Ruth Dyson speech to EMA

ADDRESS TO AUCKLAND EMA

MONDAY 6 SEPTEMBER 1999

RUTH DYSON
MEMBER OF PARLIAMENT
LABOUR SPOKESPERSON ON ACC

Thank you for the opportunity to speak with you today.

Injury prevention and compensation issues have been in the news more than they usually are over recent times, primarily because of changes to our ACC legislation. My only regret about this has been the shallowness of the public debate. It is a pleasure therefore to be part of a real debate about the options that face us in the future, particularly compared to that which occurred during the passing of the most recent accident compensation legislation.

Injury prevention should be a primary focus and concern in New Zealand. It is an area that I feel passionately about and I know that many of you here feel the same.

I will begin, as I did with our policy development, with our history. Our most recent ACC scheme is just 25 years old. It was developed from a Royal Commission Report (the Woodhouse report) which suggested five guiding principles for the scheme. Community Responsibility; Comprehensive Entitlement, Complete Rehabilitation, Real Compensation and Administrative Efficiency. I believe that those principles are still valid, and it is upon them that our policy is built.
So I confirm those five guiding principles, and also believe that there should be three primary functions of ACC:

Ø injury prevention
Ø rehabilitation
Ø compensation

Those functions should be delivered in that order, as opposed to the reverse order, which has been the practice over much of the last 25 years.

The internationally proven, most efficient way of delivering those functions is through a well-managed single public model. There has been some comment about that recently, due to the re-introduction of private insurance companies in this area. The change to private insurance is not new. We had it prior to 1974, although now, workers no longer have any right to sue in tort.

So why were private insurers removed then? Because, as is the case now, their involvement is more expensive, more litigious, and less likely to reduce injuries in the workplace. Those three reasons seem to me to work in the opposite direction to which anyone with any common sense would want the scheme to work.
The issue of cost efficiency in the area of workers' compensation has been researched internationally and I will give you just two of many examples of such research - all of which is consistent in its conclusion that the introduction of "competition" or the handing over of state responsibility to the private insurers is more expensive.

The first is the results of the study by Thomason and Burton, of the McGill University and Rutgers University. Their comprehensive study of data from 48 us states and 2 Canadian provinces over the period from 1975 to 1995 estimated the relative cost of public versus private provision of workers' compensation insurance. They found, to their surprise and perhaps even disappointment, that
"While it is not a result that we expected, cost reductions need not occur - indeed costs may increase - by shifting from monopoly provision to a competitive model of private insurance."
The second is advice to the government from Coopers and Lybrand, which warned of exactly the same consequence.

It is frankly embarrassing to have the Prime Minister and the ACC minister give quotes in Parliament about reductions in levies for government departments which do not take into account the residual claims levy, any reduction for risk sharing, any consideration of loss leading, or burn clauses. Nor do these comparisons mention that for many employers, this year's ACC levy would have been significantly lower than their last year's levy! Comparing apples to pears does nothing for the credibility of your argument.
But some big companies may do well out of the arrangements they can negotiate with private insurance companies - particularly in the very short term.
But this, on its own, does not make the scheme either efficient or fair.

I would like to draw your attention to the recent events in western Australia, where employer premiums have trebled this year, following a 13% increase last year. Once the market has captured its client base, there is not a lot of room for employers to have any "choice".
But I want you to understand that our policy is not an ideological, anti private insurance move. Every piece of information from our history and from international research confirms the conclusion that I spoke of earlier. Competition from private insurance companies in this area is more expensive.

And it is, by its design and obvious financial motivation, more litigious. And unfortunately, the design of the new legislation, which, for example, reclassifies all motor vehicle accidents as non-work accidents, will only compound such arguments.

A postie delivering the mail hit by a car - work accident or motor vehicle accident? Well it depends on whether the postie is on the footpath or on the road at the time of impact. A mechanic moving a vehicle which has just been serviced from the auto bay to the parking area? - motor vehicle accident? Still being debated!

Yes, of course these re-definitions of work accidents will save some employers some money. But they will transfer the costs elsewhere…..And that elsewhere is where we all have to put our hands in our pocket and fund. Cost shifting is not cost saving, and equally important is that these accidents will now be reported as non-work accidents, and severely undermine a sensible, coherent and comprehensive injury prevention strategy.

Injury prevention should be the primary objective and role for the corporation. Its data collection should put it in a unique position of being able to co-ordinate an integrated approach to the problem of personal injury. It should drive strategies at national industry and enterprise level. Our policy will have such a primary and statutory responsibility.

The experience rating system - used in recent times by the Corporation and now by the private insurance companies - has limited use. With some very large employers, it has been effective in focusing the minds of the management team on the cost to the business of injuries. But the majority of New Zealand employers have not responded to this penalty regime. It offers a financial incentive for under-reporting, it encourages litigation, and it penalises employers who have done every single thing possible to reduce workplace hazards.
Instead, our policy will link reduction in levies with a reduction in workplace hazards. This method has worked successfully in British Colombia and it would be a very good move, in my view, to follow an example from overseas, which has worked, rather than one which duplicates the failures.

Of course while the major focus of this conference is about injury prevention and related issues in the workplace, the corporation must also have a larger role in promoting healthy and safe practices in the home and in recreational activities.

The final point that I want to make about injury prevention is that this is not something that can be imposed by the corporation. International examples of industry driven strategies show that these are the ones that succeed. So my message to you is that if your industry is driving a good safety and health message, Labour will support it. If it isn't, we will give you the tools and the resources - and the financial incentives - to build it.

Removal of points of litigation is vital in rebuilding integrity in ACC. The definition of accident should be as inclusive as possible - any argument delays rehabilitation and a potential return to work or independence of the scheme. It is just common sense to address the injury as a primary consideration rather than the cause.

It is also important to acknowledge that a major frustration for thousands of new Zealanders is the fact that if you have impairment due to an illness, you fare worse than someone who has the same impairment due to an injury does. I do not propose extending the ACC scheme to cover illness.
However, there are moves, which can certainly be made to start to reduce the anomalies between the two systems of delivery. The most logical place for this co-operation to occur is in the area of habilitation and rehabilitation. Where these co-operative ventures have occurred between the health system and the corporation - in the areas of serious head injury, paraplegia and loss of limbs, they are successful - and save money - and they certainly deliver better quality and fairer access to those services!

The next function of the corporation must be rehabilitation. In the same way as injury prevention, rehabilitation is a bit of an alien word to many New Zealanders. The attitude towards both injury prevention and rehabilitation can and must be changed.

Quality rehabilitation does require more than a medical response to those people who have suffered a serious injury. There must be social and vocational rehabilitation as well as medical rehabilitation as part of the package. It must start early, it must have the active co-operation of employers, and the aim must be to return to the maximum degree of bodily health, social independence and vocational utility in the minimum of time. Turfing people off ACC on to a benefit will cost us all dearly both in social and in financial terms.
The corporation as a short-term response to poor past practices and increasing political pressure, has used it.

There are some fundamental points in developing a new scheme, which will promote a change in culture and a change in practice.
The first is to remove the potential penalty to an employer in taking back to work an employee who has had a prior injury
And the second thing is to ensure that return to work at a lower level of pay is compensated for by the scheme.

So finally, onto the finances of the scheme - both in and out.

It must be accepted that, without the right to sue, compensation must be fair. I support the 80% earnings related compensation, which provides a (sometimes barely) liveable wage combined with a real financial incentive to return to work. Those with a permanent partial disability should receive a permanent entitlement to acknowledge that, and those who have casual work - fluctuating income -and the self-employed - must have a realistic assessment of their lost earnings.
I acknowledge that in the past, lump sum compensation has had the potential to blow the budget. But the answer is to make it fair and sustainable -not to scrap it. So our lump sum compensation is for serious injuries only, with a capped, maximum payment, and includes pain and suffering and loss of enjoyment of life. We will be using the model of the Australian war veterans' scheme, which has financial credibility and integrity.

The funding of the scheme has been the area of the shallowest public debate. The main problems in the past have been caused by political interference. Lack of transparency and volatility in the levy setting has caused, justifiably, the biggest concerns. The Coopers and Lybrand report on private insurance provision also raised that very concern with the government, which they also ignored, on the volatility and dramatic increases of employer levies. This is the last thing that I believe that New Zealand employers want, deserve or need.

So Labour will rebuild ACC based on the three primary functions of injury prevention, rehabilitation and compensation - in that order. It will be delivered through a single, public model. We have taken the opportunity of reviewing international models and learning from the many mistakes in legislation and governance of the last 25 years. The scheme will be financially and politically sustainable, have integrity and will earn the support that it needs to survive.

This is a real opportunity for employers who follow best practice to be involved in driving its rebuilding. It is an opportunity for employees to have the education and the responsibility and the legislative back up for their health and safety management, in partnership with their employers. And it is an opportunity for us to address seriously the injuries, which impair and kill so many of our citizens. I know that this is a shared vision and I look forward to working with you to deliver it.

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