Beware of ACCidents

The fine print of proposed changes to the compensation system offered by ACC reveals a leaner, tougher regime. Photo / Northern Advocate

There's message in the war of words over ACC - and it should have more deterrence value than any of its shock-horror road crash and DIY disaster ads: be very afraid of having an accident in the next few years. Especially if your injury is long-term and you are a mature worker on a decent wage.

For all the hype about the financial health of the state-owned accident insurance scheme - making another round of levy rises apparently inevitable - it's the ability to get appropriate treatment and earnings compensation from ACC that could hurt most.

This week's announcements about ACC have focused attention on big levy rises for moped riders and the removal of compensation for self-harm. But the devil is in the detail of planned legislation and other changes which will reduce the scope of ACC coverage and see it take a tougher stance with those unlucky enough to be injured.

Some believe the cornerstone principles of complete rehabilitation and fair compensation are at risk. Who can blame them when chairman John Judge puts out press releases claiming "the continued existence of the scheme is under threat... "

Or: "Failure is a very real prospect if we don't put in place a series of actions that will result in funding to cover our liabilities."

ACC is already taking a tougher line - there's anecdotal evidence of more claimants being turned down for elective surgery because their injury is assessed as "gradual process", degenerative or age-related, not the result of a one-off accident. Those with shoulder injuries in particular have found it more difficult to get surgery. An ACC spokesman confirms more people are being turned down - but he says ACC is still approving more surgery than ever.

The Government's planned law change - a draft was handed to the media after the proposed levy increases were announced - points to more pain to come. Under the political changes:

* Those receiving compensation for more than 12 months can be forced back to work if they are deemed capable of working 30 hours, rather than the current threshold of 35 hours.

* Job assessors will no longer be required to take into account the claimant's pre-injury earnings when offering alternative jobs. This signals a return to the days when highly-paid professionals who could not resume their careers could be made to work as carpark attendants.

* Weekly compensation for part-time and casual workers off work for more than four weeks will be an average of their income over the past year, not what they were earning at the time of injury. This reverses a change introduced by the last Labour Government.

* A 6 per cent threshold is introduced for those suffering injury-related hearing loss. One estimate says this will deny compensation to 3000 people.

* Those paid below the minimum wage will have to wait until the sixth week of incapacity, instead of the third, to have their compensation raised to the minimum weekly earnings rate.

Non-legislative changes planned by ACC include:

* A clampdown on MRI scans and other high-tech imaging.

* Increased scrutiny of recommendations for surgery.

* Contracting out the management of "vocational rehabilitation" efforts to get long-term (longer than 12 months) claimants back into work.

ACC chairman Judge has disclosed other "tough love" measures already under way, including:

* being tougher on the extent and duration of ACC support

* encouraging more personal responsibility for getting back to work.

These measures aim to trim $2 billion off ACC's estimate of its long-term liabilities bill - an estimate which skyrocketed from $18 billion to $23.8 billion during the financial year.

There's huge debate about the validity of the long-term liabilities estimate and how much it really matters. Experts argue a return to good investment returns and other economic changes will quickly close the gap between ACC's reserves portfolio - currently $10.6 billion - and potential liabilities. The liabilities estimate is linked to assumptions about conditions and trends which have worsened in the past year and could just as quickly ease. And it is an estimate of the lifetime costs of claims - money that won't need to be paid for decades, if at all.

Engineers Union national secretary Andrew Little points out that ACC's income from levies last year exceeded its payments by $1 billion. He says all that was needed was a small increase in levies to cover the increasing cost of medical care. "It's simply not necessary to have enough to meet all liabilities in one year alone."

But there's no dispute that ACC is facing spiralling costs from unavoidable forces - including a growing and ageing workforce, medical advances which keep seriously injured people alive longer and the increasing cost of treatment - for which it's prudent to make allowance.

Dramatic rises in bills in areas such as physiotherapy, MRI scans and surgery in the last few years suggest a case for better gatekeeping. Spending on rehabilitation including hospital treatment and assistance at home increased by nearly 12 per cent last year.

Some argue ACC's balance sheet has worsened because levy increases were pegged below what was needed for several years.

But we've been here before with ACC - it is vulnerable not only to economic fluctuations but to political whims. With the get tough regime already kicking in and law changes and levy rises to come, ACC could soon put its financial crisis behind it. But at what cost to the injured?

Most people will notice little change - they have only fleeting encounters with ACC after an accident. Of 1.75 million claims registered in 2008/2009, less than 10 per cent needed more than a doctor's visit, a couple of days off work and perhaps half a dozen sessions of physio. Only 4 per cent went on to weekly compensation.

What worries the ACC board and the Government is the spiralling costs of long-term claims - people who continue to receive compensation after one year.

It's the long-termers who are most in ACC's sights (see accompanying story).

The clampdown on entitlements and ACC signals that levies must continue to rise combine to pose questions: are we approaching the point where the scheme is such a departure from its original principles - of full rehabilitation from injury so you can return to work or compensation at 80 per cent of previous income - that we are better off paying a private insurer? Should experienced, highly paid professionals be required to retrain in poorly paid jobs and lose their compensation.?

ACC Minister Nick Smith and chairman Judge say they remain committed to the founding principles of scheme architect Sir Owen Woodhouse and that the changes flagged this week should secure the long-term future of ACC.

Smith told a news conference he hoped the changes would be a "one-off substantive fix" and only "tinkering" would be needed in future. Even Judge - appointed by Smith after a board cleanout in March - said he was satisfied that the increased levies and entitlement cuts were enough. A week earlier he warned that the liabilities problem was of such magnitude it would take about 10 years to recover.

But critics are far from convinced that we have seen the extent of the changes. A panel headed by former Labour cabinet minister David Caygill is undertaking a "stocktake" of ACC's fundamentals, including what's driving the increases in costs for rehab and treatment, alternative options for service provision and funding, the potential for experience rating and management of risks. The panel will make a preliminary report in February and final recommendations in June next year.

If what's been outlined to date is enough, why such hyperbole around the state of ACC's finances, asks David Wadsworth, who heads Access Support Services, which represents ACC claimants.

"I think there's other things at play," says Wadsworth. "I'm not a privatising ACC conspiracy theorist but I wonder how much of this is easing the way to enable private insurers to have a good bite at the work account ..."

That's certainly what the Act Party wants, and National needs its support to push the legislative changes through Parliament.

For now, Wadsworth is more concerned about the axing of the requirement to take into account pre-injury income when planning rehabilitation into other types of work. Coupled with the change which treats 30 hours a week as full-time work, this will make it much easier for ACC and private case managers to exit claimants from the scheme.

He fears a return to the late 1990s when a harsh work capacity assessment process forced thousands of skilled workers to re-train and accept comparatively menial, low-paid jobs.

For example, he says a builder earning $60,000 whose back is worn out after 30 years in the job could be put through a short computer course and determine they could work 30 hours a week as a sales assistant on $12.50 an hour.

"It's really just a manufactured outcome that allows them to exit clients en masse as they did in the 1990s. It creates a hostile situation which claimants can't really buy into."

ACC has never been that good at getting long-term clients back to work, a process known as vocational rehabilitation. A survey of 144 rehabilitation plans in June 2008 found only 38 per cent of the plans met ACC's own standards.

"They don't provide the comprehensive rehabilitation that [long-term] clients need," says Wadsworth.

Lawyer Hazel Armstrong, who represents hundreds of clients in appeals on ACC decisions, says there's too much reliance on the opinion of a single physician to determine whether the claimant is fit to perform certain occupations. Armstrong chairs a ministerial advisory panel on work injury issues and in 2006 co-led a survey for the Department of Labour on the outcomes for 160 claimants who had challenged ACC's decision to make them vocationally independent. She found 59 per cent experienced an income loss, only a third obtained full-time work and many simply shifted from weekly compensation to Winz benefits.

"Respondents reported assessment experiences that ranged from the unrealistic to the absurd," she wrote in the New Zealand Law Review.

Armstrong believes some changes depart significantly from the Woodhouse principles, especially the introduction of a threshold level for hearing loss treatment and the removal of the requirement to pay heed to previous income in vocational rehabilitation.

"When we gave up the right to sue, the trade-off was complete rehabilitation and a return to your pre-injury employment or you received weekly compensation at 80 per cent of your earnings.

"When you shift the boundary on rehabilitation you are drawing a line in the sand. "I argue they should take into account pre-injury earnings and give you more rehabilitation, not deem you fit to become a carpark attendant when you are a journalist."

She sees an even bigger threat in the introduction of threshold levels before injuries qualify for treatment.

"It's the first time that I'm aware of that they've introduced a threshold of seriousness before you get cover.

"Another way of reducing the liability would be to take all minor injuries out of the scheme.

"Maybe bigger things are being contemplated here."

REVEALED: STRATEGY TO TARGET 1500 CLAIMANTS

An ACC strategy document for the future management of long-term claims, obtained by Access Support Services under the Official Information Act, reveals ACCs concern about 12,000 claimants on long-term weekly compensation who could potentially return to the workforce, or "independence".

The February paper warned that numbers had been growing at 5 per cent a year and that this could have a potential $1 billion impact on its long-term liabilities by June this year. The average age of long-term clients - those on the scheme for longer than 12 months - was 52. After five years, they were counted as likely to remain on the scheme until retirement.

"The potential therefore for the greatest reduction in the liability comes from achieving exits from the scheme of those claims of 5+ years. In order to stem the flow of claims moving into the five-year-plus category, work from the three-year duration mark is considered likely to have the most effect."

It argued that ACC management of long-term claims was fragmented and inconsistent and that frontline staff were too swamped by new claims to focus on more complex cases. It suggested a team of 67 case managers be employed to target this group, particularly higher income earners. It talked of the need for a culture change among staff to deal with "non-compliant behaviours by clients" and to enhance clients' personal responsibility.

"There has been a shift in the ideological basis of ACC ... there appears to be now a stronger tolerance to dealing with non-compliant behaviour and increasing personal responsibility by clients."

It predicted savings of $900 million to $1.4 billion within four years if each case manager could return between 12 and 20 claimants a year (800 to 1340) to independence.

But rather than hire and train the additional staff, ACC opted to outsource the project. It is negotiating with four private rehabilitation firms who will target an initial group of 1500.

THE NUMBERS

* ACC received $4.1 billion in levies in the 2008-09 financial year, about $430 million more than it expected to earn and $530 million more than in the previous year.

* It paid out $3.06 billion in compensation and rehabilitation, $335 million more than in the previous year but $30 million less than estimated. There was a surplus of $1.12 billion on earnings over expenditure.

* 1.75 million new claims were registered in 2008-09, slightly down on the previous year.

* ACC's investments earned $358.5 million, after a $1.6 million loss in 2007-08.

* ACC's reserves grew in value by 10 per cent, from $9.6 billion to $10.6 billion, by June 30, 2009.

* Nevertheless, ACC posted a $4.8 billion 'deficit' after revising upwards its estimate of outstanding liability of claims arising during the year from $2.6 billion in 2007-08 to $5.8 billion.

* The estimate was raised even though ACC received fewer claims overall and approved fewer weekly compensation payouts.

* However, the cost of rehabilitation and compensation payments rose 12.2 per cent to $3.06 billion.

* ACC's estimated total outstanding claims liability increased from $18 billion to $23.7 billion.