How the Government is gutting workers' compensation

by Dr Hannah Middleton

The NSW Labor Government is trying to ram through Parliament radical 
legislation which will seriously damage the rights of injured workers. The 
government has reneged on its deal with the NSW Labor Council, with the 
current version of the Workers' Compensation Legislation Amendment Bill 
2001 almost the same as the first version which Industrial Relations 
Minister Della Bosca sprang on the Upper House on March 27 without any 
warning or consultation.

In the latest version of the legislation, instead of workers being entitled 
to have their claims for compensation determined by an impartial court, 
decisions are still going to be made by medical assessors, doctors and 
faceless bureaucrats behind closed doors and with almost no rights of 
appeal. Workers will not have the right to give evidence or be heard

Binding medical assessments and draconian new guidelines for assessing the 
level of injuries will be introduced.

The draft legislation also gives WorkCover, widely criticised for 
bureaucracy and inefficiency, the power to issue regulations allowing the 
Government to make further changes without the agreement of Parliament.

Is there really a crisis?

The Government claims that the workers compensation scheme must be changed 
because it is facing a massive debt. Premier Carr threatened if the Bill is 
not passed a levy will be imposed on all NSW employers to cover the 
deficit.

Premier Carr blackmailed Parliament by alleging that the scheme is "losing 
$1 million a day" and that change is therefore needed urgently.

All this is complete nonsense.

The $2 billion shortfall to which the Premier is referring is nothing more 
than a paper deficit which may never actually have to be paid.

The NSW workers compensation scheme has grown from $3.7 billion in 1994 to 
its current amount of $6.8 billion. For each of these years the fund has 
received more money in premium and investment income than it has spent.

Last year WorkCover made a profit of $365 million.

The Government's own actuary, Tillinghast Towers Perrin, says the fund will 
continue to grow by approximately $1.5 billion over the next four years.

With that cash position, there is certainly no crisis.

In 1999/2000 WorkCover had current liabilities of $2.3 billion, of which 
only $1.8 billion was for outstanding claims.

However, there are also so-called non-current liabilities of $5.9 billion. 
This is money set aside to pay claims which may have to be met over the 
next 40 years.

However, many claims will not be paid for anywhere near as long as 40 years 
and many more are settled with a lump sum (commutation) worth about three 
to five years of weekly payments plus components for lump sum entitlements 
and costs.

If every single actual and anticipated claim had to be paid out to the full 
extent of its estimated cost right now, there would be a shortfall in 
funds. That, however, cannot happen — injured workers have no right or 
ability to demand that an insurer pays them the full estimated value of 
their entitlements at any one time.

The fund does not owe money and can meet its liabilities. There is no 
crisis and there is only a paper deficit.

Impairment assessment

At present, payments of lump sum compensation are made by reference to a 
"Table of Maims", which deals with injuries to individual body parts. Minor 
injuries to single body parts attract only small payments while more 
serious or multiple injuries attract larger amounts, and also a separate 
"pain and suffering" payment.

The new proposal requires a change to assessment of "Whole Person 
Impairment" (WPI), based on either the American Medical Association (AMA) 
Guides or WorkCover guidelines.

The Minister for Industrial Relations, Mr Della Bosca, said union 
objections to the change from a set table of disabilities to a medical 
guidelines system is merely misunderstanding over wording.

This is simply not correct.

The AMA Guides, as modified by WorkCover, would be used to determine the 
amount an injured worker would be entitled to for permanent injury or loss 
of use of a part of the body. That percentage of impairment would also 
govern a worker's access to pain and suffering compensation in the no-fault 
part of the scheme. The Guides are also intended for use in assessing 
whether an injured worker has a sufficient degree of permanent impairment 
to be allowed to claim common law damages for an employer's negligence.

The AMA Guides themselves contain explicit warnings that they should not be 
used to decide access to benefits: "It should be emphasised and clearly 
understood that impairment percentages derived in accordance to Guides' 
criteria should not be used to make directly financial awards or direct 
estimates of disabilities."

The AMA Guides make a distinction between "impairment" and "disability". 
Impairment is intended to be an objective medical measure of the severity 
of an injury. Disability, on the other hand, is defined as the consequences 
of that impairment for a particular individual.

Applying the same test regardless of an individual's particular 
circumstances results in arbitrary and unjust results. For example, the 
amputation of the ring and little finger of a young pianist attracts the 
same level of impairment as the same injury to a retired lawyer, despite 
the fact that the consequences of the injury are far greater for the young 
pianist.

Under the AMA Guides the loss of range of motion in back and neck injuries 
is measured and these measurements are in turn used to arrive at a level of 
impairment. However, these measurements take no account of strength or 
lifting ability, the degree of pain involved in actually attaining the 
measured degree of mobility, or the ability to work a full shift.

A study of a large number of injured workers in one US State found that the 
AMA Guides routinely underestimate the severity of injuries and 
particularly the effects of an injury on a worker's quality of life.

Binding medical assessments

The present legislation incorporates a system for assessment by court-
appointed medical panels. The findings of medical panels can be binding on 
the parties if correct procedures are followed.

Under the new proposals, government appointed medical assessors would make 
conclusive assessments of the degree of permanent impairment and whether 
impairment is permanent.

Rights of appeal from a medical assessor's decision would be extremely 
restricted and claimants would not be entitled to legal representation 
during the course of a medical assessment.

The proposed reliance on binding medical assessment assumes that medicine 
is an exact science and that there is a single correct medical answer to 
matters that may be in dispute.

Under the proposed new scheme, medical assessments would be subject to 
WorkCover guidelines and training. This raises the distinct possibility of 
the Authority being able to exert its influence and priorities on the 
scheme.

A new bureaucracy

The Bill would set up a new Workers' Compensation Commission. Disputes 
would be referred by the Commission to arbitrators. Decisions of the 
Commission would be binding on all parties, with no right of appeal or 
review by any other court or body.

As a result of the way this would work, injured workers would no longer 
have the right to have their claims decided by independent judicial body.

The Commission President must be a legal practitioner of at least seven 
years standing, but does not need to have experience in this area of law. 
Arbitrators can be appointed if they are legal practitioners or have other 
skills, qualifications or experience as may be determined by the Minister, 
raising a very real possibility of arbitrators being selected by the 
Minister to suit political purposes.

A member of the Commission, whether he or she is a Presidential member or 
an arbitrator, could be appointed for a fixed term of seven or five years 
maximum respectively, and is eligible for reappointment. This does not 
guarantee any independence of those members from the influence of vested 
interests.

Arbitrators would not have to deal with real people. They could receive 
files and decide matters behind closed doors. They could hold any kind of 
conference they believe is appropriate, hold private conferences with any 
party or expert, or even make a decision without any hearing at all. 
Workers will not have the right to give evidence or be heard.

This creates the real possibility of decisions being hidden from any 
scrutiny, being made behind closed doors without the opportunity of a fair 
hearing, and substantial injustice being done.

Common law rights

Major aspects of workers common law rights have been referred to a judicial 
inquiry headed by Justice Sheahan.

It apparently began its work on June 18 (two days before its terms of 
reference were made public!) and must report by August 17.

It is widely expected that its findings will reflect the proposals in the 
Government's March 27 legislation. These would prevent the majority of 
injured workers from being able to receive Common Law payments, including 
not only pain and suffering compensation, but also coverage for actual 
financial losses and care costs which cannot be obtained in the statutory 
no-fault benefits part of the scheme.