Written By: - Date published: 12:27 pm, December 4th, 2008 - 52 comments
Categories: ACC, Media, national/act government, spin -
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There’s a lot of talk about the ACC budget deficit and National’s use of the issue to create an environment in which their privatisation scheme can roll with the minimum political fall-out.
Any doubt I had that this was their plan evaporated this morning when I heard Nick Smith on RNZ moving the story along by talking about maybe having to increase levies.
You see the ACC “blow out” is an anchor-story. It’s a big newsworthy story that can be spun with an “urgent” media conference and get lots of press that then anchors a whole stream of smaller stories that wouldn’t have got any coverage without it.
And National is doing exactly that. The urgent media conference was a great piece of theater as was the “ministerial inquiry”, and the lines “billion dollar blow-out” (gotta love that alliteration) and “ticking time-bomb” (oh noz! the clock is ticking!) were clearly prepared well in advance. The aim was to make as big a splash as possible and they pulled out the stops to do so.
Now they’ve created this anchor expect to see lots and lots and lots of minor ACC stories such as Nick’s ‘levies could rise’ bunkum spill out over the next few weeks with lines like “this follows closely on the heels of the billion dollar blow-out” and “against the background of a government inquiry in to the ACC timebomb” in them.
After a few months of this coverage it will look like there are a million things wrong with ACC. And then? Well, who could blame them for flogging it off?
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ts: Definitely an identity jack from someone who knew your e-mail, which is why it didn’t get picked up here. It is a different IP range. I’ll contact the possible suspect, but it is a dynamic IP. Putting the IP range on moderation.
I’d suggest that you start logging in.
Is ACC giving the country good value for money?
Not really, unfortunately a system has developed in which many health professionals and others in the ‘faux private’ sector have become dependant on ACC sometimes lenient treatment and rehabilitation guidelines. If the public realised what the benefits of a treatement were and the cost of the treatment – spending would reduce dramatically.
It’s about Trust…
Funny how the Standard’s idea of “Spinbusting” is a story to completely change the focus from Labour’s concealment of their appalling mismanagement to being somehow about speculations on hypothetical future Nat policies…
Bill
So your position now is ACC is a robust functioning system because the work account – the one account capable of being easily opened to competition – is in surplus whereas the rest is over 8 billion in the whole?
Doesn’t this kind of prove the point about efficiency?
I heard Larry Williams was talking about his experience with ACC on ZB last night. Apparently, he went in for some phisio for an injury. According to him, he had fully recovered and did not need anymore sessions. He tried to cancel the remaining ones. However, they pressured him into completing the remaining sessions anyway. Larry had the distinct impression that the phisio wanted to make sure they got the remaining ACC payments.
I am sure there is a lot of this sort of thing that goes on. Thus, the system is probably being rorted left right and centre.
2.5 Billion and counting….”remember this election is all about trust”!
If Clark and Cullen were people of integrity they would resign immediately, these two blatantly lied to the people of New Zealand and should have no place in our Parliament.
Those of you who continue to defend them are equally guilty.
IB wrote:
I don’t understand your point, IB. The cost increases in the Earners’ account will be directly paid for by Earners, meaning an increase in levies on earners to the tune of around $600 a year. That seems to me to be a very good reason to proceed with the tax cuts, with such an increased cost looming.
I could see your argument if the blow-out constituted a cost to the taxpayer (and the non-earners account does, to the tune of $300 million), but the earners’ account isn’t paid by the taxpayer. Using an increase in levies in the earners’ account as a reason to delay tax cuts is stretching it, in my view.
Tim, as I understand it the earners account (and most of the others) have their deficits subsidised. The increased levies have been recommended to make the account self-funding by 2014. Labour looked at this and decided it would mean raising the levies to high too quickly.
If National’s tax cuts didn’t go ahead there would be more than enough money to continue the subsidy. But it is about political priorities and National is obviously of the belief that taxcuts that focus on the top 10% of earners are a greater political priority than an ACC system that works for all New Zealanders. That’s their decision to make and having done so they need to sell it. That’s what they are doing with this media campaign.
Tim Ellis: In my view, it just isn’t acceptable to continue delaying fully-funding ACC accounts.
I absolutely agree – but that’s pie in the sky at present.
Rationally, the only account that might be open to competition and privatisation is the Workers Account.
Correct. But my argument is that gutting this account will weaken the entire system such that it is no longer even as viable as it is today – which is to say, the only rational think to do at that point would be to sell it lock, stock and barrel for peanuts to IAG or some gang of crooks like that. That would mean an end to universal comprehensive no-fault accident cover in NZ, and that’s simply not an acceptable outcome for me.
My own view is that New Zealand just isn’t wealthy enough to pay for such a luxurious scheme.
I disagree, but …
We need to have that public debate.
I couldn’t agree more. It’s a matter of situational utility.
gomango: but Lew – what do you want someone to prove?
The initial gedankenexperiment was here. A fairly useful but unresolved discussion between burt, myself and others is to be found in this thread. Basically, I wanted some of the National true believers who claimed that opening the worker account up to competition would not lead eventually to privatisation to rebut this fairly elementary proof. It wasn’t a comment on the state of indebtedness of ACC or its operations – as I’ve made clear, I believe there are improvements to be made, just not via competition leading to privatisation. I’m not trying to bait anyone – I really want to see if anyone, anywhere can actually explain why it won’t happen in apparent contradiction to what we know about behavioural economics. If you want to argue privatisation is a good thing – then that’s a different argument, and one National aren’t prepared to have with the electorate.
And if your only proof that ACC is better now than it was is that your mothers business has better cashflow now – well really?
I meant no such thing as proof – just an offhand anecdotal observation than when an agency can’t even pay its own contractors something is badly wrong. At least they can do that now. But indeed, it shouldn’t be their top KPI.
a root cause of ACC problems is the fact it has become a social policy tool [...] it is a politicised outfit (in terms of the rules given to it by the minister),
I agree, but we probably locate the source of the problem differently. National attacked and undermined the entire ACC concept and model with the 1998 privatisation, and did so on a strictly unilateral basis. This politicised ACC to an extent that it shouldn’t have been, and is why I think future changes must be made in consultation with those who’ll actually be implementing them, though of course not to the exclusion of other stakeholders’ needs. I think their first step should be to try and salve some of that bad blood, because like it or not, ACC and the Nats have to work together, and while they can fire the board or whoever, they can’t start rolling the tanks over the front-line staff, providers and contractors they’ve been so forthright in championing this election campaign.
The one argument I like from the right is impose some discipline on its management – easiest way to do that is some targeted competition.
In almost any other industry I would agree, but here we get back to my initial six-point schema of how it all turns into a US-style system which rewards providers who pay out the fewest claims at the lowest average cost to the lowest-risk clients, rather than a scheme whose objectives are properly compensating those who suffer accidents.
And there is no irony in my comment you highlight – I also say “thank god the banks globally have stupid owners willing to back them to the tune of x billion/trillion dollars’.
It ain’t me, babe – that was rave.
L
IB said:
No, that isn’t correct IB. Pay-as-you-go doesn’t mean that the state subsidises it. It means that the cost of the present year’s injuries are funded from the present year’s levies. Fully-funding provides for all the future costs of accidents incurred in the one year. Let’s say you injure your back. The cost of treatment this year might be $20,000. But you might need twenty years’ treatment at that cost, so the total cost might be $400,000. By not fully-funding costs, the future cost of accidents incurred today are passed on to future levy-payers.
It’s not a subsidy. It’s shonky accounting that puts a larger burden on future levy-payers.
I think I’ve demonstrated that it isn’t about political priorities. As I’ve noted earlier in this post, you just can’t sell ACC. The structure of ACC and how it is funded mean that the only account that can be opened for competition is the Work account. People who understand how ACC works know that you can’t privatise the Earners, non-Earners, or Motor Vehicle accounts without removing universal cover. The earners’ account could include an opt-out provision for workers who take up private insurance, but that is effectively nothing more than an extension of the Accredited Employer scheme to earners’ cover. That’s a side issue, since it isn’t being advocated by National. So the claim that these accounts might be privatised is only ever made through mischief, or ignorance.
Lew said:
If there is no cross-subsidy between accounts, Lew, then how would opening the worker account account up to competition, or even privatising it, weaken the system? Admittedly, ACC would lose some of its critical mass if work accident cover was removed, but ACC still would enjoy a monopoly across all other accounts, and still retain significant service buying power. A strong argument, in my view, to open the work account to competition is that it allows the ACC to focus on its other accounts.
Tim: There is no cross-subsidy between accounts, but that doesn’t matter to most people – as far as they’re concerned there’s `ACC’. If the earner account fails because of cherry-picking (and if you don’t think it would, I invite you to rebut my argument linked above) then it’s a short step to `ACC must be sold’.
L
“So the claim that these accounts might be privatised is only ever made through mischief, or ignorance.”
Perhaps I was lax with my language. If you want to be pedantic then I’ll restate: National want to privatise the work account. To return to my original post, they know that the difference between accounts is not clearly understood (even I mixed up the earners and the work account) and that the privatisation of the work account will come with less political fallout if the ACC brand as a whole is brought into disrepute with the electorate.
While it doesn’t necessarily exist to make a profit, is it not a concern that by privatising the profitable part of ACC, i.e. the employer’s account, will make the rest of ACC an even bigger burden than it is currently?
ACC will retain the dues of those who have the worst H+S records, and therefore shoulder a huge potential burden. Why should taxpayers be subsiding bad companies, and letting private operators take the best clients? The problem with the whole scenario is that it is an opening of the floodgates – comments above suggesting that we have a luxurious system do not inspire me with confidence regarding the future of universal accident cover in New Zealand.
The claim that “competition in the employer’s account market would reduce premiums, and provide an incentive to workplaces safer” is simply bollocks. A overwhelming majority of the firms who would benefit from lower employer premiums are those whose employees are put at minimal or no risk in their occupational roles. The dangerous would remain dangerous, as they have little incentive, as the private operators would not want their business. This also omits the fact there are already strict H+S guidelines around workplaces, and that violation of these can result in criminal prosecution, a strong incentive, if any, to pay attention to occupational safety and health
No, PP. The work account is not supposed to make a profit. It does not subsidise other accounts. Removing the work account from ACC doesn’t place a larger burden on other accounts. Arguably it allows ACC to put a tighter focus on other accounts.
I am not an expert in actuarial risk, but that isn’t how the scheme would work. Presently employers are already rated by risk. The worst employers, in the worst industries, with the worst health and safety ratings, do pay higher premiums. If ACC remained the default insurer for bad companies who could not get cover elsewhere, then the taxpayer wouldn’t be subsidising that burden, as they are not subsidising the work account now. In that scenario, were it to happen, then the worst employers would just face dramatically higher premiums than they do now.
Cherry-picking is a convenient idea, but it just doesn’t stack up in a fully-funded model. Actuarial risk determines premium rates across all risk profiles.
IB said:
Bill, it would really help the debate if we didn’t have hysterical calls from the Left of “privatisation of ACC” was not bandied about whenever the work account is discussed. As is agreed by pretty much everyone, it is really only the work account that we are talking about. This is only a small part of the ACC scheme in terms of levies collected, claims and expenditure, with around 15% of claims and 10% of claims liability. The non-earners account represents around 48% of all claims.
National already faced the political fallout before the election by saying that they were open to moving the work account to competition. Further political fallout? I know it is a touchstone issue for unions and business, but the work account is only a very small part of ACC. Business would like to see lower premiums. Unions are concerned that coverage will be reduced in a privatised model. If coverage is guaranteed (as it was under the last National government when the work account was opened up), then I’m not convinced that opening up the work account is as likely to face political fall-out as you’re suggesting.
Of course, it suits Labour to shriek privatisation and “ruining the integrity of the ACC scheme”, but there are much more fundamental and deeper problems with the ACC system than whether the work account is open to competition. Like whether the level of coverage across the earners’, non-earners, and motor-vehicle accounts is sustainable, and whether levy payers in those groups are prepared to continue to pay for this gold-plated scheme when they are properly fully-funded.
And right on que: http://www.stuff.co.nz/4783487a11.html
“Finance Minister Bill English has confirmed there is likely to be a “significant” rise in the amount workers pay to ACC from April 1 next year.
ACC Minister Nick Smith yesterday said a blowout in the ACC earners account could see average wage earners lose almost a third of the value of next year’s tax cut if the incoming Government follows officials’ advice.”
Rave,
Its a right wing snow job to point to the broken toe on the thug who is busy kicking our brains out.
Lovely!
Now for the big question.. can’t say I’m too hopeful of an elegant answer.. but with everything else on the slide and – let’s say sanity plus markets-adjusting – how about the new administration doing the business and re-aligning costs instead of users pay more. Sure, the latter is quicker but the minister this morning yapping on about gottabe done(sorted) by Christmas can mean only servicing-to-price. aka costs-driven.
Justifiedor not.So who says when enough is enough.. can you see providers.. users.. doing it?
So how is that anybody’s brighter future if the government doesn’t unfurl the flag for folks back aways in the providers procession to recognise.