Since I posted the article Tassie Compo Payments up! – Looking behind the figures!, I have been able to obtain comments from WorkCover Tasmania.

The only source of information they have is from the insurers, however WorkCover believes their figures are ‘reasonably accurate’.  They are not able to audit individual claims to check the accuracy of data and wouldn’t have the resources to do so in any case, but they do conduct some validation checks.

Further WorkCover have clarified that only the costs ‘claimed’ are reflected in the figures, so that a worker who incurs costs for treatment of a work-related injury or seeks legal advice and that is not covered by the insurer, the figures are not reflected in WorkCover figures.

What WorkCover Says

WorkCover confirmed ‘the average cost of medical benefits for 2013/14 was 5% higher than the previous year. Around $5,500’.

In relation to the increase in lump sum payments WorkCover advise:

‘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 2009 amendments to the Act brought in the two year rule for redemption payments. This saw lump sum payments fall from around $40M in 2009/10 to $35M in 2010/11 and 2011/12.

Since 2012/13 there has been a ‘catch-up’ phase where the two year waiting period for a number of claims has expired and claimants are now preceding with redemption payments, hence the increase in lump sum payment to $46M in 2012/13. This would also account for some of the increase in 2013/14.

In 2013/14 there was also the unique single large claim of $10M and a further $8M to number of other large common law claims settlements and redemptions over $1M. It is expected that lump sum payments will go back to ‘normal’ (around $46M) again for 2014/15.’

In relation to Legal and Investigation Costs, WorkCover states:

‘Legal and investigation costs of $13.4 million were up 17% in real terms in 2013/14. This follows increases of around 19% per annum in the years 2011/12 and 2012/13. We expect the increase legal and investigation costs is linked to the changes in lump sums following the 2009 amendments, reflecting both the initial slow down and subsequent catch-up in redemptions and, to a lesser extent, the increasing number of claims receiving multiple lump sums.

It is expected that legal and investigation costs will be around $14.0 million next year.’

In relation to the comments by Macky, WorkCover says:

‘The gist of what this Victorian lawyer is saying is correct, though not everything he says lines up exactly with our expense categories.

Prior to 1 July 2012 we used to only collect data on two types of expenses – legal expenses and investigation expenses. Here worker and insurer/employer payments were lumped together. Since July 2012 (and with the implementation of the new data system) we are able to split these categories up.

 The new payment categories are listed below.’

‘We at WorkCover rely heavily on insurers allocating expenses to the correct category. It will hopefully allow us to see where these types of payments are going.

The graphs below show the breakdown of the payments for the past 2 years. It would seem that about a quarter of payments relate to the worker’s legals and the remaining split between the insurers legals and investigations.’

What Conclusions Can We Draw?

To me it seems that while there are other explanations, and the answer is not clear, the data is consistent with increasing legal and investigation costs due to a more legalistic approach to claims management, even though legislative changes regarding lump sums might be driving some of the costs. There is however no ‘blow out’ in medical treatment expenses.

Whatever the cause, rising lump sum and legal/investigation expenses is a poor reflection on the health of the scheme.