouldn't employ someone with a mental health problem," he said.
Work and Pensions Secretary John Hutton, who published the bill on Tuesday, has argued that the current system perpetuates hardship because deprived areas tend to have a high number of claimants.
Mr Hutton said: "We are going to expect more from people who come on to the new allowance and we will provide them with more help and support and I think that is the right way to take things forward.
"We are certainly putting more resources into providing more mental health treatment and therapy for people who cite this as a reason why they cannot work."
Mr Hutton said the reforms were intended to help millions of people get their first opportunity to return to the labour market.
He said that measures put in place by the government were acknowledged around the world as some of the most effective in helping to get people off incapacity benefit and back into work.
Mr Hutton said: "About 90% of people coming on to incapacity benefit say they actually want to work again, they can work again. We have got to help them do that."
Responding to concerns over the assessment process, Mr Hutton said people had to be treated fairly and added that expert groups had been used to get the new process right.
About 2.7m people currently claim incapacity benefit, resulting in an annual bill of £12.5bn.
For those deemed able to work, there will be support provided by a network of specialist advisers based in job centres across the UK. They would offer counselling, training and advice.
Arthritis Care chief executive Neil Betteridge said the government had so far failed to consult on how to train staff to assess claims.
"It is an incredibly difficult job to be an assessor and to determine whether somebody is able to work or not," he told BBC News.
And Marjorie Wallace, chief executive of mental health charity Sane, praised measures which give greater recognition to conditions such as anxiety and depression.
But she said the tougher tactics being taken could be counter-productive.
"The stronger sanctions imposed on those who "fail to co-operate" with the support interviews may create a sense of threat which could trigger individuals living on a fragile balance into relapse."