In Search of the Magic Pudding
In August 1984, I addressed a conference at Melbourne
University which examined the workers' compensation
system. My paper was entitled 'Towards an Occupational
The thrust of the paper was to change the system to:
- reasonable compensation; with
- a strong emphasis on rehabilitation.
This later formed the basis of the Chamber's submission
to the Cooney inquiry and, indeed, of WorkCare.
The introduction of WorkCare was marred, however,
by changes to accommodate the Trades Hall Council and
the political situation.
Consequently it commenced with defects which are still
being worked out now. Among these defects, I list:
- community-based system;
- definition of injury;
- role of medical profession;
- absence of medical tribunals;
- amount of compensation payable;
- lack of a role for employers;
- absence of compulsory rehabilitation; and
- role of the Victorian Accident Rehabilitation Council.
Community (Industry) Based System
The previous system of workers' compensation insurance
was based on employee- and firm-specific assessment
of risk and insurance against that risk. An employer's
premiums reflected his risks.
Under WorkCare, an employer is not subject to an individual
and annual assessment of risk. He is classified to
an industry and to its levy rate according to the Australian
Standard Industrial Classification (ASIC) as adopted
ASIC is an economic and statistical analysis of industry
according to end product or service. It does not group
together industries or firms with similar technologies,
risks or businesses; for example, Mr Wirski who manufactures
lampshades with a stanley knife and scissors was grouped
with the manufacturers of electrical generators and
other heavy electrical equipment, simply because his
lampshades were intended for electrical lamps.
Consequently we have massive cross-subsidisation of
dangerous industries over the seven levy rate classifications
and within industry groups. Dangerous industries such
as building and construction (22 per cent under the
old system), saw-milling and motor vehicles and parts
(14 per cent) had premium reductions to 3.8 per cent.
The outcome in practice has been an acknowledged lack
of incentive to improve occupational health and safety
and to increase accident prevention effort.
A legislated framework in 1985 for bonus penalties
has still not been implemented. Currently under discussion
is a proposal to commence on 1 July. However, it remains
inadequate, being focused on the worst 20 per cent
and the best 20 per cent, both on an industry basis.
The majority 60 per cent won't be troubled. I believe
we must question seriously the wisdom of the broad
industry approach---I suspect the rejection of the
old firm-specific approach was a clear case of the
baby being thrown out with the bathwater.
Definition of Injury
Since the introduction of workers' compensation in
1914, the definition of injury has broadened significantly.
Originally, an employer was liable for traumatic injury
or illness caused by work accident.
In the late 1960s and early 1970s the definition was
widened and a flood of ageing process symptoms were
admitted, particularly for deafness and heart conditions.
In 1979, the Hamer Government tried to cap this by
requiring that work be identified as a 'substantially
contributing factor'. After strikes and civil disturbance,
they retreated to a contribution of 'recognisable degree'.
Even this limit was removed with WorkCare. Now, provided
work is a contributing factor (to any degree) to the
recurrence, aggravation, acceleration, exacerbation
or deterioration of a pre-existing injury or disease,
the employer must pay 100 per cent compensation.
It is difficult to imagine any symptoms of the ageing
or natural process which may not be said to be accelerated,
exacerbated, etc. by one's work.
The medical profession have been criticised for accepting
claims too readily and, while I believe this to be
true, I admit to sympathising with their dilemma given
this definition. Accordingly, I was pleased to read
last week of the profession defending themselves and
attacking the definition of injury. We must, however,
first address a wider question. That is, whether workers'
compensation is a social service or whether it is properly
a system a compensation payable by employers who fail
in their duty to employees.
In the 1960s and 1970s the catch-cry among Labor lawyers
and those feasting at the workers compensation trough
was a loud 'Its a social service, so don't deny our
claims!' WorkCare is the triumph of this thinking.
The problem with this triumph is that social service
is best delivered on the broadest community level and
thus subject to the strictest control and accountability.
Role of Medical Profession
I have long criticised the medical profession's role
in workers' compensation. They enjoy the fruits but
accept little responsibility.
They accept no responsibility to decide whether an
injury is genuine, caused by work, or incapacitates
the worker for any work. Moreover, they have no responsibility
to work with the employer to return the injured worker
I acknowledge these to be broad statements and subject
to qualification and explanation. Firstly, I have noted
the difficulty of defining injury. Also I note that
workers can readily change their treating physician.
Finally, I note the apparent lack of financial incentive
for physicians to work with employers to return workers
But in support of my criticism, let me lay these facts
- the AMA's negotiation of higher fees for workers'
- the unwillingness to understand the workplace
one Dandenong employer invited 32 local physicians
to visit his premises on 2-hours paid time: none accepted;
- employer reports of physicians admitting they were
the family doctor and therefore could not reject the
- similarly, reports of acknowledgments that failure
to issue on-going certificates risked loss of the patient
to another physician;
- reports of over-servicing and over-charging.
Employers believe the medical profession must be called
upon to play a much greater role in a pension-based
system focusing on rehabilitation.
Firstly, they must play a more significant 'judicial'
role in admitting claims---'some-one else will decide'
is no longer an acceptable attitude. Secondly, they
must play an integral role with the employer in the
supervision of recuperation and rehabilitation of the
Employers supported before the Cooney inquiry the adoption
of Queensland-style medical tribunals.
We see in such tribunals an opportunity for peer pressure
and a role both in acceptance of claims and supervision
We believe the current enlarged disciplinary role
for medical tribunals to be an inadequate measure.
At the very best, we need specialist medical tribunals
to deal with 'soft-tissue injuries'---the bulk of WorkCare
claims and problems.
Amount of Compensation
The current amount of compensation is excessive---
often being 100 per cent of pre-injury earnings.
It is a major incentive to seek compensation in lieu
of work and a major disincentive to an early return
The Government's actuaries, Trowbridge & Tillinghast,
confirm this and suggest paying 60 per cent only if
current reforms don't improve WorkCare's financial
performance. At the very least, the legislation needs
amending to remove the anachronism under the old system
of 'top-up' allowances for dependent spouse and children.
This anachronism means that few workers are restricted
to compensation of 80 per cent pre-injury earnings,
as the Government intended.
A problem under the old system was that accident prevention
and rehabilitation fell between divided responsibilities.
An employer washed his hands of the issue upon passing
a claim to his insurers. The insurers regarded the
issue as one of economics : lump-sum settlement to
get shot of the claim and a premium increase to cover
any shortfall.The trade union and government reaction
was to remove private insurers to a minor role and
restrict employers to paying premiums and paying compensation.
Employers believe they should have a role in defending
claims (especially as to the degree of incapacity for
available work), and a role in the workers's rehabilitation.
When I first envisaged a system focused on rehabilitation,
I regarded workers as having an obligation to make
an effort to rehabilitate themselves.
You would recognise the principle physician heal
It is a principle recognised at common law where an
injured person is obliged to mitigate his damages and
cannot return to the workforce if he fails to do so.
I envisaged an obligation to undertake supervised medical
treatment and, where possible, attendance at work---as central to rehabilitation.
Instead, the Trades Hall Council view prevailed---
that is, compulsory rehabilitation is counter-productive.
I don't accept this nor do employers accept the situation
where workers can go 'doctor shopping' when return
to work looms. I totally reject the Council's submission
last year that the problem with the rehabilitation
system is that too much emphasis is being placed on
returning workers to the workplace.
Role of VARC
The Victorian Accident Rehabilitation Council is an
independent body charged with returning workers to
work or at least to a normal social life through rehabilitation
programs and services.
Employers view VARC as a bloated bureaucracy of do-gooders,
acting as a safe-house for work-shy workers.
VARC is too remote from the workplace and from the
urgent requirement that rehabilitation commence immediately.
Examining VARC reminds those familiar with the TV
series 'Yes Minister' of the episode 'The Compassionate
Society' about Edward's Hospital 500 administrators
but no patients!
Minister Hacker opines that taxpayers' money was voted
to make sick people better.
Sir Humphrey replies 'On the contrary, Minister,
it makes everyone better better for having shown
the extent of their care and compassion. When money
is allocated to Health and Social Services, Parliament
and the country feel cleansed. Absolved. Purified.
It is a sacrifice'. Minister Hacker 'The money should
be spent on patient care, surely?'
Sir Humphrey 'When a sacrifice has been made, nobody
asks the Priest what happened to the ritual offering
after the ceremony'.
VARC according to its 1986-87 annual report spent
only 25 per cent of $2.8m on rehabilitation; the balance
(75 per cent or $7.8m) was spent on administration!
Worse, not even the money designated for rehabilitation
services was actually spent on service.
In fact, when you examine the notes to the accounts,
the $2.8m 'spent' on rehabilitation service shows:
Office rent $195,414
The situation with grants possibly part of the 'other'
$401,321---is no better. $250,000 in grants were made
for other bureaucracies such as:
- Hampton Park Care Group ($4,120);
- RSI Support Group FIST ($7,230);
- Broadmeadows RSI Support Group ($12,000);
- Greek Injured Workers Group, Lalor, Thomastown,
Epping and District ($5,150);
- Brunswick Repetitive Strain Injury Support and Self-Help
- Geelong RSI Centre ($15,000);
- Latrobe Valley 'GRlP' ($15,000);
- Victorian Public Service Injury Support Group ($15,000);
- Clothing & Allied Trade Union Support Group
- Collingwood Community Health Centre Injured Workers
Support Group ($12,000); and
- Womens Repetition Injury Support Team ($135.000).
Can you imagine VARC's administration---how can you
run a $1.4m deficit when your income is known and you
control your expenditure!
Employers believe the time has come to prick this
bloated bureaucracy, cut its independence and return
the focus of rehabilitation to the workplace where
employers can work with the local medical community.
I have not examined other Australian systems in detail
today. But I note moves in some States---South Australia,
and New South Wales---to follow WorkCare. I note too,
however, that they have not accepted WorkCare as a
Holy Grail and sensibly dropped some elements.
Certainly, WorkCare is a system of significant change.
Given that, we can acknowledge that there would be
difficulties attendant upon that change.
Even so, many of the current problems were forecast
and could have been avoided. Even now, significant
action is required to put WorkCare back on the rails.
Perhaps that is the lesson we can draw from the current
situation---accident prevention, compensation and rehabilitation
require more than magic political potions: it requires
It's time to emphasise work in WorkCare.