WORKCOVER'S POOR MANAGEMENT SYSTEM HAS ALMOST SENT THE ORGANISATION TO THE WALL - IS THERE A SOLUTION THAT DOES NOT INCLUDE PUNISHING INJURED WORKERS?
An Interesting Perspective By Phil Moir
Until early 2000 WorkCover complied to some extent, with the Legislative provisions regarding Redemption of Permanently Incapacitated Workers off of the system in a fair and commercial manner.
After WorkCover lost a lot of money in offshore investments in the late 90’s, their policy changed and they ceased paying reasonable redemptions despite the Legislation providing for them.The result is pretty clear in the following graph taken from page 13 of the Board Members report into the proposed Legislative Changes.
The problem facing WorkCover is that they simply don’t appear nor want to understand the aetiology of the problem. I find it hard to believe that they could put this graph in their submission yet don’t appear to realise the significance of the data it so clearly displays.
The graph shows that the problem is not because more people being injured or malingering on the system but because incrementally more people are remaining on the system since 2000. Why would 2000 be such a seminal period? Because that was when WorkCover, after losing tens of millions of dollars in offshore investments, made the policy decision to only offer token redemptions which are, in the main, rejected and permanently injured workers, devoid of any other option, now find themselves trapped on benefits. The subsequent trailing cost of carrying these permanently incapacitated workers has incrementally blown out creating the liability we now face.
WorkCover reports that of the 45000 claims annually only 150 workers remain on benefits for periods in excess of 3 years. A learned estimate would therefore suggest in financial terms the ever increasing blow out amounts to the actuarial equivalent and compounding cost of 150 permanently injured average aged workers on average weekly earnings per annum until they reach 65.
150 X $43,000 X 22 yrs
For my own interest, I projected the figures and indexed wages at 3 percent. I arrived at $219 Million. If we turn to page 58 of last years Annual report you will note that the actuary assessed a net change in Outstanding Claims provision to be $213 Million. Referring to the same Revenue Statement, and but for the blow out in Liabilities in Financial Year Ending June 30 2006, WorkCover would have achieved an operational surplus of $163 Million which represents 30 percent of Levy Revenues received.
My suggestion is that if WorkCover simply complied with the spirit, intent and provisions of the existing legislation and offered fair redemptions to permanently incapacitated workers in the order of 15-20 percent of the actuarial assessment, the billion dollar liability could be paid out for approximately $150 million which is less than last years banked cash surplus, represented by an increase in assets of $157 million as shown at page 59 of last years Annual Report.
WorkCover’s own figures state that 50 percent of their operational costs are associated with managing long term claims, claims which, regardless of the changes proposed will continue to increase for a further four years. WorkCover also suggests that 50 percent of all actions taken to the tribunal are related to Redemptions and Section 38/39 reviews. That being said, a flow on in operational cost savings would be expected at both WorkCover and EML as well as in decreased Medical expenses and unnecessary legal expenses associated with the current regime of unfair and unreasonable redemptions and case management practices.As confirmed in their own Graph, if WorkCover were to take this policy on board, Levy rates could be cut by 30 percent to just 2 percent as there would be no requirement to bank surplus Levies in pursuit of an ever increasing liability. Injured workers trapped on what is best described as a callous and neurosis inducing system can then begin to rebuild what is left of their lives and EML can begin to provide the necessary rehabilitation and administrative support injured workers of tomorrow need to ensure they return to work as soon as reasonably possible. Any impact of compensation neurosis would be minimal against the overwhelming evidence the effect not providing any reasonable exit strategy has on long term liabilities and furthermore, with responsible case management the incidence of fraud and malingering will become more evident and therefore more readily addressable. These substantial savings in all cost areas of managing the scheme can then be used to ensure future liabilities are managed in a morally sound and commercially expedient manner, again consistent with the stated objects of the current legislation.
A much leaner and more effective WorkCover would then have an opportunity to focus on the key areas related to Workplace Safety and Employer’s compliance to their levy obligations, areas that have proven extremely successful in both NSW and Victoria.It is obvious that a poor management decision in the year 2000 in reaction to poor management decisions from the late 90’s has caught up with WorkCover and any attempt to change the Legislation to simply deny future injured workers fair entitlements will not address the fundamental policy error in place today.
By Phil Moir
The charts and data contained herein are objective and verifiable facts. They make no assumptions, there is no spin!
The statements and figures quoted are taken from WorkCover annual reports, Alan Clayton's report and Data obtained by FOI. Read it and make up your own mind what went wrong with WorkCover.
When you understand what really went wrong, and not the Bruce Carter/Media
Liaison Version, the solution may be more simple that you think.