Govt admits: We're looking at ACC fee

John Judge (L) and Nick Smith. Photo / Mark Mitchell

The Government has confirmed that accident victims may have to pay the first $50 or $100 of their costs.

The move is under consideration as part of a second round of changes to the accident compensation scheme next year.

Accident Compensation Corporation chairman John Judge says requiring victims to pay an insurance-style "excess" of $50 or $100 for each claim would cut ACC costs by about $1.6 billion over the next 10 years, reducing the need for further levy increases.

ACC Minister Nick Smith said he had been briefed on the proposal, but no decision would be made on it until a wide-ranging "stocktake" of the scheme, led by former Labour Finance Minister David Caygill, was completed next July.

"It's true that there is a very large transaction cost in ACC, with more than 1 million claims a year," he said.

"The concept [of a $50 or $100 excess] would need to be carefully balanced with regard to low income earners for whom a $50 or $100 excess might prevent them getting medical attention."

Mr Judge, an Auckland accountant appointed to the ACC board by Dr Smith in March to address "serious funding issues", said the board had asked management to report on the main factors driving up costs and on what could be done about them.

Dr Smith announced some changes last week.

These included raising levies and requiring accident victims to go back to work as soon as they were capable of any work, even if that meant they earned much less than before their accidents.

But Mr Judge said Mr Caygill's stocktake would consider other changes that could not be decided on so quickly.

"What we have gone out with for consultation [last week] is changes that would make the scheme fully funded in 10 years," he said.

"If in the end people don't want to pay levies at that high a level, then we are going to have to do something else."

Other options for next year included reducing compensation from 80 per cent of pre-accident income to 70 per cent after one year and 60 per cent after two years, ending compensation for soft-tissue injuries, such as back pain, after two years, and giving ACC investigators wider surveillance powers to detect fraud.

All these options had been adopted in other schemes in the Australian states and Canada, but only the $50 or $100 excess had been costed for the New Zealand scheme.

Dr Smith said the principle of paying 80 per cent of pre-accident income could not be changed lightly, because it went back to the 1974 "social contract" in which injured employees gave up the right to sue negligent employers in return for "real compensation".

"The real hard bit of it is that there are some accident victims who are severely hurt, and for whom there is no realistic prospect of returning to work, for whom it would seem rather harsh to be cutting the income back from 80 per cent of their pre-accident earnings," he said.

"There is another group who should be going back to work, for whom it would provide an incentive.

"We'd need to examine whether it would be possible to differentiate between those two groups."

Similarly, he said back pain and other soft tissue injuries produced the greatest abuse of ACC, "but equally the question is whether you can separate out the genuine cases".

* ACC stage 2 options

Victims to pay $50 or $100 "excess" on claims.

Compensation cut from 80 per cent of previous income to 70 per cent after one year and to 60 per cent after two years.

Compo for back pain to end after two years.

Surveillance powers to detect fraud to be increased.