In Search of the Magic Pudding


Ken Crompton

In August 1984, I addressed a conference at Melbourne University which examined the workers' compensation system. My paper was entitled 'Towards an Occupational Rehabilitation System'.

The thrust of the paper was to change the system to:

  • pension-based;
  • 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 by WorkCare.

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 to employment.

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 to employment.

But in support of my criticism, let me lay these facts before you:

  • the AMA's negotiation of higher fees for workers' compensation cases;
  • 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 claims;
  • 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 injured worker.

Medical Tribunals

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 of rehabilitation.

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 to work.

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.

Employers' Role

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.

Compulsory 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 thyself!

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:

    Salaries $2,073,184
    Office rent $195,414
    Depreciation $190,321
    Other $401,321
    Total $2,860,240

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 Group ($12,000);
  • Geelong RSI Centre ($15,000);
  • Latrobe Valley 'GRlP' ($15,000);
  • Victorian Public Service Injury Support Group ($15,000);
  • Clothing & Allied Trade Union Support Group ($15,000);
  • 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 hard work.

It's time to emphasise work in WorkCare.