Jean Black sits in the café at her local hospital, mulling over the two appointments she has had in the last week.

She's a cancer survivor. One appointment was about helping her with the twisted and inflamed gut that is a side-effect of the powerful chemotherapy drugs she's taken. Another was to schedule a booking for the next of her regular two-monthly series of mammograms to check that her aggressive form of breast cancer is not coming back.

Black finds the activities of everyday life a struggle. She likes to stay close to walls in case she loses her balance or collapses. When she gets up, she has to put her hands on the table to help her stand. Rather than write down a phone number, she asks people to text it to her it since she cannot use a pen. Her consultant, she says, told her she had been very unlucky in having been the victim of such a cascade of different side effects of her cancer treatment, including the muscle deterioration known as muscular myopathy that has left her disabled for the rest of her life. "I've had amazing treatment here," she says. "They treat you like a queen, you get thousands spent on you, and then you go down to the work-assessment centres and you are treated like crap."

Currently, Black is one of thousands of people caught up in the disability tribunal system – where people who have been refused disability benefits fight for the right to receive state payments and have to prove they are unfit for work. People like Black have all been through a work-capability assessment – a judging process which decides whether someone is fit for work or not and whether or not they should receive the Employment and Support Allowance (ESA), which replaced Incapacity Benefit.

The year 2010-11 saw more than 166,000 appeals against decisions made by Atos Healthcare, the French-based consulting company which carries out the assessment process for the Department of Work and Pensions. From April to August last year, there were almost 80,000 appeals, costing £19.1 million – some 40% were successful. But success at an appeal isn't all it seems. Many claimants are caught in a seemingly unending Kafkaesque cycle of appeal and assessment in which they succeed at tribunal, only to receive a letter almost immediately afterwards calling them for another round of assessments.

Black's story is a saga of waiting. A year ago, she was told that she should be able to go back to work in six months, and put in what is called the "work-related activity group", with a view to helping her back into the workplace.

Suffering dreadfully with the effects of her illness and treatment, she appealed and has been waiting for a full year for a tribunal date, during which time she has been called back for a muddled series assessments, and faces the prospect of losing her benefits if the process drags on much longer. Some would see Black as lucky, though. In all, 31 people who were declared fit for work have died in Scotland in the period between assessment and tribunal date.

"One of my consultants has said to me, Jean, you're never going back to work again," she says. "It broke my heart when I was told there was nothing they could do for my muscular myopathy. I had to go on anti-depressants after that."

For Black, a former hard-working administrative manager, the fact that she'll never work is a brutal truth. This is a woman who wants to work – even when she finished her radiotherapy, and still thought she could earn a living, she went out and bought two business suits intent on restarting her new life and getting back to work. Currently they remain unworn. "I suppose I might wear them for funerals," she says.

Her outrage with the assessment system is fuelled by its folly – how, she wants to know, can a woman whom doctors say can never work again be told to get back to work –and its cruelty. She and many others who have been through the system find it thoroughly demeaning. She recalls the humiliating process of being questioned by the assessment examiner. "I lie in bed at night," she says, "asking myself, did they really ask me if I soiled myself? How dare they ask that kind of thing? It scarred me. 'Can you wash your torso?' they ask. Such a ridiculous indicator of how you can take care of yourself. She even asked me if I could wash my hair. I said, 'Yes, I take it off and run it under the tap. I had cancer'."

The Clydebank Independent Resource Centre (CIRC), an organisation that has in recent years helped many claimants who believe they have wrongly been found fit for work, has passed the Sunday Herald the findings of a detailed report funded by Oxfam into the tribunals. It analyses the hundreds of individual cases who have come to them for help and accuses the current system of discrimination against disabled people in contravention of the Equality Act. The Department for Work and Pensions (DWP), the report charges, is failing its legal duty. Chair of CIRC, Danny McCafferty, describes how public perceptions of the levels of fraud have become inflated with disabled people frequently labelled as "scroungers", guilty of "benefit fraud". This, he says, is a distortion of the truth. "The government's own statistics suggest there is only a 1% level of incapacity-benefit fraud."

The CIRC is seeing some 69% of cases they take to appeal successfully overturning the tribunal decision. Citizens Advice Scotland reports the same level of success. This compares with an average 40% of cases being overturned, which proves, the CIRC says, that ordinary people fighting the system on their own are at a massive disadvantage. The CIRC dealt with the case of one man who died in the five months between being told he was fit for work by the assessment tribunal and the date of his appeal. He's just one of many such cases. The 59-year-old, referred to as Mr C, had a severe mental condition – he suffered from severe anxiety, depression and an eating disorder, as well as nerve damage, poor concentration and visual hallucinations. Even though the tribunals found him to have a "moderate" mental-health condition, he was deemed fit for work. Months later he was dead.

A CIRC adviser commented: "He may have seemed, during the examiner's brief meeting with him, to be able to cope with social interaction, self maintenance and his difficulties with mobility, but the examiner took no heed of the variability of either his mental health or physical condition. He was far from fit for work and we feel this stressful process contributed to his declining health and eventual death."

Many other disabled people say they are "spinning" constantly through a "revolving door" of assessment, tribunal and appeal. One woman the CIRC helped had severe epilepsy and twice went through the cycle of failure at assessment followed by success at appeal.

Another, a man with spinal-cord problems, mobility issues and heart problems, who had recently lost his wife to cancer, was told he was fit for work.

And despite the fact that one 35-year-old man had "moved discs" in his back and neck, was on strong pain killers, had wrist splints and was undergoing a series of MRI scans, he also failed the tribunal and was told to get back to work. In the report of his assessment the examiner noted he "stood independently for one minute without difficulty". Months later, at his appeal tribunal, the man was declared unfit for work and the judge stated he found the tribunal's decision "difficult to understand".

While the tribunal is universally condemned by the disabled, many are also losing faith in the appeals process. One woman failed at appeal, even though she was unable to hold a pen and was taking a total of five different prescription painkillers every day, including Tramadol.

The country is experiencing a deluge of appeals. Courts in some areas are having to hold sessions on Saturdays, which they have never done before, in order to cope with the backlog. Rutherglen and Hamilton West MP, Tom Greatrex, who says there is a large number of disabled constituents coming to him for help, has started chipping away at the issue in Westminster by tabling a series of parliamentary questions. What outrages him, apart from the human distress, is the financial cost of the system, which has been calculated at £40 million for last year and a projected £60 million for this year – and that's just in terms of the appeal system.

For the real cost, add in the £100m a year that Atos, the company carrying out the assessments, is paid for its contract. Greatrex describes the system for those caught up in it as "like a hamster wheel".

"People are waiting for about eight months for an appeal. They appeal, they win their appeal, and almost straight away they get their letter asking them to come to the next one," he says. This system, he says, "is not helping people into work, it's hounding people who can't work."

Greatrex cites one constituent, a Parkinson's disease sufferer, who has been through the cycle of assessment followed by successful appeal twice, in spite of the fact he has a degenerative condition which will never get better. The man, who worked as an engineer for 30 years, had been devastated by the fact his career was over.

Greatrex says that the system was almost goading this man. "Obviously," says Greatrex, "people with Parkinson's have good days and bad days, but you're not going to improve overall. So if you're not fit for work the first time, how the hell are you going to be fit for work the second time? Why is so much money being wasted on jumping through those hoops?"

One group particularly liable to fall between the cracks of the system is those with mental illness. Campaigners say only those with the most severe mental illness can get through the process. One man the Sunday Herald spoke to, Tom Chalmers, a former bank worker who has long-term depression and is currently awaiting his appeal, said "my examiner only really seemed to be interested in physical things, not the kind of problems I have".

The DWP, however, claims it has improved the system and officers a tailored, personal service. It also claims it is seeing an increase in the number of severely disabled people given long-term unconditional support. But it also admits that "it is clear there are still improvements we can make".

Many claimants say the examiners are not interested in their actual conditions, but rather just the tick-box questions of the test – which fails to look at the human being. As the CIRC report points out: "An investigation conducted by the DWP on claims from April to June 2009 found that more than half of ESA claimants felt the Atos examiner did not understand their condition well."

Most of those the Sunday Herald talked to backed that claim. Frequently, they complained that examiners ignored the literature they had taken along about their own conditions. As Jean Black says: "The problem was they took the GPs out of the equation. I can understand they thought that they were too close to their patients and wouldn't want to let them down. But they could have replaced that with other doctors performing a similar role."

Until that changes, it's unlikely that the appeals will stop. The hamster wheel will keep spinning.