According to a PriceWaterhouseCoopers' report of 2008, "New Zealand's Accident Compensation Corporation (ACC) scheme is the only system in the world that provides universal, 24-hour coverage for all accidental physical injuries. ACC was a groundbreaking world leader at its inception and remains today highly regarded by many experts in the field of accident compensation." 

However in the ACC's statement of intent for 2009 to 2012, the organisation's focus has clearly turned to reducing costs. The ACC indicate their financial outcomes are not sustainable and note that in recent years, the costs of delivering the Scheme have increased rapidly due to a number of factors. These include:

• "New claim rates increasing faster than the underlying population growth;
• Rehabilitation performance rates declining, meaning claims are open longer and costing more;
• A larger than expected increase in the size of the long-term claims pool;
• The impact of the global recession on the outstanding claims liability (the liability); and
• An increase in the scope of the Scheme due to legislative change and court decisions. "

Claim costs have reportedly risen by 57% and unfunded liabilities grown from $4 billion to $13 billion over four years.  In 2009-2010 medical treatment and rehabilitation services were expected to cost $2 billion, an 8% increase on the previous year.  The organisation reports that  the scheme will be obliged to increase levies and / or taxes if the trend continues, and suggests the scheme could become non-viable in the long-term.

Against this backdrop, the NZ RTW Monitor results published of declining return to work results provide a modest insight into current  discussions and media reports.  The monitor results show:

1. A reduction in return to work rates, from 88% to 83%, over the last two years.  The NZ return to work rate is now the same as the Australian (National) average.
2. The durable, or sustained, return to work measure has dropped from 81% to 75% over the last 12 months. The reduction in durable return to work has only occurred over the last 12 months, and may be impacted by the global financial downturn.

The drop in return to work performance has been acknowledged by the governing body:

"ACC’s rehabilitation performance has been declining for some time. This is due to a number of factors, including the ageing population, the increasing complexity of claims, and claims management inefficiencies. The resulting impact has meant that clients are staying on the Scheme longer and costing more."

The New Zealand scheme is now in a state of limbo. Cost reduction is the major focus of government, and many project the scheme will be privatised, with private insurers entering the market as commonly occurs within Australia.  The cost issues were said to be the reason for the ACC Board 'realignment' or spill in 2009, with newly appointed board members coming from a financial background.  The organisation is now clearly focused on improving the scheme’s financial position. 

There is opposition to both the proposed changes and changes currently underway.  Vocal opposition has come from the ACC Futures Coalition, which includes unions, employees and treater groups. 

Arguments for maintaining the scheme as it stands centre on the social benefits and social justice benefits of the scheme.  These include a greater proportion of money from the scheme going to claimants, reduced disputation without lawyers in the system, and system values consistent with the population's values.  Trust is rated highly.  Many consider the scheme works well, considerably better than many other systems around the world.  

Opposition to changes also include the manner in which claimants are being dealt with.  The ACC has taken the common scheme approach of dealing with financial problems by trying to move long-term claimants out of the scheme.  Long term claimants are the most costly part of any scheme, and removing them is the most cost-effective ways to deal with cost blowouts.  

As an example of opposition to this approach, functional capacity evaluations are now being used to assess long term claimants' work capacity. As Bronnie Thomson, who is one of our feature writers, points out, there are significant problems with functional capacity evaluations. Functional capacity evaluations are useful if the goal is to define a person as having a work capacity and therefore as ineligible for scheme payments. However, this does not mean that functional capacity assessments are valid.  Moving people on from the system after a few years is basically declaring a failure of rehabilitation.  If they are capable of returning to the workforce at that point, why haven’t they done so earlier?

Cost pressures may dictate changes are needed, but they are unlikely to improve return to work outcomes. In the light of financial pressures and decreasing RTW rates, is the forecast grim for NZ's ACC?