Labour accused the Department for Work and Pensions (DWP) of “rewarding failure” by Atos and Capita, which appear set to be paid more than £700 million for their five-year contracts.
This compares with an original estimate of £512 million for the contracts to carry out assessments for personal independence payments (PIP).
The DWP said the assessment process for PIP is key to supporting claimants, and it has to balance effective support for the most vulnerable with getting the best value for the taxpayer.
Analysis shows Atos and Capita have already been paid £578 million in relation to PIP since it launched in 2013.
These costs are spiralling out of control
This includes £257 million in 2016, the highest year so far, according to the department’s monthly spending data.
But the three original call-off contracts for this work totalled £512 million.
This figure was supposed to cover a five-year period, according to the original contract documents.
The contracts are due to run out in December.
With DWP having paid Atos and Capita an average of £19 million a month over the past two years, the companies are set to be paid in excess of £700 million by the time the contracts hit the five-year mark.
Shadow work and pensions secretary Debbie Abrahams said: “It is beyond belief that this Tory Government is rewarding failure.
“The PIP process is in disarray and these private companies are receiving huge payouts in a time of extreme austerity.
“It is clear that these costs are spiralling out of control.
“The Government needs to get an urgent grip on these extortionate payments to private companies, especially at a time when they are getting more and more assessments overturned in the courts.”
The payouts by DWP totalled £198 million in 2015, £91 million in 2014 and £7 million in 2013, the year PIP launched.
Figures released for January and February 2017 show the companies have been paid a further £25 million this year.
Atos won two of the three original tenders – a £206.7 million contract to carry out assessments in the North and Scotland, and a £183.9 million contract for London and the South.
The other £121.6 million contract for assessments in Central England and Wales was won by Capita.
More than 160,000 people initially denied PIP have had this decision overturned since the benefit launched in 2013, according to DWP figures, while Atos and Capita have been dogged by accusations of insensitive assessments.
A DWP spokesman said: “We are determined to provide claimants with the support that they need, and the effective assessment of people’s abilities is key to this.
“We routinely review our work to make sure that we focus our resources on the most viable options and deliver the most effective support for the most vulnerable in society, while also ensuring the best value for the taxpayer.”
A separate £59 million contract for PIP assessments in Northern Ireland is devolved to the Northern Ireland Executive and is not recorded in DWP data.
The original DWP contract tender suggested the four contracts would be worth between £480 million and £680 million.