“Big jump in payouts for work injuries”
This was the title in an article in today’s Hobart Mercury Newspaper.
The newspaper article highlighted a 50% increase in lump sum compensation payments from $43.2M in 2012-13 to $63.6M in the 2013-14 year, an increase of about 50%. Apparently there was a single $10M common law claim from a 2005 injury that accounted for a proportion of that increase.
The figures appeared in the WorkCover Tasmania Annual Report for 2013/14.
What does a closer look at the figures tell us?
The number of actual claims has dropped from 8,417 in 2012/13 to 7,841 in 2013/14, a drop of about 7%, yet total claims payments have risen from $150.2M last year to $170.9M in 2013/14, an increase of about 13%.
Weekly Benefits payments have dropped in absolute terms, Lump Sum payments have increased as identified in the Mercury article, while Medical and Related Benefit payments have remained stable at about $46M, representing a small actual increase in medical costs per claim from about $5,400 per claim to $5,800 per claim, an increase of about 8%. This is not much above the annual average medical inflation rate of about 5% over the last 10 years.
It is difficult to interpret the increase in lump sum payments given these payments represent a combination of payments for future lost income and medical treatment in addition to payments for permanent impairment. The trend could indicate an increase in the desire to settle claims over long-term payment of compensation benefits or just reflect worsening outcomes and associated costs. Analysis of the components of these lump sum payments would be needed to interpret this increase.
The interesting figure is the increase in Legal & Investigation payments. The costs have increased from $ 11.6M to $13.5M, representing an increase from about $1,375 to over $1,700 per claim. An increase of 25%!
Legal and Investigation payments, in some ways reflect the failure of the system. In an ideal compensation system such costs would be minimal. These payments represent funds directed to lawyers and investigators that don’t benefit the injured worker, in terms of advancing their recovery, maintaining their income or providing compensation for permanent impairment.
It would be useful to understand the factors behind the increase in Legal and Investigation payments. Are increasing claims costs driving the insurers to utilise legal and investigation resources to contest liability or challenge medical costs of treatment in the hope of an overall reduction in the cost? Are legal fees rising at a rate greater than inflation? Is there an increase in the frequency of fraud? Are there more disputes over impairment assessments? I don’t know the answer, but it does seem clear that there isn’t a blow out in medical costs driving claims costs as is sometimes suggested, despite the increasing costs of medical technology and pharmaceuticals.
My view is that there is too much spent on legal and investigation costs. Better and cheaper outcomes could be obtained by enhancing expert medical and rehabilitation expertise in the early phase of a claim to overcome identified risk factors for poor prognosis and reduce the burden of chronic pain and depression and associated disability that seems too common an outcome in the cases that I see.
It would be interesting to hear the perspectives of the various insurer, legal, rehabilitation and medical practitioners on this issue to see if some conclusions can be drawn from these figures.
I look forward to comments.
Link to WorkCover Annual Report: