The coalition government has suffered three defeats in the House of Lords over planned cuts to employment and support allowance (ESA).
The government wants to remove the so-called "youth provision" that allows some young people to receive contributory ESA even though - due to disability or illness - they have not been able to work and build up National Insurance.
Liberal Democrat Baroness Meacher was among several peers to oppose the plans, arguing that the move would condemn young disabled children to a lifetime of means tested benefits.
Peers voted by 260 to 216, majority 44, to ensure disabled children who are unable to work can still receive the benefit, during day three of report stage of the Welfare Reform Bill on 11 January 2012.
Labour shadow welfare minister Lord McKenzie of Luton supported the amendment, telling peers the policy seemed "particularly spiteful".
But Welfare Minister Lord Freud maintained it was unfair for a young person to continue to get a contributory benefit without having "paid in" - even if they were to inherit a lot of money.
He estimated that 90% of those affected by the change would still get the income-related part of ESA.
The second defeat in the Lords came over plans to impose a one year time-limit on cancer patients claiming ESA.
Peers agreed to crossbench peer Lord Patel's move to replace the cap with the ability for the government to introduce secondary legislation specifying a limit of not less than two years.
Lord Patel said he understood the need to cut the deficit but added that he was "highly sympathetic to sick and vulnerable people not being subjected to something that will make their lives even more miserable".
He claimed some people faced losing up to £94 a week as a result of the government's plans.
Labour supported the idea of a cap but argued it should be sufficient enough to allow people to overcome their illness or disability in order to be able to work.
Welfare minister Lord Freud maintained the policy struck the right balance between restricting access to contributory benefits and allowing those with long-term illnesses to adjust to their condition.
The amendment was passed by 234 votes to 186, a majority of 48.
Peers then passed another of Lord Patel's amendments, this time to remove the time limit altogether for people while they were undergoing treatment for cancer, by 222 votes to 166 - majority 56.
Ministers may seek to overturn the decisions when the bill returns to the House of Commons.
This is not the first time the coalition has suffered a defeat in the upper chamber over its welfare reform plans.
Last December peers altered a cut to housing benefit for social tenants under-occupying their homes.