$1.6 Billion wasted on paper shuffling by WorkCover

Just in from [popup url=’ http://davidshoebridge.org.au/2012/05/14/1-6-billion-wasted-on-paper-shuffling-by-workcover/’]David Shoebridge’s office[/popup] – and we wonder where  all the money is going? How can any government in good conscience see a quarter of the amount paid in benefits to injured workers siphoned off to private insurers to simply manage claims?

Since 1997 payments to private insurers to manage workers compensation claims have grown a staggering 620 per cent faster than both inflation and actual benefits paid to the injured,” Mr Shoebridge said.

$1.6 Billion wasted on paper shuffling by WorkCover

Figures obtained by The Greens show that since 1997 private insurers have been paid more than $3.9 billion dollars to just manage workers compensation claims.  These fees have grown more than times faster than both inflation and actual benefits paid to the injured.  This bureaucratic paper shuffling has wasted more than $1.6 billion and eroded the scheme’s financial sustainability.

The performance of the bureaucrats and private insurers is even more troubling when the reduction in injuries is factored in.  Since 1997 serious workplace injuries in NSW have fallen by 53%, from 60,109 to 28,056 in FY 2010.  On these figures, management fees per serious injury have grown 16 times faster than inflation from $2,358 in FY 1997 to $17,001 in FY 2010.

The Greens NSW are calling for the NSW government to urgently address this waste and mismanagement in the workers compensation scheme, rather than attack injured worker’s benefits.

Fast Facts:

  • From 1997 to 2010 major workplace injuries fell by 53%
  • From 1997 to 2010 inflation increased by 44%
  • From 1997 to 2010 management fees increased by 236% (more than 5 times inflation)
  • From 1997 to 2010 benefits paid increased by 43% (less than inflation)
  • From 1997 to 2010 management fees per major injury increased by 620% (14 times inflation)
  • If private insurer  management fees had, like benefits, grown only by inflation then $1.6 billion dollars would have been saved.
  • In FY 2010 management fees paid to private insurers accounted for 24% of the value of benefits paid to injured workers compared to just 10% in FY 1997

BACKGROUND

A.      The blowout in costs

An analysis by The Greens of WorkCover’s annual returns shows a staggering rate of growth in the fees paid to private insurers to manage workers compensation claims.  Over the same period injury rates have fallen and benefits paid to injured workers have barely kept up with inflation.

 

B.     Where has the money gone?

While the WorkCover scheme is a publicly owned statutory fund, it pays private insurers to manage every claim.  Currently the seven private insurers that provide claims and policy services under contract to WorkCover are:

  • Allianz Australia Workers’ Compensation (NSW) Ltd
  • Cambridge Integrated Services Australia Pty Ltd (trading as Xchanging)
  • CGU Workers Compensation (NSW) Limited
  • Employers Mutual NSW Limited
  • Gallagher Bassett Services Pty Ltd
  • GIO General Limited, and
  • QBE Workers Compensation (NSW) Limited.

Payments made to private insurers are to manage claims and encourage those injured to return to work.  The $3.9 billion paid to these private insurers since 1996 has not lead to any significant increase in injured workers returning to work.  There has been almost no change in the rate at which injured workers have returned to work since 2003.[1]

Management fees paid to the private insurers have grown from just 10% of the cost of benefits paid in FY 1997 to more than 24% of the benefits paid to injured workers in FY 2010.

The simple fact is there has been hundreds of millions of dollars wasted every year on endless reporting and form filling by private insurers.  This bureaucratic tangle has been delivered by the agency overseeing the scheme, WorkCover.


[1] WorkCover Annual Report 2010/11 page 41 and WorkCover Annual report 2007/08 page 24 (FY 2003 being the first year comparable figures are available as reported in the FY 2008 Annual Report).

Media comment by The Greens NSW Industrial Relations spokesperson David Shoebridge:

“Since 1997 payments to private insurers to manage workers compensation claims have grown a staggering 620 per cent faster than both inflation and actual benefits paid to the injured,” Mr Shoebridge said.

“In 1997 the fees paid to insurers to just manage claims cost 10 per cent of the amount paid to injured workers; yet in 2010 insurers were creaming off almost one dollar in every four paid to benefit workers.

“With more than $3.9 billion dollars being paid to private insurers in the last 15 years, this growth in bureaucratic paper shuffling has wasted more than $1.6 billion and eroded the scheme’s financial sustainability.

“These are appalling results and to date no government has had the courage to tackle the real problem in the workers compensation scheme which is this unchecked growth in bureaucracy and paper shuffling.

“These figures show that the looming deficit in the scheme is not caused by payments for injured workers which over time have hardly kept pace with inflation.

“If payments to insurers had matched inflation, like payments to benefit workers have, the scheme would have saved $1.6 billion.

“With over $1.6 billion wasted in overpayments to private insurers, it is little wonder the scheme is facing financial trouble.

“This Government needs to hold WorkCover accountable for the staggering growth in paperwork that does nothing other than divert money from injured workers to private insurers.

“How can any government in good conscience see a quarter of the amount paid in benefits to injured workers siphoned off to private insurers to simply manage claims?”

“Before a single dollar is taken from injured workers the government must address the paper shuffling that is chewing up almost a quarter of the money paid to injured workers,” Mr Shoebridge said.

 

Source: http://davidshoebridge.org.au/2012/05/14/1-6-billion-wasted-on-paper-shuffling-by-workcover/

 

Shortlink: http://workcovervictimsdiary.com/?p=7911

6 Responses to “$1.6 Billion wasted on paper shuffling by WorkCover”

  1. Thank you Mr Shoebridge
    There are many other agencies who could benefit from a reality check re wasting taxpayers funds
    eg centrelink (no need to flog this dead horse again)
    child support for example, for every dollar collected it costs up to 5 dollars in administration fees a 500% markup FFS?
    that equates to five extra dollars just gone poof never to be seen again
    Well not so this money will appear at a nice European car seller in exchange for some short term happiness ,then the cycle will repeat adnauseum,…. 5 bucks at a time

    No wonder canberra has an air of stagnancy

    Billy Connolly once said if the world needed an enema it would be inserted at canberra
    too true…..:-)

    ” helping you meet meet your obligations” lol

    I,m afraid our gov loves nothing more than to give us lip service and keep us distracted with the vagaries of life to “throw us off the scent”
    but hey who cares as most are happy as long as their personal apple cart doesn,t get disturbed
    Is there a gov anywhere that can get it right?
    I think not
    The world is suffering from the absence of good ideas acted upon by good equitable people
    I,m glad some of you showed up here
    We can only give each other strength and hope coping with the daily onslaught which is the workcover nightmare
    CN

  2. Where are the fools from the Labor party with figures like this?

    The fact is that these major parties do not genuinely care about people – all they care about is getting back into power and doing more of the same.

    I congratulate The Greens for their wonderful, factual and hard-hitting work!

    • We congratulate the Greens as well, especially David Shoebridge, who has a genuine, deep and clear understanding in the issues we raise – Bravo for digging up these figures!

      workcovervictim3 May 14, 2012 at 7:50 pm
  3. A good question:

     

  4. Thank you John for publishing these very hard FACTS! So, where has the money gone to? To the pockets of the insurers of course, who are doing “business” – remember their interests is to look after their shareholders, not to look after injured workers. It’s a big dirty and massively profiting business – nothing more to it. The less they pay for (the benefit) of an injured worker the more PROFIT they make – add to that the internal BONUS structure of these giant insurers – recipe for disaster indeed.

    What’s the driving force?

    Let’s say you are hired as the CEO of a major corporation. One of the elements of your compensation is stock options. Let’s say the stock is selling today for $20 a share. You might, as part of your package, be given several million options to purchase that stock at $25 a share. If the stock goes up above $25 during the period that your options can be exercised, you get a windfall. If it does not, your options are worthless. Some companies and some CEOs will do absolutely anything to get the stock price up above their option buying level. So what we started to see several years ago was this notion that you had to surprise the street, surprise the stock analyst.
    You couldn’t simply make profits the way you had been making profits because that was already factored into the price of the stock…

    Read: http://workcovervictimsdiary.com/2011/11/insult-to-injury-an-interesting-interview-with-ray-bourhis-expert-litigator-on-insurance-fraud/

    Our great Australian landscape is littered from ocean to desert with the bones of injured workers who have been dissected, inspected, bisected and rejected! They are victims of what Allan Greenspan called “an infectious greed”, served up by share (or stock)-option-crazed workcover insurance CEO’s with shiny dollar signs in their eyes. Is there no answer?

    Read: http://workcovervictimsdiary.com/2011/12/can-we-fix-the-sick-workcover-system/

    workcovervictim May 14, 2012 at 3:41 pm
    • I agree completely – as I’ve said on a number of occasions ‘injured workers are viewed as liabilities by both employers and insurers’ .  What eats more into profits than cost liabilities!  Forget employer loyalty or compassion from an insurer, it isn’t going to happen.

      I remember being involved in senior management meetings where the discussions around profit and loss statements were nearly always a central focus – everything is measured in numbers – people don’t enter into the equation.  Very disturbing, but all too common.

       

       

      John McPhilbin May 14, 2012 at 4:01 pm