Let’s shine a brighter light on scheme performance
I could have used AI to write this article, but I decided to confine its role to assisting with research, data analysis and grammar. The views and conclusions are my own.
In my previous article, Scheme Review – Let’s Do It Properly!, I argued that we need a coherent picture of how Tasmania’s workers’ compensation system operates as an economic model and how its resources are distributed. Such an analysis should be an essential part of the Scheme Review currently underway.
There are significant deficiencies in the published data. Nevertheless, examining the information available from independent sources provides a useful starting point.
For me, the central question is simple: how can we achieve the best outcomes with the resources available? Before we can answer that, however, we need to know what those resources are and how they are being used.
What do independent reports tell us?
The Auditor-General’s July 2015 report examined the cost and management of personal leave across five major State Service agencies. Workers’ compensation was excluded, with a separate audit proposed.
Subsequent Auditor-General reports have commented on agency-specific workers’ compensation costs and the Tasmanian Risk Management Fund’s outstanding claims liabilities:
- The Auditor-General’s 2019 audit of the Tasmania Prison Service identified workers’ compensation as a significant and difficult-to-control cost.
- In 2022–23, the TRMF’s outstanding claims liability increased from $374.34 million to $438.15 million.
- The increase in personal-injury liabilities was attributed largely to psychological claims, increasing weekly-benefit costs and claim duration, higher non-weekly costs, wage exposure and inflation.
- By 30 June 2025, total outstanding claims liabilities had increased from $516.24 million to $665.87 million. The personal-injury provision increased by $140.92 million in that year alone. Psychological claims, increasing payment costs and claim continuance were again identified as major drivers.
The strongest Tasmania-specific independent analysis is the annual actuarial review commissioned by the WorkCover Tasmania Board. These reviews examine the performance of both the State Service and private insurance arrangements.
The latest published report is KPMG’s Tasmanian Workers’ Compensation Scheme Review to 30 June 2025. Earlier reviews were undertaken by Scyne Advisory, formerly PwC Consulting.
Before considering KPMG’s findings, I want to describe my own experience as a medical service provider within the Scheme. It illustrates some of the difficulties involved in interpreting the published expenditure categories.
A service provider’s view of scheme expenditure
When I conduct an independent medical assessment arranged by a worker’s lawyer, my fee is paid by the lawyer on behalf of the client. Increasingly, it may instead be funded by a finance company under a loan arrangement pending settlement of the claim.
The Scheme’s data may not identify this as a medical-assessment expense. If the cost is later deducted from the worker’s settlement, it may simply be embedded within the financial consequences of the lump-sum payment. Published data do not show how much of a nominal settlement is ultimately retained by the worker after legal fees, medical assessments and other disbursements have been paid.
WorkSafe’s reporting system separately identifies redemption payments and worker legal costs paid by insurers. However, it is not clear whether costs deducted from the settlement itself are separately reported. Nor do published reports provide a settlement-level breakdown showing the worker’s gross entitlement, legal and medical expenses, and net amount received.
Some workers have told me that almost their entire “payout” was required to meet outstanding accounts from lawyers, doctors and allied-health providers, leaving little to fund future income support or healthcare arising from their injury. These personal accounts cannot establish how common this is, but they raise an important question that the published data cannot answer.
The timing of lump-sum reporting presents a further problem. Lump sums are generally reported in the year in which they are paid, although the injury may have occurred several years earlier. KPMG indicates that much of the 2024–25 increase was associated with the 2021–22 accident year and may reflect the accelerated closure of an accumulated group of claims.
A rise in lump-sum expenditure in one year therefore does not necessarily indicate that injuries occurring in that year were more frequent, more serious or more generously compensated.
Medical treatment or claims assessment?
Until recently, the cost of an insurer-arranged medical assessment generally appeared within legal and investigation expenditure.
The introduction of NIDS version 8.1 created Code 18 for independent medical reviews conducted under section 90A. These costs were reclassified from legal and investigation expenditure to medical and related expenditure in the latest KPMG review.
This contributed to a reported 25.9% increase in medical expenditure and a 21.9% reduction in legal expenditure. The reclassification did not represent a comparable increase in healthcare delivered to injured workers.
The broader “Medical and Related” category also combines expenditure with quite different purposes. It includes treatment, investigations, reports, rehabilitation services and independent assessments. The published KPMG categories do not provide enough detail to distinguish therapeutic care from services used to assess, administer or determine a claim.
The underlying NIDS codes distinguish medical practitioners, allied health, vocational rehabilitation and independent medical reviews. Physiotherapy and psychology are coded as allied-health services rather than as doctor expenditure. However, KPMG does not publish the mapping between these individual codes and its broader categories of “Doctor”, “Rehabilitation”, “Hospital”, “Other Medical” and “Miscellaneous”.
Allied-health expenditure appears likely to be aggregated within KPMG’s “Rehabilitation” category, but this cannot be confirmed from the published report.
Costs that may not be captured at all
The classification problem becomes still more complicated when a worker develops a secondary psychological condition during the course of a claim.
Sometimes an insurer agrees to fund psychological treatment under the existing claim. In other cases, the GP may be asked to prepare a Medicare-funded Mental Health Treatment Plan or the worker may be required to submit a new workers’ compensation claim.
Depending upon who pays, the psychologist’s fees may appear as allied-health or rehabilitation expenditure—or may not appear in Scheme expenditure at all if the treatment is funded through Medicare or paid privately.
This raises a larger question: what other expenditure relevant to workers’ compensation is outside the published figures?
The Department of Justice recently advised that its Wellbeing Unit would be abolished and replaced by an outsourced Employee Assistance Program. One purpose of such an internal service was presumably to prevent psychological injury, support affected employees and provide an alternative pathway before difficulties became compensation claims.
Should expenditure on prevention and early intervention be considered when reviewing the workers’ compensation system? I suggest that it should.
Employers also incur substantial expenditure on workplace health and safety, injury prevention, employee wellbeing and claims management.
Major State Service agencies—including Justice, Health, DECYP and Police, Fire and Emergency Management—operate their own Injury Management Units. Their staff manage workers’ compensation claims and, in some instances, participate directly in service delivery.
In addition, the TRMF engages JLT as its Fund Administration Agent for claims administration, claims-management and insurance advice, and insurance placement.
The cost of JLT’s contract does not appear to be included in KPMG’s State Service claim-payment categories. It is probably included within the TRMF’s aggregate “Other expenses”, reported as $6.813 million in 2024–25, but the amount paid to JLT is not separately disclosed or allocated between workers’ compensation and the TRMF’s other risks.
The staffing and operating costs of agency Injury Management Units also appear to sit outside the published Scheme payment data. They are more likely to be absorbed within departmental employee, human-resources and administrative expenditure.
These are real costs of administering the workers’ compensation system, even if they are not visible in the Scheme Review.
What do the recent figures show?
I used AI to help interrogate the KPMG data from three perspectives:
- expenditure directed towards workers;
- expenditure on managing, investigating and contesting claims; and
- differences between the State Service and licensed insurers.
Several findings stand out.
Income-support payments are rising rapidly
Between 2021–22 and 2024–25, nominal weekly payments increased by approximately:
- 80% in the State Service; and
- 60% among licensed insurers.
In 2024–25, State Service weekly payments of approximately $71.6 million almost equalled the $71.8 million paid by all licensed insurers, despite the State Service having a much smaller covered wage base.
This is not a risk-adjusted comparison. The occupational profile, prevalence of psychological injury, claim duration and injury severity differ between the sectors. Nevertheless, the size of the disparity warrants closer examination.
Treatment expenditure cannot be reliably isolated
The medical and related category does not adequately distinguish:
- therapeutic treatment;
- diagnostic services;
- allied-health care;
- vocational rehabilitation;
- provider reports;
- insurer-requested assessments; and
- independent medical reviews.
It is therefore unsafe to interpret all reported medical and rehabilitation expenditure as healthcare delivered for the purpose of promoting recovery.
Lump sums are not equivalent to net benefits received by workers
Lump-sum expenditure combines redemptions, permanent-impairment payments, common-law payments and some older negotiated settlements.
Some legal costs are reported separately, but other legal, medical and finance costs may be embedded in, or deducted from, the settlement. Published figures do not show how much of total lump-sum expenditure is ultimately retained by workers.
Administration is incomplete and reported asymmetrically
Licensed insurers reported $66.4 million in total expenses in 2024–25—approximately 20% of premium. However, this includes administration, commissions and brokerage, levies and reinsurance, rather than claims management alone.
Equivalent State Service costs are not published. In particular, we do not know the full cost of:
- JLT’s workers’ compensation administration;
- agency Injury Management Units;
- internal HR and payroll activity;
- management and supervisor time;
- Treasury’s TRMF administration; or
- internal government legal services.
A superficial comparison could therefore make State Service claims administration appear much less expensive than private insurance simply because many State Service costs are recorded elsewhere.
Important system costs sit outside claim-payment categories
Employer WHS and prevention programs, regulatory activity by WorkSafe, Tribunal operations, internal agency services and some dispute-related professional costs are either reported elsewhere or not separately identified.
The problem with the present reporting model
The published Scheme Review does not provide a complete functional account of workers’ compensation expenditure.
It reports transactions principally according to insurer payment codes rather than separating expenditure according to its underlying purpose. Medical expenditure includes both treatment and assessment. Rehabilitation may combine therapeutic allied-health services with workplace rehabilitation and case-management activities. Internal claims-handling costs are largely outside claim-payment data. Legal and future treatment costs may be embedded in lump sums. Employer-incurred and broader system-administration costs are reported elsewhere or not identified.
The figures therefore cannot establish what proportion of total system resources is devoted to:
- healthcare and recovery;
- income support and compensation;
- injury prevention and early intervention;
- claims administration;
- investigation and medical assessment;
- dispute management and litigation; or
- general system regulation and insurance operations.
The fundamental questions remain unanswered
From the published data, I cannot answer two fundamental questions.
First:
How much of the available resource is spent administering, managing, investigating and contesting claims, compared with the amount directed towards healthcare, recovery, income support and compensation for permanent injury?
Second:
Are the systems used to manage compensation claims effective—or might some aspects of those systems worsen outcomes while themselves consuming excessive resources?
My understanding of the literature is that the best health and recovery outcomes for workers with physical or psychological injuries are achieved through early action to identify and modify psychosocial risks, maintain appropriate workplace connection and support recovery.
The needs of workers whose incapacity continues beyond two years are different. These long-duration or “tail” claims contribute disproportionately to Scheme costs and may justify a different model of care and support.
Yet the published data do not show how resources are deployed over the life of a claim. We cannot distinguish adequately between expenditure during:
- the first few weeks or months;
- the remainder of the first two years; and
- long-duration claims extending over many years.
This is a major omission if we want to know whether resources are being applied when they are most likely to improve outcomes.
What information should the Scheme Review obtain?
A more useful functional account would report expenditure by insurer sector, injury type and claim duration, separating:
- direct treatment and therapeutic rehabilitation;
- income-support payments;
- permanent-impairment compensation;
- redemptions and other settlements;
- worker and insurer legal costs;
- independent medical assessments and other reports;
- external and internal claims management;
- insurer and TRMF administration;
- employer-funded prevention and early-intervention services; and
- regulatory and Tribunal costs.
For settled claims, reporting should also show the gross settlement, costs paid in addition to the settlement, costs deducted from it and—subject to appropriate privacy protections—the amount ultimately retained by the worker.
Let’s make the review count
It is important that the Scheme Review does not become trapped in a political contest between workers’ rights and employers’ interests.
If reform does not make better use of finite resources, everyone will ultimately be worse off: injured workers, their families, employers and the Tasmanian community.
Before deciding what must change, we need a much clearer understanding of where the money currently goes and what outcomes that expenditure achieves.
Let’s ensure that reliable data, independent academic analysis, professional expertise and lived experience are integral to the review.
Let’s shine a brighter light on Scheme performance.
