ACC levy hikes another step to privatisation

Written By: - Date published: 8:40 am, December 11th, 2009 - 79 comments
Categories: ACC, privatisation - Tags: ,

acc-undermine-200As expected, Nick Smith has imposed substantial ACC levy hikes on families. For a worker on $40,000 with a car, you’re looking at $150 more a year. I would say that would take a large bite out of most people’s tax cuts but the fact is most people didn’t get a tax cut from National. This government that promised the average worker ‘north of $50 a week’ in tax cuts has only succeeded in increasing the amount that goes from your wages to the government.

Of course, Smith’s increases are smaller than his handpicked head of ACC John Judge proposed but we always knew that would be the case. Judge’s job is to paint ACC as broken and costly. He has failed to draw attention to ACC’s successes (like the fact work injuries are falling) and overhyped every problem. Judge is now furiously denying he has acted politically. What a laugh. The guy’s a member of the Business Roundtable. His agenda is clear. Smith didn’t appoint him by accident.

Now, if these increases were necessary to keep our excellent ACC system healthy and sustainable, I would be the last to oppose them. But the fact is, they are unnecessary. ACC is taking in more than enough money to cover its annual costs and even the whole-life costs of new claims. The supposed ‘deficit’ is just the cost of old ongoing claims from before they switched to a fully-funded model. Insurance companies need to be fully-funded in case they go under; ACC is not an insurance company, it is a universal, no-fault compensation scheme and it can’t go under.

The only reason that ACC would need to be fully-funded like an insurance company is to prepare it for sale to insurance companies. That’s National’s long-game. To get there, they need to make the public dissatisfied with ACC and get it on a financial footing where it is ready for privatisation. And that’s what these levy hikes are all about.

wavegoodbye_acc

79 comments on “ACC levy hikes another step to privatisation ”

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  1. Rob 1
    11 December 2009 at 8:51 am

    Even if they are fully funding he did not take account of the date change to 2019. This means the extra 20 billion + they want to randomly save for ACC is now spread over 4 years not 9. That means 5 billion a year rather than 2. It is a stupid move.

  2. Geek 2
    11 December 2009 at 9:15 am

    I don’t disagree with you on the stupidity of what they are doing but wasn’t it Labour who started moving ACC towards fully funded. I don’t think they were moving it towards sale so it is not strictly true to claim that it is the only reason you would move it to fully funded.

    • Bright Red 2.1
      11 December 2009 at 9:57 am

      no Geek. It was National in 1998 as part of their privatisation scheme.

      You’re just underinformed.

      • ben 2.1.1
        11 December 2009 at 10:21 am

        Geek asks a question. You have to insult him. Why?

        [lprent: He didn’t. He corrected and suggested why Geek was wrong. It did waste my time by having to read the sequence.]

        • Bright Red 2.1.1.1
          11 December 2009 at 10:26 am

          He didn’t ask a question. He made a statement. i don’t see any question mark.

          His position is based on something that is untrue (his claim that Labour instituted full funding). And because his statement was falsely premised (that means it was based on a fact that isn’t in fact a fact) there’s no debating with him. He is too underinformed to have an actual discussion with.

          It’s like trying to discuss the impact of disappearing sea ice on polar bears with someone who doesn’t know that polar bears hunt on sea ice.

          • Rob 2.1.1.1.1
            11 December 2009 at 10:58 am

            Labour did retain fully funding for 9 years however when they amended the ACC system multiple times and thus could have changed it at any one of these times without much extra effort on their part. However their reason for keeping it was simply they thought National might not cut entitlements if they wouldn’t be able to reduce costs by doing so as the claims were already paid for from what I can see. Turns out to have worked the other way.

          • Geek 2.1.1.1.2
            11 December 2009 at 11:02 am

            Sorry bright I forgot this sight is the epitome of perfect grammar. Nice work ignoring the part where I said “wasn’t it Labour that started moving ACC toward fully funded.” You’re right I didn’t put the question mark in and I understand with your perfect record on not making any typo’s that you would use it as a great way to dismiss what *I was saying. Including that I don’t think what National are doing is good.

            You are an idiot.

            • Bright Red 2.1.1.1.2.1
              11 December 2009 at 11:07 am

              Mate, I’m not the one who thought that Labour introduced full-funding, and from that went on to draw the silly conclusion that because Labour had introduced full-funding but not privatised ACC that must mean full-funding has nothing to do with privatisation.

              I mean, you’re on the internet champ. Why didn’t you check who introduced full-funding before going and constructing a theory around your mistaken assumption?

              An idiot gets things wrong. I’m not the one who got it wrong today, geek.

              • Geek …
                11 December 2009 at 11:17 am

                Well done bright. So idiots are the ones who make mistakes? Well I am glad that in your life of being perfect you managed to avoid youre own definition of idiots. However those of us who make simple grammatical errors such as dropping a question mark will happily admit they were wrong and that Labour didn’t introduce fully funding ACC.

                However as r0b points out they also didn’t take opportunities to reverse it. Not because they are interested in privatizing.

                My initial point was that there are other reasons for introducing fully funded ACC such as not passing costs generated today onto the tax payers of tomorrow. You however acted foolishly and chose to ignore that simple point based upon the aforementioned missing question mark.

                I stand by my judgment that you are an idiot.

              • Lanthanide …
                11 December 2009 at 11:41 am

                I have to agree with Geek on this.

        • ben 2.1.1.2
          11 December 2009 at 11:57 am

          And I see we’re reduced to arguing black’s white again. Yes, it was an insult. Try telling somebody at tonight’s Xmas party in all seriousness “You’re just underinformed” and see how far that gets you.

  3. ben 3
    11 December 2009 at 10:20 am

    Privatise it. Now. ACC could hardly be run less responsibly than it was under Wilson. I don’t expect anything to improve under National or any other government. Having politicians in monopoly control of anything is a recipe for higher cost and poor service.

    Privatise it. Now.

    • treble 3.1
      11 December 2009 at 10:32 am

      can you show any evidence that we would have better, cheaper service from private companies?

      No you can’t.

      And you’re obviously incredibly ignorant. Why don’t you read the PWC report on ACC that said it was a world-leading system and that it should not be privatised? Why don’t you research about how the private systems in the US and Aussie stack up against ours in terms of cost, provision of compensation, and recovery times?

      I would be embarrassed to go around voicing such strong and ironcast opinions when I clearly have no knowledge of the issue. I wouldn’t do it because I know I would look foolish in the eyes of everyone who does understand the issue.

      For you, ignorance seem to be no barrier or, more likely, you don’t percieve that you may be lacking in knowledge, you think that you know all you need to know. You’re just an ideologue, you’re not informed, your position is as mindless as a jerking-knee.

      • ben 3.1.1
        11 December 2009 at 11:00 am

        I’ll focus on your substantive points. I have read a good deal of the economic literature on privatisation, but I’ll quote a nice summary from a recent comment by Paul Walker (Nov 16, Kiwiblog):

        The empirical evidence shows us that private ownership is by and large superior to state ownership, Nellis (‘Privatization—A Summary Assessment’, Center for Global Development Working Paper Number 87 March, 2006.) for example, summaries this evidence as

        “The vast majority of economic studies praise privatization’s positive impact at the level of the firm, as well as its positive macroeconomic and welfare contributions. Moreover, contrary to popular conception, privatization has not contributed to maldistribution of income or increased poverty at least in the best-studied Latin American cases. In sum, the technical picture is generally positive.’

        The following comes from the summary of chapter 4, ‘Empirical Evidence on Privatization’s Effectiveness in Nontransition Economies’, from William L. Megginson’s book “The Financial Economics of Privatization’, New York: Oxford University Press, 2005,

        “The 87 studies from nontransition economies discussed in this chapter offer at least limited support for the proposition that privatization is associated with improvements in the operating and financial performance of divested firms. Most of these studies offer strong support for this proposition, and only a handful document outright performance declines after privatization. Almost all studies that examine post-privatization changes in output, efficiency, profitability, capital investment spending, and leverage document significant increases in the first four measures and significant declines in leverage.

        The studies examined here are far less unanimous regarding the impact of privatization on employment levels in privatized firms. All governments fear that privatization will cause former SOEs to shed workers, and the key question in virtually every case is whether the divested firm’s sales will increase enough after privatization to offset the dramatically higher levels of per-worker productivity. Three studies document significant increases in employment [Galal, Jones, Tandon, and Vogelsang (1992); Megginson, Nash, and van Randenborgh (1994); and Boubakri and Cosset (1998)], but most of the remaining studies document significant-sometimes massive- employment declines. These conflicting results could be due to differences in methodology, sample size and make-up, or omitted factors.

        However, it is more likely that the studies reflect real differences in post-privatization employment changes between countries and between industries. In other words, there is no “standard’ outcome regarding employment changes.

        Perhaps the safest conclusion we can assert is that privatization does not automatically mean employment reductions in divested firms, though this will likely occur unless sales can increase fast enough after divestiture to offset very large productivity gains. Since the empirical studies discussed in this chapter generally document performance improvements after privatization, a natural follow-up question is to ask why performance improves. For utilities, the need to introduce competition and an effective regulatory regime emerges as key, but there is no “silver bullet’ answer for what makes privatization successful for firms in competitive industries. As we will discuss in the next chapter, a key determinant of performance improvement in transition economies is bringing in new managers after privatization. No study explicitly documents systematic evidence of this occurring in nontransition economies, but Wolfram (1998) and Cragg and Dyck (1999a,b) show that the compensation and pay-performance sensitivity of managers of privatized U.K. firms increases significantly after divestment. Studies that explicitly address the sources of post-privatization performance improvement using data from multiple nontransition economies tend to find stronger efficiency gains for firms in developing countries, in regulated industries, in firms that restructure operations after privatization, and in countries providing greater amounts of shareholder protection.’

        Sunita Kikeri and John Nellis write in their article, An Assessment of Privatization, “The World Bank Research Observer’, vol. 19, no. 1 (Spring 2004)

        “This article takes stock of the empirical evidence and shows that in competitive sectors privatization has been a resounding success in improving firm performance. In infrastructure sectors, privatization improves welfare, a broader and crucial objective, when it is accompanied by proper policy and regulatory frameworks.’

        Mary M. Shirley and Patrick Walsh write in “Public versus Private Ownership: The Current State of the Debate’, Working Paper, The World Bank,

        “Our review found greater ambiguity about ownership in theory than in the empirical literature. In the debate over the effects of competition, theory suggests that ownership may matter and if so, that private firms will outperform SOEs. The empirical studies squarely favor private ownership in competitive markets. Theory’s ambiguity about ownership in monopoly markets seems better justified, since the empirical literature is also less conclusive about the effects of ownership in such markets. Theories that assume a welfare maximizing government suggest that SOEs can correct market failures. In contrast, public choice theories are skeptical of the benevolent government model. Corporate governance theories suggest that even well intentioned governments may not be able to assure that SOE managers do their bidding. The empirical literature favors those skeptical of SOEs as a tool to address market failures. In studies of industrialized countries, where we might expect more developed political markets to motivate greater government concern with welfare maximization or better information and incentives to overcome corporate governance problems, private firms still have an advantage. The private advantage is more pronounced in developing countries, where market failures are more likely.’

        Treble, maybe ACC is the exception to the rule established in this literature. Perhaps you could explain why (and not just roll out arguments from authority and the like).

        [lprent: How about linking – read the FAQ to find out how. ]

        • Clarke 3.1.1.1
          11 December 2009 at 11:06 am

          The difference between theory and practice is that in theory, there is no difference between theory and practice … but in practice, there is.

          If your extensively quoted theory was actually correct, how do you explain the consummate failure of a privatised Kiwirail?

          • ben 3.1.1.1.1
            11 December 2009 at 11:21 am

            Clarke, fine, ignore the theory. The quoted passages above also cite a large body of empirical evidence. That’s real people looking at real world data and finding real differences.

            If that is not the way to test for differences between private and public performance – then what is?

            • Clarke 3.1.1.1.1.1
              11 December 2009 at 11:36 am

              Kiwirail is a perfect way of testing for real-world differences in public/private performance, as it is a New Zealand case study in a New Zealand context, with readily available data on what empirically occurred.

              So go on – have a go at defending the indefensible. I double-dare you.

              • ben …
                11 December 2009 at 12:47 pm

                So go on have a go at defending the indefensible. I double-dare you.

                Oh, please. Firstly, any one-off example is not nearly as instructive as general trends. There are always exceptions for whatever reason. Second, Kiwirail is no such exception. It is horribly uneconomic, whether in private or public hands. Rail in New Zealand has not added economic value since the 1930s, according to a recent study by Dave Heatley at ISCR (www.iscr.org.nz). Lew Evans a while back also showed that this performance would not be reversed if the playing field between road and rail were leveled (which, subsequently, it has been through tax increases).

                But for political interference, most but not all of the rail network would be closed. Most of it does not generate near enough revenue to justify its enormous capital costs. The shortfall is a cost borne by the country. We are poorer by the difference. For what? The nationalisation of rail was a total shambles. Labour, desperate to have the matter settled before the election, paid $200 million of your money and mine too much. That’s on top of the billions already lost.

                Prior to privatisation in 1993, the New Zealand rail network was the epitomy of why politicians make poor owners and operators of assets. It employed 24,000 people, had a legislated monopoly in moving most goods over 150 kilometers, delivered absolutely terrible service by all accounts, and still lost a ton of money. The economic performance of rail improved substantially under privatisation, although it still earned negative returns. See Heatley.

                From memory, Heatley showed rail destroys about NZ$5 billion/decade in economic value. That is pure deadweight loss, because rail on the whole has no environmental benefit once capital is taken into account. What can you buy for $5 billion? How many more hospitals or schools or roads or universities?

              • Clarke …
                11 December 2009 at 1:48 pm

                Well done, ben – it’s not often that I get a chance to tear such facile analysis to shreds.

                Let’s start at the top. You’re entirely right in your analysis of the historical state of Kiwirail:

                Prior to privatisation in 1993, the New Zealand rail network was the epitomy of why politicians make poor owners and operators of assets. It employed 24,000 people, had a legislated monopoly in moving most goods over 150 kilometers, delivered absolutely terrible service by all accounts, and still lost a ton of money.

                As usual, however, you’re missing the political context. The reason for the meddling was that Muldoon had been using the Railways Corporation as a mechanism for hiding the true unemployment figures of the time – but remember that the process of unwinding this legacy began with the Lange government. Reduction of the deadweight employment had begun long before it was sold, and the government – i.e. the taxpayer – bore the brunt of the the redundancy costs. The monopoly over moving goods more than 150 miles had also been removed by Lange’s government, and the clean-up of the balance sheet continued across multiple governments to ready the Corporation for sale.

                By the time it was privatised, the Corporation had undergone the vast majority of its restructuring, had made tens of thousands redundant, had had it’s transport monopoly removed and all its debt written off. All the necessary steps for it to stand on its own two feet had been taken – by politicians.

                It then passed into private ownership, where over a number of years of well-documented management screw-ups and an insider trading scandal, it was subsequently bought back by the Clark government, having failed to deliver any value to either New Zealand or shareholders. This can be put down to the sort of management incompetence that should be banned by UN treaty – which all rather contradicts your simplistic assertions of “private good/public bad”.

                And it’s clear from the rest of your analysis that you have an unfortunate lack of understanding of how transport funding actually works in New Zealand, nor of the Ministry of Transport STCC study.

                The Surface Transport Costs and Charges assessment (last done in 2005, currently being updated) showed that trucks pay a mere 55% of their direct costs – the rest is borne by the taxpayer. In comparison, rail pays more than 90% of its direct costs. So even if your apparently undocumented assertion that rail produces a deadweight loss of $500 million per annum is correct, it pales besides the more than $2.5 billion in direct subsidies it costs to keep the trucks on the roads every year.

                Once again, reality completely fails to support your claims.

              • Clarke …
                11 December 2009 at 4:29 pm

                Remember, the question here is whether rail performed better or worse under private ownership.

                So Kiwirail was privatised after restructuring costs and after all debt had been written off, yet a bit more than a decade later it was effectively insolvent when purchased back by the government.

                I contend that the rate of wealth destruction under private ownership was significantly higher on an annual basis than anything that was achieved in public ownership.

                Clearly this is a management failure, either because (a) they lacked the requisite ability to run the business profitably, or (b) they were unaware of the structural issues with a legacy rail system in a small-population country because their due diligence was poor, or (c) they cynically decided to asset-strip the business and run it into the ground.

                None of these alternatives portray the people concerned as being any better at running the rail system than the equivalent public sector employees.

                As far as your assertions about the STCC study go, it might be helpful if you actually read the Booz Allen report (PDF, 2.2MB). Here’s the relevant bit about the aggregated costs and charges for the roading network:

                Current charges total some $2.63 billion p.a., or $2.34 billion if roading rates are excluded as not being a user charge. The best estimate of total provider/external costs is $5.59 billion p.a., i.e. just over double the current charges.

                The difference between these two figures is the subsidy provided by the taxpayer. Of course, this mythical report from Heatley that you keep referring to may well trump the detailed analysis from Booz Allen Hamilton, but given that you’ve never provided a link, who knows?

            • Draco T Bastard 3.1.1.1.1.2
              11 December 2009 at 2:50 pm

              When the theory is demonstrably false then ignoring it is the rational thing to do.

              • ben …
                11 December 2009 at 3:36 pm

                Clarke, honestly that is the absolute worst smackdown I can recall seeing. Remember, the question here is whether rail performed better or worse under private ownership. Nothing in your analysis addresses that.

                The meddling by Muldoon is an extreme example of the more subtle meddling that goes on all the time when politicians have control over companies. Witness Nick Smith tell Mark Sainsbury last week he’s going to step in and tell ACC to do something about the latest fiasco. Whether it is obvious like Muldoon or more subtle like now, an important reason why the government makes a poor owner is this constant meddling and mixed objectives political masters give these organisations.

                I have never argued politicians cannot introduce reforms. But also recall just how close to bankruptcy NZ had to come before politicians finally were able to push those long overdue reforms through. Again, these reforms are routine in the private sector, and valuable (not without cost, I acknowledge).

                The next para says rail added no value in private hands, and you are correct. Although it destroyed a lot less than before or after. Your analysis says nothing about relative performance of private vs public.

                And then some needless personal attacks.

                And finally you close with the claim that trucks only pay 55% of their direct costs. a) where is this figure? b) it is not comparable to the 90% rail figure because the contribution from cars is missing c) according to Heatley, combined road user charges across all vehicle types do approximately cover the annualised capital and maintenance cost of the road network. If charges between cars and trucks need re-balancing then so be it.

        • Craig Glen Eden 3.1.1.2
          11 December 2009 at 11:08 am

          I cant help noticing Ben that these were written before the crash and its certainly not New Zealand’s experience regarding privatisation.

          But hey lets not let reality get in the way of a good theory written by the World Bank!

        • treble 3.1.1.3
          11 December 2009 at 11:14 am

          oh jesus. the guy’s read a quote from a book by some ideologue of privatisation and now he thinks he knows all he needs to know.

          This is your problem, ben, your ideology is like a hammer and so you see every issue as a nail.

          Why not actually learn something about ACC in reality, rather than bluntly apply the teachings (which you clearly havent’ appleid any critical thoguht to) of some dude who knows nothing about ACC?

          Have you thought about why, for example, businesses in NZ, particularly small businesses don’t want privatisation?

          Why not read the PWC report, there’s an executive summary. That’s report written by experts who have studied the actual scheme and its counterparts in other countries, not the theorising of some guy on a blog quoting a book by a theorist.

        • Bored 3.1.1.4
          11 December 2009 at 11:50 am

          Ben,

          All very academic and not so real world. Justifying anything by reference to the World Bank automatically should get “shit radars’ on red alert. What I see above is reference to documents by interested parties; we could all do the same and claim justification. You invite a counter volley; we can all reach for Adam Smith, Marx, Keynes, Friedman etc etc and their acolytes. So very dull. Perhaps you should read more widely and give us a Shakespearean or Dickensian viewpoint. Or you could perhaps go out into the real world and get some real experience and the informed wisdom that you gain along the way.

          • ben 3.1.1.4.1
            11 December 2009 at 12:00 pm

            What is it with the World Bank? This research comes out of economics departments at universities. Does anybody here know how research gets done? Are you all so blinkered as to think anybody doing research you don’t like isn’t part of a conspiracy? Not everything is political.

            • Draco T Bastard 3.1.1.4.1.1
              11 December 2009 at 2:54 pm

              Economics departments that happen to be wrong. If they weren’t then they would have been able to predict the present recession.

              Believing something that is provably wrong is delusional and all you’re doing here is putting forward a theory that is wrong as if it’s fact. This makes you delusional.

              • ben …
                11 December 2009 at 3:17 pm

                Economics departments that happen to be wrong. If they weren’t then they would have been able to predict the present recession.

                Wow. Now there’s a non-sequitur. The failure of macroeconomists to forecast a recession entitles you to ignore anything a microeconomist says about efficiency, and all the empirical evidence?

                Believing something that is provably wrong is delusional and all you’re doing here is putting forward a theory that is wrong as if it’s fact. This makes you delusional.

                As I’ve said, fine. Ignore the theory. It strongly supports the idea that private competition produces better goods and services than public monopoly. But fine. Ignore all that. The empirical evidence is even more strongly in favour of the idea.

                What, the empirical evidence isn’t good enough now?

                So what is? Show me the beef. Really. Show me. Show me the proof in “provably wrong”. And I don’t mean “just ask [arbitrary person x] what they think”. And I don’t mean “just look around you”. Show me whatever it is that is convincing you. Because I think your sole source in all of this is simply your ideology. Pure and simple.

        • Rob 3.1.1.5
          11 December 2009 at 12:40 pm

          I fail to see how any of that is really relevant to the privatisation of ACC. What we want to know is will coverage drop and will prices rise if privatised. All the reports done specifically on ACC say yes.

  4. Bored 4
    11 December 2009 at 10:35 am

    Ben, your ideological glasses blind you to the real world. If you had sat in some of the board meetings and management meetings I have over years in the private sector you would find that the inclination of organizations both public and private toward efficiency, cost effectiveness, governance, etc etc is extremely variable. Reality is a bastard, it trumps ideology every time. Then there is Sods Law which would indicate that to privatise would make things at best no better.

    If the private sector is so much better I think you might ask yourself how did it manage to crash recently and need to be bailed out by taxpayers worldwide? Are you advocating that a system so regularly demonstrating a propensity to fail is the one we should blindly adopt?

    • Craig Glen Eden 4.1
      11 December 2009 at 11:00 am

      Nice response Bored and Treble I couldnt have said it better my self, however I think logic and reason are probably not Bens strong points.

      Hey I don’t want to cast aspersions Im just saying.

    • lprent 4.2
      11 December 2009 at 11:01 am

      That would be my experience as well.

      Frequently the main factor in any private sector meetings (board or otherwise) and its decision making is inter-personal relationships and ‘politics’.

      The critical factor that tends to make the private sector more focused is that they have a single underlying focus (making a profit) and a short-term (couple of years) time-frame.

      Of course that is pretty useless when you’re looking at longer-term planning. For instance demographic shift effects on education, health, super, etc… You only have to look at the public health issue in the US to see that. A lack of focus on long-term objectives means that the systems fall over by only covering the profitable parts of the population. Unfortunately that means you get disease reservoirs.

      • ben 4.2.1
        11 December 2009 at 11:06 am

        Frequently the main factor in any private sector meetings (board or otherwise) and its decision making is inter-personal relationships and ‘politics’.

        As if governments get to avoid that problem! Good grief.

        The critical factor that tends to make the private sector more focused is that they have a single underlying focus (making a profit) and a short-term (couple of years) time-frame.

        That is the exact problem ACC has suffered recently. Expansions in liability left unfunded. That is the very definition of short term thinking. Again – what is the problem government is meant to be solving here? Not this.

        Plainly, putting politicians in charge of anything does not make the short term focus disappear.

        • treble 4.2.1.1
          11 December 2009 at 11:22 am

          “That is the exact problem ACC has suffered recently. Expansions in liability left unfunded. That is the very definition of short term thinking.”

          shudder.

          ACC isn’t “unfunded”. Its revenue is more than enough to cover its annual costs with a billion to spare. What it can’t cover from its existing reserves is the total future cost of all past claims. But why should it need to do that? We don’t full-fund education. We don’t full-fund health. there’s an argument for some future-funding, like the Cullen Fund does with superannuation to ease the increase in future costs over a wider time period but the only reason to full-fund is for privatisation.

          “Again what is the problem government is meant to be solving here? Not this.”

          And here’s the ignorance again. Before ACC few people got income coverage when they were injured, coverage was expensive, and a massive portion of our court system’s capacity was taken up arguing cases. That’s the situation that still exists in backwards countries like the US (most Aussie states have a halfway house system between the broken US system and ACC). Without ACC coverage would be spotty, expensive, and unfairly distributed. Those are the problems that ACC solves and it does them incredibly well.

          But you haven’t even bothered to obtain this basic information before deciding where you stand. It’s sad.

          • ben 4.2.1.1.1
            11 December 2009 at 11:47 am

            The shortfall is calculated by comparing projected liability with projected assets, including levies:

            Outstanding claims are compared to a projection of fund assets for future years. The calculation of fund assets considers the initial funding of the account, expected income from levies and investments, and expected outgo due to claims and expenses. source

            That makes that shortfall real.

            • Rob 4.2.1.1.1.1
              11 December 2009 at 12:49 pm

              Which equates to attempting to pay a lifetime of costs with 1 year of income. There is no need to conform to GAAP accounting standards for a government owned business.

        • Lanthanide 4.2.1.2
          11 December 2009 at 11:50 am

          “Plainly, putting politicians in charge of anything does not make the short term focus disappear.”

          Only if you put the bad politicians into power who are more interested in lining their own pockets than the future of the country.

          Granted, finding politicians that don’t fit this bill is difficult, but to simply throw up your hands and say “it’s impossible!” leads to the type of government that we have today.

          • ben 4.2.1.2.1
            11 December 2009 at 12:07 pm

            Granted, finding politicians that don’t fit this bill is difficult

            I submit it is impossible, left or right. Politicians are elected precisely because they are so prepared to climb over others and be politically opportunistic. That makes them supremely poor candidates to direct large complicated organisations like ACC. Politicians simply do not face any (or much) incentive to direct ACC to be responsible in the long term and deliver efficient mix of costs and benefits.

            Not an attack on left or right – to me politicians on any side have specialised in areas and face incentives that are not conducive to good management of producers. This is nearly ubiquitously borne out in the performance evidence.

    • ben 4.3
      11 December 2009 at 11:02 am

      Nobody is arguing the private sector is perfect. But the evidence strongly indicates it knows better than government how to organise the delivery of services, see above.

  5. ben 5
    11 December 2009 at 11:19 am

    Folks, ideology has absolutely nothing to do with this. Consider the problems with ACC.

    First, it is a scheme where people who choose to undertake low risk activities subsidise those who choose to undertake high risk. The effect of this subsidy is to have more people killed in high risk occupations. How is that good?

    Second, ACC is a financial basket case that has been plainly mismanaged. It has lasted this long because it is protected from competition and has a legal right to tax citizens in the same way as government. You cannot say no to ACC.

    Third, ACC has almost no policy. Your compensation is based on need, which means convincing your case manager you have a problem worth compensating. Inevitably, this lack of policy leads to inconsistency, and soon enough you get the media talking to war veterans who can’t get their compensation only to see murderers get $10,000 limbs. Then the Minister gets on tv and promises to fix it. This is no way to run anything, let alone a major compensation scheme.

    Four, ACC appears to be rorted left and right. Witness the massive expansion in use of ‘free’ physiotherapy. It is a classic case of welfare abuse operated by people with weak incentives to control costs and strong incentives to be re-elected in three years.

    Five, it is a public monopoly, and the empirical and theoretical literature is unambiguous: monopoly produces inferior outcomes (higher cost, less service, lower quality) than does comepetition.

    Ideology has absolutely nothing to do with this. That is a complete red herring. This citizen simply wants protection from risk of accidents that is commensurate with the risks he bears and which should not cost an absolute fortune, and wants protection of a fixed policy rather than rely on the foibles of the particular case manager assigned to me.

    • treble 5.1
      11 December 2009 at 11:36 am

      first point: no, work place deaths and injuries under ACC are lower than they were under the private scheme and lower than in other coutnreis, with faster recovery times. Why? because ACC has a mandate to invest in injury prevention. Private insurers just want to avoid paying out and they devote a large amount of their overheads to that task.

      second: ACC is not a financial basket case. It has $11 billion in assets. It could stop taking in levies and still fund four more years worth of claims.

      third: your problem is with the PM playing politics. Not with the scheme, which delviers compensation and treatment to need.

      fourth: there is no evidence of significant fraud. ACC has a very competent fraud team, and there are far lower levels of fraud than private insurers suffer. Again, read the PWC report. Higher physio claims were a good thing – people were getting treatment early, and not needing mroe expensive treatment later. It’s like how its better for the cost of subsidised doctor’s visits to rise rather than people wait until they’re really sick and then need expensive hospital care (like in the US)

      fifth: public monopolies work. Examples: the Police, water services, road provision, electricity before the Bradford reforms, rail befor privatisation, ACC – which beats private insurers on every score. The fact is some things work better as monopolies (ACC’s universalism is one of the key’s to its low admin costs), and those natural monopolies should be in public ownership.

      Look at countries that have monopolies vs those that don’t – European healthcare vs US, European education vs US. Haivng public monopolies carry out the tasks they are suited for delivers services to everyone fairly and cheaply.

    • chris 5.2
      11 December 2009 at 11:45 am

      Ben, most monopoly theory from neo-liberal econ is and has been proven to be wrong (see: http://www.debunkingeconomics.com/extracts.htm#4 and his book, available at http://www.debunkingeconomics.com). So I guess you just committed a massive argument structure fail.

      Secondly, you say ideology has nothing to do with it, then you claim empirical evdience when you only analyse one small part of economics? Neo-liberal economics is one brand, it is a dominant one, but it is by no means the complete extension of economic thought. I would’ve thought a self-proclaimed “empiricist” (cough) like yourself would have done a little more research before making yourself look like and idiot.

      Finally – and yes, this is ideological – I think we have a better society because of the shared risk allowed by ACC. I like that I can go mountain biking and not have to take out extra accident insurance or worry that my premiums will go up if i crash and injure myself. It’s the whole point of the scheme and the scheme works. Go on, investigate, with your world leading “empiricism” so private accident insurance in other countries and let us know what activites are excluded?
      xoxo

      • ben 5.2.1
        11 December 2009 at 11:49 am

        Chris: fine. Forget the theory if you prefer and rely on the empirical evidence. It gives about the same answer. Cost and revenue and quality are measurable and the evidence when it is examined does not support public ownership.

        • chris 5.2.1.1
          11 December 2009 at 11:56 am

          You’re joking right? Quality? I injure myself, i go to a privately owned provider and get treatment. I never see ACC, i just go to my treatment provider and if I’m covered recieve treatment. how less bureaucratic could it be?

          Oh. and care to address my question about how private schemes work in other countries and what activities aren’t covered?

          • Bored 5.2.1.1.1
            11 December 2009 at 12:08 pm

            I am afraid Ben does not live in the real world, very Brash like.

            • ben 5.2.1.1.1.1
              11 December 2009 at 12:12 pm

              I’m sorry but to accuse somebody who has actually looked at the research on privatisation, looked at what people who actually measure this find, of not being in the real world is ludicrous. Anecdote is hardly a substitute.

              How else is one supposed to understand whether privatisation works?

              • Bored …
                11 December 2009 at 12:21 pm

                Quick answer Ben, you made a bold statement saying privatise ACC. You then quoted references that supported your proposition. You did not quote alternatives that opposed the proposition, nor as a consequence debate their validity against the pro references. At no stage did you bring into the frame your real world experience. You might be right, who knows, we have not seen any sign of broad and valid judgement in your argument to date.

          • ben 5.2.1.1.2
            11 December 2009 at 12:10 pm

            Chris: where do you make that point?

            • chris 5.2.1.1.2.1
              11 December 2009 at 12:15 pm

              “Go on, investigate, with your world leading “empiricism’ some private accident insurance in other countries and let us know what activites are excluded?”

              spelling mistakes corrected

              • ben …
                11 December 2009 at 12:54 pm

                Quick answer Ben, you made a bold statement saying privatise ACC. You then quoted references that supported your proposition. You did not quote alternatives that opposed the proposition, nor as a consequence debate their validity against the pro references. At no stage did you bring into the frame your real world experience. You might be right, who knows, we have not seen any sign of broad and valid judgement in your argument to date.

                Brought to the table by my many adversaries are a single ACC report and a great deal of bluster. The stuff I did quote does acknowledge contrary evidence where it exists. The theory on private vs public monopoly is mixed, for example. Did you actually read the quote?

                I’ll go to the trouble of getting more when I see a serious attempt at a debate, not before. I struggle to see what personal experience can add to 80-odd empirical studies actually measuring performance and most reporting about the same thing.

  6. TightyRighty 6
    11 December 2009 at 11:44 am

    I know this will not provide full accident cover, but i thought i would go over to southern cross medical care and see if i could find out how much the top flight health insurance scheme costs from them. i smoke and drink, though i am a healthy eater, but still no healthy lifestyle discount. any way, for $1100 a year i can have full primo ducks nuts deluxe health cover, with a subsidy (generous) on dental. now i know full accident cover will increase this in the realm of $200-$300 per year, so $1300-$1400 total. but for $300 less than i am forced to pay through acc now, i also get full surgical and subsidised dental. doesn’t that kind of show there is an imbalance in the system?

    • TightyRighty 6.1
      11 December 2009 at 11:53 am

      or does it show that acc has gone beyond it’s mandate of just being an accident compensation scheme?

      • fizzleplug 6.1.1
        11 December 2009 at 11:55 am

        Any accident scheme that pays out for suicide, is no longer an accident scheme.

        • fizzleplug 6.1.1.1
          11 December 2009 at 11:57 am

          Couldn’t edit. I wanted to add that it’s not that I think suicide and sexual abuse shouldn’t be compensated, but compensation shouldn’t come from ACC.

    • Pascal's bookie 6.2
      11 December 2009 at 11:57 am

      now i know full accident cover will increase this in the realm of $200-$300 per year,

      How do you know this?

      Also liability insurance

      • fizzleplug 6.2.1
        11 December 2009 at 11:59 am

        since when does ACC give liability insurance? Or are you referring to medical misadventure instead of professional indemnity stuff etc?

        • Pascal's bookie 6.2.1.1
          11 December 2009 at 12:21 pm

          I’m thinking along the line that w/out ACC, if you cause a car accident, your insurance co may well have to pay for the medical costs of the other party as well as their broken car.

      • TightyRighty 6.2.2
        11 December 2009 at 12:01 pm

        I don’t, and i’ll admit it. but if the costing came back in the general ball park of what i think it might be, would you change your stnace? it would definitely deliver better bang for taxpayers dollar.

        • Lanthanide 6.2.2.1
          11 December 2009 at 12:13 pm

          Here, I’ll paraphrase your argument:

          I propose that unicorns have horns made of solid gold. Do you agree, that if this is the case, we should go hunt unicorns?

          The rebuttal to this, is of course: unicorns don’t exist.

          Captcha: quite

        • Pascal's bookie 6.2.2.2
          11 December 2009 at 12:19 pm

          but if the costing came back in the general ball park of what i think it might be, would you change your stance

          For 24 hour, no fault, and universal coverage?

          Yeah, I might change my stance. But I’d need to be convinced that those parameters would hold. If it looked like some citizens, (the poorest or those in the most dangerous occupations, or whatever) would be losing coverage due to cherry picking, then nah.

          • TightyRighty 6.2.2.2.1
            11 December 2009 at 1:25 pm

            so if private cover could provide an economic option in competition with acc, that offers the same benefits, so that those who can afford can choose, and those that can’t are covered, you would change your stance?

            • Pascal's bookie 6.2.2.2.1.1
              11 December 2009 at 1:30 pm

              What, looks like you are saying hey, let’s leave the expensive cases in the ACC system, and incentivise everyone else into a private system.

              But like I said if you can get the same effects and coverage out of a private system, prove it. If you can’t prove it first…

              No thanks.

    • snoozer 6.3
      11 December 2009 at 11:59 am

      Tighty. the money you pay Southern Cross is for stuff in excess of what you get from ACC. It does no replace cover you get from ACC.

      God. How could you miss that?

      • TightyRighty 6.3.1
        11 December 2009 at 12:03 pm

        i didn’t you muppet. i pointed it out that i know it doesn’t cover acc type stuff. i guesstimated what it might cost in addition. god. how did you miss that?

        • snoozer 6.3.1.1
          11 December 2009 at 3:42 pm

          so, you made up some numbers and used them to support your prejudged conclusion.

          Very informative.

    • lprent 6.4
      11 December 2009 at 12:01 pm

      You forget that Southern Cross effectively includes ACC in calculating their premiums. If you have an injury or something that can be perceived as being an injury, then Southern Cross gets you to do the process with ACC first before they will pay out. They pay out the difference between ACC and actual costs at their usual percentages.

      This just happened with my mother who had a disk slip in her back causing intense pain. It isn’t helped by her reactions to morphine. Southern Cross wanted to wait for the glacial ACC process of 3-4 weeks before they’d process a claim.

      Fortunately my parents are reasonably affluent, so they were able to pay for the MRI and the resulting surgery (removing the disk in 20 little bits). This meant that she wound up with 3 weeks of agony rather than the 6-8 weeks she’d have had otherwise. I’ll be going to see her on weekend, but apparently she is ok now apart from the usual surgical discomfort. The pain has gone.

      However my point is that your increased premiums from Southern Cross would be probably be substantially higher than your ACC levies. Perhaps you should have a closer look at how the system actually operates, rather than how you think it should operate.

      • TightyRighty 6.4.1
        11 December 2009 at 12:04 pm

        could we see the costings though? that’s all i’m asking. i don’t know, but it would be interesting to compare it for the sake of adding perspective to the argument.

        • lprent 6.4.1.1
          11 December 2009 at 12:13 pm

          The surgery was on Monday so I’d guess that the ACC/SC stuff hasn’t untangled yet.

          My parents handle their own finances. But I’ll ask the old man if he wants to do a post. However it probably won’t be for a while. He is going to be a servant for a while longer (and he does love pointing it out) and a bit distracted by having his partner of 50+ years laid up.

          However I suspect that you won’t be able to see the premium differences because it is based on averages. Offhand I can’t think of a way of being able to see the data unless SC publish it somewhere. It won’t show on their financial statements because there won’t be a line for “paid by ACC”

          • TightyRighty 6.4.1.1.1
            11 December 2009 at 1:27 pm

            sorry lprent. i wasn’t referring to your particular situation. i hope you father is ok and recovering well. i meant the costings for a private healthcare provider to offer such a scheme in addition to full health cover, it would provide some perspective.

    • chris 6.5
      11 December 2009 at 12:18 pm

      True, but you don’t think that low premium has something to do with competiton from the public health system? I would not imagine it being that cheap if there were a system like the american one.

      • ben 6.5.1
        11 December 2009 at 12:58 pm

        The American system could hardly be more corrupted by politicians. The two most egregious interventions is to ban all interstate competition between health providers, and to force all providers to provide minimum coverage which covers much more than many people would otherwise choose. These interventions have the effect of very substantially raising costs. It is ludicrous to think that the US is what a private system need look like, or that the large costs of running it, are the product of private provision.

        • Pascal's bookie 6.5.1.1
          11 December 2009 at 1:08 pm

          You sound like a nice cynical chap, tell me, do you think state govt politicians would have more interest in a) the healthcare given to citizens of other states, or b) hosting the HQ’s of giant healthcare insurance co’s.

          Ask some Americans what they reckon about their credit card contracts, which are a direct result of the race to the bottom between state regulators.

          • ben 6.5.1.1.1
            11 December 2009 at 1:40 pm

            You sound like a nice cynical chap, tell me, do you think state govt politicians would have more interest in a) the healthcare given to citizens of other states, or b) hosting the HQ’s of giant healthcare insurance co’s.

            As a US citizen why would I care about either of those things? What I want is affordable bundle of health care with a mix of premia and deductible that suits my particular circumstances. Rules against interstate competition and which force providers to sell me services I do not want directly interfere with that. The expense of the US system is in part caused by such rules. It is not anything like a free market. The prevailing view seems to be that it is.

            • Rob 6.5.1.1.1.1
              11 December 2009 at 4:42 pm

              So there is no expense to the billions of dollars removed from the system by its owners each year?

  7. DeepRed 7
    11 December 2009 at 5:19 pm

    Ben: A key reason why America’s privatised health system is so inefficient is because of the malpractice litigation industry dogging it. “You denied my claim – I’ll see you in court” is an all-too common refrain. Litigation was the whole reason why ACC was formed in the first place, and I wouldn’t be surprised if privatised accident insurance ultimately gets bankrupted by litigation, taking things full circle.

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