Department of Labour briefing

Executive summary

1 This briefing proposes various means to achieve cost savings in the ACC Scheme. The paper is set out as follows:

• Part A details legislative change proposals

  PART B AND PART C NOT RELEVANT TO THE INJURY PREVENTION, REHABILITATION, AND COMPENSATION AMENDMENT BILL 2009

2 Some of the legislative proposals are cost-saving measures, others are to improve flexibility for the Motor Vehicle Account or for ACC purchasing, and still others will help rationalise advisory committees.

3 You have been briefed separately on the following legislative proposals: to change the approach to funding residual claims, including extending the 2014 target date for full-funding; to allow the motor spirit levy to be used for residual claims funding; and on the Injury Surveillance Ministerial Advisory Panel and the Ministerial Advisory Panel on Work-related Gradual Process, Disease, or Infection.

4 Receiving your decisions on the proposals in this paper will determine the timing possible for the introduction of the IPRC Amendment Bill into the House. Proposals to change the approach to, and extend the full-funding date for, residual claims and the various advisory panels need to be progressed quickly if legislation is to be passed this year. The drafting for the residual claims proposals is expected to be complicated. Once your decisions are made, the Department will issue drafting instructions to Parliamentary Counsel Office, who will indicate the time they need to draft the Bill.

5 The first group of proposals are those to repeal some of the amendments made in 2008 to the Injury Prevention, Rehabilitation, and Compensation Act 2001 (IPRC Act). These are:

1.1 return eligibility for weekly compensation for workers who are injured between jobs or on unpaid leave, to 14 days after stopping work, rather than the current 28 days (details page 12)

1.2 review the calculations for long-term weekly compensation (after four weeks) for non-permanent employees (details page 13)

1.3 review the weekly compensation abatement calculation for partially incapacitated people who return to work part-time (details page 14)

1.4 abatement of holiday pay - return to the provision that claimants' leave entitlements, after their employment ends, are considered as part of weekly earnings when calculating weekly compensation (details page 15) 1.5 return to eligibility for payment of the minimum weekly compensation amount from the fifth week of incapacity instead of the second week (details page 17)

1.6 reduce weekly compensation for loss of potential earnings (LoPE) claimants from 100% to 80% of minimum weekly earnings (details page 18)

1.7 remove cover for mental injury that has been wholly or substantially caused by direct exposure to a sudden and traumatic event during the course of a person's employment (details page 19)

1.8 change the provision requiring occupational assessors to consider pre-incapacity earnings in the initial and vocational independence assessments to Clause 26(1) of Schedule 1 (details page 21)

1.9 reinstate the test for workplace gradual process, disease, or infection that applied before the 2008 amendment (details page 23).

6 Other amendments to the IPRC Act that can be made now with minimal further policy work being required are proposed. These are:

2.1 change the approach to funding residual claims, including extending the 2014 target date for full-funding (details page 24)

2.2 allow the Residual Motor Vehicle Levy to be funded from the Motor Spirit Levy (details page 26)

2.3 WITHHELD UNDER s9(2)(f)(iv) OF THE OFFICIAL INFORMATION ACT 1982

2.4 remove the requirement to have the Injury Surveillance Ministerial Advisory Panel (details page 30)

2.5 remove the requirement to have the Ministerial Advisory Panel on Work-related Gradual Process, Disease, or Infection (details page 31)

2.6 WITHHELD UNDER s9(2)(f)(iv) OF THE OFFICIAL INFORMATION ACT 1982

2.7 change the Vocational Independence threshold from capacity to work for 35 hours per week to capacity to work full-time as defined by Statistics New Zealand (details page 33)

2.8 WITHHELD UNDER s9(2)(f)(iv) OF THE OFFICIAL INFORMATION ACT 1982

7 WITHHELD UNDER s9(2)(g)(i) OF THE OFFICIAL INFORMATION ACT 1982

8 Treatment injury costs have been rising. This is due largely to increases in the cost of social rehabilitation and reflects the number of long-term seriously injured claimants paid for out of the Treatment Injury Account. Many of these long-term claimants were in the Scheme before the recent Treatment Injury legislative changes were made. The Department recommends that a review of social rehabilitation should be undertaken encompassing all Accounts.

9 NOT RELEVANT TO THE INJURY PREVENTION, REHABILITATION, AND COMPENSATION AMENDMENT BILL 2009

Recommended actions

It is recommended that you:

1 indicate which of the proposed legislative amendments in Table 1 you wish to proceed with:

Table 1

Amendment	Estimated full-funded savings 09/10 ($000)	Include in Bill Yes/No
Amendments to repeal 2008 amendments
1.1 Return eligibility for weekly compensation for workers who are injured between jobs or on unpaid leave, to 14 days after stopping work, rather than the current 28 days.	550
1.2 Review the calculations for long-term (after four weeks) weekly compensation for non-permanent employees.	15,000
1.3 Review the weekly compensation abatement calculation for partially incapacitated people who return to work part-time	2,490
1.4 Abatement of holiday pay - return to the provision that claimants' leave entitlements, after their employment ends, are considered as part of weekly earnings when calculating weekly compensation.	1,060
1.5 Return to eligibility for payment of the minimum weekly compensation amount from the fifth week of incapacity instead of the second week for employees.	7,430
1.6 Reduce weekly compensation for loss of potential earnings (LoPE) claimants from 100% to 80% of minimum weekly earnings	7,400
1.7 Remove cover for mental injury that has been wholly or substantially caused by direct exposure to a sudden and traumatic event during the course of a person's employment.	13,800
1.8 Change the provision requiring occupational assessors to consider pre-incapacity earnings in the initial and vocational independence assessments	Unable to cost
1.9 Reinstate the test for workplace gradual process, disease or infection that applied before the 2008 amendment	6,300
Other amendments
2.1 Note you have already approved changes to: incorporate the Residual Claims Account into the Work Account and remove the separation of residual claims from current claims in the Earners' and Motor Vehicle Accounts require a final valuation of the residual liabilities as at 30 June 2009, which would become the total amount to be paid by residual levy payers allow the Minister for ACC to set in regulations the portion of the levies to be allocated to the residual portion for the relevant Accounts each year Nominate and agree a final date (please indicate which date) further out than 2014 by which the estimated outstanding claim liability associated with residual claims must be paid off	Will reduce levy rates depending on which date you choose	(Approved) (Approved) (Approved) 2016/17 2018/19 2020/21 2022/23 2024/25
2.2 Add a provision enabling the Motor Vehicle Account Residual Levy to be funded from the Motor Spirit Levy.	Not applicable
2.3 WITHHELD UNDER s9(2)(f)(iv) OF THE OFFICIAL INFORMATION ACT 1982
2.4 Remove the requirement to have the Injury Surveillance Ministerial Advisory Panel.	40 (cash costs)
2.5 Remove the requirement to have the Ministerial Advisory Panel on Work-related Gradual Process, Disease, or Infection.	67 (cash costs)
2.6 WITHHELD UNDER s9(2)(f)(iv) OF THE OFFICIAL INFORMATION ACT 1982
2.7 Reduce the threshold required to attain vocational independence from a capacity to work for 35 hours to a capacity to work full-time as defined by Statistics New Zealand.	11,000
2.8 WITHHELD UNDER s9(2)(f)(iv) OF THE OFFICIAL INFORMATION ACT 1982
Total estimated savings	$67,035

2 note that you have received separate briefings on legislative proposals to: change the approach to funding residual claims, including extending the 2014 target date for full-funding, allow the motor spirit levy to be used for residual claims funding; and disestablish the Injury Surveillance Ministerial Advisory Panel (ISMAP). The Associate Minister for ACC has received both the ISMAP briefing and a briefing from ACC on the Ministerial Advisory Panel on Work-related Gradual Process, Disease, or Infection.

3 direct officials to do work on the issues associated with lump sum payments

AGREE / DISAGREE

4 agree that rather than amending the legislation relating to treatment injury now, when social rehabilitation is the key driver of these costs, officials begin a review of social rehabilitation across the Scheme to identify areas where costs could be reduced

AGREE / DISAGREE

5 NOT RELEVANT TO THE INJURY PREVENTION, REHABILITATION, AND COMPENSATION AMENDMENT BILL 2009

6 NOT RELEVANT TO THE INJURY PREVENTION, REHABILITATION, AND COMPENSATION AMENDMENT BILL 2009

7 note your decisions on the proposals in this paper will determine the timing possible for the introduction of the IPRC Amendment Bill into the House.

Craig Armitage
Deputy Secretary Workplace
for Secretary of Labour

Hon Dr Nick Smith
Minister for ACC

 

 

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