Editorial: ACC levy plan brave pointer to needed cuts

Opinion

Last week we learned the Government is borrowing $250 million a week to cover the deficit the recession has left in its revenue after it meets all current social commitments. That figure should be searing itself in public consciousness and making a profound change in attitudes to state savings and efficiency. The economy has weathered the recession in better shape than it was when the public accounts were last in the red. But it will not remain in good shape if the returning debt is not addressed and creditors lose the confidence to continue lending us $250 million a week.

In this predicament it is encouraging that the Government has not finally ruled out an insurance "excess" charge for the accident compensation scheme. ACC is not strictly a contributor to the fiscal deficit. The scheme is self-financing, or will be now that premiums are to be raised to cover the life of all current liabilities. But the willingness to consider an excess is a welcome sign of political courage that will be needed in other sensitive areas of public expense.

An excess charge of $50 or $100 a claim, as recommended by the corporation, could reduce its costs by about $1.6 billion over 10 years, a considerable saving for any service in the economy. The value would lie not only in the money raised from charges but also in the effect on claimants' behaviour.

Insurance policies typically contain excess charges to discourage needless or frivolous claims. Accident compensation needs to do the same. The scheme may have been conceived as a form of social welfare rather than insurance, according to its venerable "father", Sir Owen Woodhouse, in the Herald yesterday, but he was speaking of an era of closed, welfare-state economies with high taxation rates and universal benefits.

Today greater general prosperity has been found in open, competitive trading economies with lower taxation and state income supports for the lower paid. Any excess charges introduced for accident compensation claims will have to provide exemptions for the bearers of community service cards. None must be denied treatment for injury because they cannot afford the excess, as ACC Minister Nick Smith has acknowledged.

Still, an excess charge would be attacked as an imposition on average households, particularly those with incomes just above the cut-off level for exemption. Even the moderately well-off could face that charge when their incomes may be suffering from the injury. In cases where ACC is providing income support treatment charges should be waived. Any cost that helps restore someone's previous earning capacity as soon as possible is good value for the scheme.

But it cannot be denied that the scheme is vulnerable to needless claims for minor injury. Most people have had the experience of visiting their doctor with a niggling ache and the first question asked is whether it might result from a known event. The ACC forms are always at hand and many a patient who is willing and capable of paying for treatment is invited to put in a claim.

It is human nature to make excessive use of any service that comes free. And for that reason it is usually in the interest of the service providers to oppose a charge. Even a token charge - much lower than the sums suggested for ACC - would cause many claimants to reassess their need. It would also force providers to satisfy paying clients that continuing treatment was worthwhile.

A charge would be unpopular and the Key Government has not yet shown a willingness to be unpopular when it needs to be. It did not adopt the corporation's charging suggestion in the changes announced for the scheme last week. If it is suggested again when an independent panel completes an ACC "stocktake" next year, it should be accepted. The years of plenty have passed.