ACC success provides model for cutting invalids' costs

By Rob Hosking

Friday 20th December 2002

Lessons learned in reducing long-term accident compensation claims could be adopted to tackle the explosion of long-term invalid beneficiaries.

The numbers receiving invalid benefits in New Zealand erupted from the mid-1970s, rising an average of 6.6% a year. The average population increase over that period was 1%. About 60,000 New Zealanders now receive an invalid benefit. For the 30-odd years before 1970 the number hovered slightly below 10,000, with little change.

While about half of that increase can be accounted for by the aging population and an increased number of people in the workforce, the remainder is causing headaches among policymakers.

In the current year alone, the amount spent on the invalid benefit is budgeted to rise from $835 million to $912 million.

Treasury papers show ministers were advised, as part of this year's Budget round, to learn lessons from the way the Accident Compensation Corporation (ACC) had reduced its long-term claims.

While there is a belief in some quarters that the rise in numbers on the invalid benefits is due to the ACC's success in reducing the long-term claims, Treasury figures show the problem began in the mid-1970s and has risen at a steady clip ever since.

The Treasury identifies ACC's success in more than halving the numbers of long-term claims to:

* challenging suspected fraud;

* active case management;

* providing much stronger guidelines for time off work after injuries;

* working with employers to accelerate return to work after injury;

* active training and education of GPs;

* changing criteria for long-term benefits; and

* requiring beneficiaries to undertake active rehabilitate programmes.

While the Treasury can be expected to take a beady eye on the costs of invalid benefits, even a parliamentary select committee one with a government majority earlier this year expressed concerns at the continued growth in invalid beneficiaries.

The Treasury proposed social services officials examine "adopting techniques used successfully by other agencies such as ACC" in at least curbing the relentless annual increase in invalid numbers.

A more radical proposal in the same papers is changing the method of paying for all beneficiaries to a "fully funded" method, similar to ACC, rather than the current pay-as-you-go process.

"Another option ministers could consider is to encourage more contracting out of the management of the long-term unemployed to third parties. ACC contracted out its long-term accident claims to provide some contestability ... and to provide a benchmark for the services provided by ACC's claims management. This led to innovative and flexible approaches to managing claims and increased incentives to rehabilitate long-term claimants."

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