WorkCover "Buggered" – Where to from here?
Deputy Premier John Rau has declared that WorkCover is “buggered” and he has promised a “root and branch” recasting of the scheme to “bring it into closer alignment with comparable schemes interstate”.
With a State election due in March 2014 (the Year of the Horse in the Chinese lunar calendar) the real question is has the horse bolted and do we need a new stable or can we just fix the gate?
A New Act?
There will be plenty of proponents of a totally new Act to replace the Workers Rehabilitation & Compensation Act 1986 as amended and there will be advocates for each of the statutory schemes in Queensland, New South Wales and Victoria and some will point to the Western Australian model which allows private insurers to compete with the State insurer. Before any changes are contemplated, however, I would urge the Government to look at the situation more closely to determine what the real problem is before undertaking a radical restructure which will inevitably have unintended consequences and create uncertainty and upset amongst injured workers who are currently in receipt of benefits.
The proponents of change will point to the poor performance of the scheme over the last 10 years and the criticism will be justified but we should not just look at the last 10 years.
In general, the scheme was reasonably stable during the period 1995 to 2000. Claim payments were well controlled and reducing in real terms throughout that period and, as at June 2000, the funding ratio was 97%. Beyond that, however, longer durations started to emerge, creating a “tail of liability” and the period 2003 to 2006 saw a growth in the unfunded liability and a deterioration in the funding ratio. Of course, that trend has continued and at the same time, the return to work rate has consistently been below the national average and at times significantly so.
What is the Problem
It is easy to identify the cause of the deterioration in scheme performance over the last 10 years. It is the fact that the “tail” claims of long duration are responsible for an inordinately large percentage of scheme liabilities and that, together with a return to work rate which is historically poor by national standards, is the root cause of the problem.
It is ironic that at a time when there is criticism of the scheme for failing to meet return to work objectives, the latest data on return to work rates issued by the Social Research Centre for Safe Work Australia (2013) shows that the performance in South Australia has improved over the last 12 months from 77% in 2011-12 to 82% in 2012-13. Although still below the national average, it is a much improved performance and only slightly below Victoria, which has recorded an 84% return to work rate.
We should be heartened by the improvement in the return to work rate against a background of rising unemployment in South Australia.
At a time when WorkCover is making radical changes to the way in which rehabilitation services are delivered by the scheme it is, perhaps, worthy of pausing, taking stock and building on the initiatives which have delivered a 5% improvement in return to work outcomes over the last 12 months.
Return to Work
There is ample evidence that health outcomes for injured persons are improved by early return to work. Once they are disconnected from the workplace, it’s hard to get them back and numerous studies establish that if the injured worker is off work for 2-3 months, there is only a 30% chance of a successful return to the workforce.
That reality assumes enormous significance for our scheme in the context of a new study undertaken by academics from the Institute for Safety Compensation & Recovery Research (ISCRR) and Monash University’s Department of General Practice and Department of Epidemiology and Preventative Medicine. The study is reported in the 2013 publication of the Medical Journal of Australia.
The objective of the study was:
“To examine patterns of the sickness certification of workers compensation claimants by general practitioners in Victoria, Australia, by nature of injury or illness.”
The researchers undertook a retrospective analysis of Victorian workers compensation data for all injured and ill workers with an accepted workers compensation claim between 2003 and 2010.
The results were startlingly disturbing, but (for those of us involved in the workers compensation industry for many years) not surprising.
The study’s examination of over 120,000 medical certificates provided to injured workers in Victoria from 2003 to 2010 found that more than 70% of initial medical certificates issued by GP’s advised injured and ill workers not to work!
Less than a quarter of medical certificates recommended workers return to work on modified duties.
The rate of sickness certification per 1000 workers varied substantially between injury and illness categories, but the highest proportion of unfit for work certificates were written for workers with a mental health condition.
At a time when claims for mental illness are on the increase, the research has serious implications for scheme liability.
The problem, as I see it, is that the family doctor is not best equipped to treat work-related injuries and a failure on the part of the doctor to certify for capacity, rather than incapacity, in the early stages of a claim reinforces the concept of injury and incapacity rather than concentrating upon capacity. The result is that often the condition is over-medicalised and workers become deconditioned and emotionally detached from employment.
The researchers conclude that:
“The high proportion of medical certificates recommending complete absence from work presents major challenges in terms of return to work, labour force productivity, the viability of the compensation system (my emphasis) and long-term social and economic development.”
It is recognised that:
“General practitioners play a key role in the return to work process, being the first point of contact with the healthcare system for many injured workers, and the main ‘gatekeepers’ to workers compensation and disability benefits”.
Perhaps the focus for an apparent failure of rehabilitation to achieve the desired return to work outcomes in the past should shift from the rehabilitation professionals to “the gatekeepers”.
What is the Solution
We know the problem, but what is the solution? In my view, it is NOT to throw out the legislation and bring in something bright, shiny and new. A new Workers Compensation Act developed from scratch would be a big job, inevitably have unintended harmful consequences, cause distress to injured workers because of the uncertainty associated with any change of significant magnitude and likely take years of judicial interpretation to provide any semblance of stability.
By and large judicial interpretation of the current legislation (at least as it existed pre-2008) is settled. The basic framework is sound and, as reported by Alan Clayton in his review of the South Australian workers compensation system in 2007, had in the early 2000’s achieved “an apparently healthy position with respect to both financial stability and reputation for forward thinking”.
Whilst our scheme deteriorated from the early 2000’s, the Victorian Scheme has improved over the same period, but its legislative framework fundamentally remained intact. In my view, the Act (pre? the 2008 amendments) provided a sound fundamental basis which could be improved with better engagement with all stakeholders and improvements in the standards of claim and injury management and outcomes delivered by the claims agents.
A gradual return to the health exhibited in the early 2000’s could be achieved by a concentration on the basics.
Modifications to the Act are required to ensure that those unfortunate enough to have achieved maximum medical improvement but remain totally incapacitated for work continue to be supported by the scheme whilst those who are partially incapacitated only are afforded a way of equitably leaving the scheme at modest cost. These modifications would ensure that the “tail” is brought under control and reduced with the consequent improvement in the unfunded liability and eradication of the, so called, “lump sum compensation mentality”.
At the same time, all stakeholders need to work better together, but in particular GPs and medical professionals need to be educated to approach each injured worker from the point of view of capacity, rather than incapacity. The conversation should not be, “You are injured and you need time away from work”, but rather “You are injured, but even so there is still much that you can do in the workplace and I will certify your capacity to undertake modified duties consistent with your capacity.”
The Role of Self Insurance
It is pleasing that in giving evidence before the House of Assembly Estimates Committee in June 2013 the Deputy Premier and Mr McCarthy, Chief Executive WorkCover Corporation, acknowledged that self-insured employers have been successful in operating within the framework of the Act and that they “have got a lot to learn from self-insurers”.
Something between 35-38% of the working population are employed by self-insurers. The fact that such a large proportion of the scheme can and does operate very successfully within the current framework is a powerful argument against throwing the baby out with the bath water and starting again.
Confirmation that WorkCover has a “lot to learn from self-insurers” comes from the Ombudsman who reports that there has been a 44% increase in complaints this year BUT only 20% of complaints were against self-insurers, “which is surprising considering that nearly 40 per cent of the State’s employment is provided by self-insured employers”
We should be looking at why it is that self-insurers operate so successfully and adopt those learnings to the scheme as a whole.
As I wrote in an update in November 2011, the comments of Professor Kim Burton from Kendall Burton Consulting in the UK when he addressed WorkCover’s annual conference in September 2011 are apt. He said that 70% of workplace injuries are common health problems, ranging from muscular skeletal to mental illness, rather than debilitating injury or disease and employers should “unless they’re out on a stretcher” negotiate with the worker to see whether the worker could be accommodated to continue at work because this improved the employer and employee mindset about the injury and potential for recovery and could avoid some employees stopping work while they dealt with their situation. Those comments clearly articulate the advantage that a self?insured employer has.
Commonly, a self-insurer will have on-site occupational health staff and/or nurses and the ability to have an immediate impact upon treatment of the injury and rehabilitation. They have well-trained claims managers who are well resourced and have access to the best professional, legal, rehabilitation and medical advisers.
The performance of the scheme could only be enhanced by encouraging self-insurance for those employers who meet the financial criteria and have the professionalism and commitment to achieve best practice in self-insurance. As I wrote in November 2011, the advantages that self?insurers have could be extended by allowing associations of employers to self-insure and operate in much the same way as the Local Government Association of South Australia.
At the same time I postulated that:
“Perhaps it is time to think outside the square, encourage self-insurance and diminish the role of WorkCover and allow the introduction of private insurers…The free market will enable employers to source insurance where their needs are best met by the premium quoted.”
I also said that:
“There is also a good argument for dividing the regulatory and insurance functions of WorkCover…Each function is quite separate and the separation would allow greater focus on their individual objectives”.
THE WORKCOVER BOARD
In an article in August 2008, I wrote that:
“A truly worthwhile reform would be an amendment to the WorkCover Corporation Act to remove the requirement that at least four members must directly represent the interests of employers and employees. We should, quite simply, have a board made up of the most qualified people to lead the Corporation”.
I asserted that:
“The make up of the board is open to criticism. It can be fairly asked whether a board which comprises of stakeholders can ever be properly functional and capable of making decisions for the benefit of the organisation when the views that many of the stakeholders have are so diametrically opposed.”
Legislation to dissolve the current WorkCover Representative Board and reduce its membership from 9 members to 7 so that it “will be put on a proper commercial footing to keep the scheme functioning properly” has been passed. Unfortunately the new “business-focussed” board which I had understood would be free of Stakeholder interests is more of the same. Stakeholder interests will effectively be maintained by the retention of Peter Malinauskas and the appointment of Nigel McBride who is Business SA Chief Executive. I do not see that the changes made to the Board are anything radical at all and I have little confidence that the restructure will have the desired effect. In practical terms it seems to be a politically expedient measure to be seen to be doing something before the election.
We need to see some sensible commitment to maintaining the pre-2008 framework with some amendments to address the tail together with administrative improvements to improve claims management. Combine that with education of stakeholders and particularly “the gatekeepers” to focus on the injured worker’s capacity rather than the default position of certifying total incapacity and I believe we can restore the scheme to the position it occupied in 2000 as the best Australian example of a Statutory Scheme that provided fair benefits for injured workers at an affordable cost to business.
To read John Walsh's (Managing Partner, Donaldson Walsh Lawyers) previous WorkCover Updates please visit http://www.donaldsonwalsh.com.au and click through to the News section.
To contact John directly please visit his profile page at http://www.donaldsonwalsh.com.au/profile/john_walsh/