According to a number of researchers, including the Australian Productivity Commission, for years the real costs of workers compensation in most states have resulted from the mismanagement of schemes by the government. Furthermore, research shows that workers compensation schemes across Australia are based on incorrect assumptions about what motivates injured workers.
Myths and faulty assumptions about what motivates injured workers only adds insult to injury
These assumptions are dangerous and have led to the further erosion of benefits to injured workers. The logic behind these policies? They provide a disincentive that prevents cheating the system and discourages malingering. We would argue that this is cynical and dismal view taken by politicians who are poorly schooled in human behaviour and motivation. This has led to the development of systems that uses punishment and coercion in order to motivate injured workers.
Research carried out on behalf of the Industrial Health and Research Foundation, in 2011, highlighted a number of false assumptions governing current systems:
Fraudulent claims are overstated
Despite research claims that false claims increase when larger payouts are available, these represent a tiny fraction of overall claims that are legitimate. Emphasis has been placed on minor increases without considering the fact that many legitimate injuries never reach the claims stage. The failure to detect false claims is systems issue. The current assumption is to treat all claims as though they are fraudulent rather than improving the system to detect the small amount of claims that fall into this category
The under-reporting of legitimate claims
Most reported injuries never make it to the claim stage – in fact, it has been found that many people persevere with injuries to the point of being forced to take time off work for treatment and recovery. If anything, legitimate claims for workers compensation are under reported. The current assumption seems to be that workers will make claims for false and or frivolous reasons.
There is no incentive to claim, for most workers
Most workers return to work as soon as their injuries have healed regardless of the issue of economic incentive (previous and more equitable entitlement available) or disincentive (reduced entitlements that reflect disadvantages of the current system). This suggests that the vast majority of workers are unlikely to make false claims, despite the assumption that false claim costs would skyrocket if larger claims are made available.
Poor claims and injury management process is a major issue
Other factors associated with poor return to work management need to be considered as a major reason for prolonging claims resolution. Failure by employers, insurers, providers and workplace health and safety all play major roles in successfully managing claim, however, injured workers and their families are routinely penalised by the current system.
Complacency about safety is a myth
There is no evidence to support claims that workers become complacent about safety when higher rates of compensation are available. Previous concerns have been based on false assumptions based on questionable research data. Most people simply do not ignore safety in order to qualify for workers compensation.
Adding insult to injury
The stepping down of workers compensation in recent years has exacerbated problems typically associated with injury management and recovery (financial distress, family problems etc). This has also given rise to secondary injuries (i.e. depression and anxiety) on top of many injuries that were initially physical in nature. This suggests the likelihood that many short to medium term injuries turning into long-term problems is substantially increased.
The moral hazard, taxpayers pay for negligence
Poor injury management ends up being paid for by taxpayers as more and more injured workers fail to make successful transitions back into the workforce. Employers routinely view many people who have been unfortunate enough to be on workers compensation as liabilities best avoided, which limits the potential injured workers (especially with long term injuries and psychological injuries) from ever returning to pre-injury employment status and earning capacity. Many long-term injured workers end up being forced onto unemployment benefits at taxpayer’s expense. Employers have limited liability and therefore little incentive to take the health, safety and wellbeing on injured workers seriously.
Interestingly, the research focused primarily on physical injuries – however, the growing concern is the increase in psychological injuries, both primary and secondary, resulting from the poor management of claims (not only by insurers, but employers who take a negative view of injured workers). Reductions in wages, financial pressures, and poor return to work management are all implicated. The real concern is that given physical injury claims should be relatively straightforward to manage – which it seems is anything but, because the system is more adversarial towards injured workers, in general. The rapid rise in psychological injuries in many workplaces only places greater pressure on the entire system, because the management of psychological injuries are significantly more complex and time consuming to manage than physical injuries.
The rising costs of psychological injuries
Claims data for psychological injury for Australian government organisations over recent years indicates a rise in these types of claims. Work pressure accounts for around 50 per cent of psychological injury claims. The next most significant category for Australian government organisations is harassment/bullying combined’ – which accounts for around a quarter of psychological injury claims. Of declining importance in recent years is ‘exposure to workplace or occupational violence’ which accounts for only about 10 per cent of psychological injury claims. ‘Exposure to a traumatic event’ (which includes witnessing a fatal or other accident) accounts for less than 5 per cent of psychological injury claims.
According to Comcare, Australia’s federal work health and safety regulator, claims associated with mental stress have risen 54% since 2006-2007. Work related mental stress is of concern in the Comcare scheme, especially in the APS. The number and proportion of worker’s compensation claims as well as the cost of psychological injury claims, has increased over recent years.
Over the four-year period to 30 June 2010:
> around 9 per cent of accepted Australian Government premium payer claims were attributed to mental stress; and
> around 35 per cent of total claim costs related to these claims.
However, the impact of mental stress is even greater when secondary conditions are taken into consideration. There are a number of cases where the initial claim was not caused by mental stress, but the injured worker developed a mental disease as a secondary medical condition. Taking these cases into consideration, over the same period:
> around 11 per cent of all accepted claims within Australian Government premium payers involved mental disease as either a primary or secondary condition
> around 43 per cent of the total cost of accepted claims related to these claims.
There also tends to be a limited view of the work capacity of people facing these problems. According to Comcare employers struggle to find suitable duties for people with a psychological injury claim. Those with a psychological injury do not return to work as quickly as those with claims for non-psychological injures. For example, during 2010–11, 49% of the mental stress claims from employees of Australian Government premium payers that involved 4 weeks lost time from work progressed to 26 weeks lost time. This compares to just 23% of all other claims that progressed from 4 to 26 weeks lost time during the same period.
Comcare. (2011). Comcare submission to the public hearing: House standing committee on education and employment inquiry into mental health and workplace participation. Australian Government.
Productivity Commission. (2004). National worker’s compensation and occupational health and safety frameworks. Final report. Australian Government.
Purse, K. (2011). Provisions of fair and competitive worker’s compensation legislation, University of South Australia. Research funded by the Industrial Health and Research Foundation