Free physio top of hit list in ACC shake-up

The Government is set to abolish some ACC entitlements - and free physiotherapy and medical misadventure claims are top of the hit-list.

ACC Minister Nick Smith yesterday said the scheme had to be cut to stop workers, employers and motorists being hit by soaring levy costs.

"If you want a whole lot more out of ACC, you are going to have to pay for it."

Dr Smith said the Accident Compensation Corporation had liabilities of $21.87 billion and assets of $10 billion - meaning if it was a commercial insurer it would be insolvent.

Though ACC's investments had been affected by the global financial crisis, its real problem was its rising costs.

The ACC levy paid by the average worker would have to rise by $27 a week in five years to cover the scheme's costs.

This, he said, would swamp next month's tax cuts unless changes were made.

Labour said Dr Smith was using "shonky figures" and being alarmist to take away the entitlements and soften the public up for National's plans to privatise ACC.

Dr Smith said the cost to ACC of free physiotherapy treatment was "out of control" and officials had advised its future was "untenable".

The free service was budgeted to cost $8.9 million extra a year when it was introduced in 2004.

But physiotherapy costs had gone from $58 million a year then to a projected $139 million this financial year.

Dr Smith said these costs were expected to increase further, to $225 million by 2011/12.

Officials had told him there was no evidence the free physiotherapy service had increased rehabilitation rates as it was intended to do.

Since becoming free, use of the service had "occurred disproportionately in higher socio-economic areas".

A return to part-funding physiotherapist visits was an option, but other changes would also be made to control costs.

ACC's treatment injury account - set up by Labour in 2004 to take a more generous "treatment injury" approach to medical misadventure claims - was another problem area, Dr Smith said.

Instead of costing an extra $8.7 million a year as budgeted, the scheme's costs had doubled from $42 million a year to an expected $82 million.

He would not say what changes were planned but bringing the scheme back to tighter provisions was a likely option.

Up to 50 extra ACC entitlements introduced by Labour were being reviewed.

They included those introduced last year, such as cover for mental injury arising from traumatic workplace events and weekly compensation for seasonal and casual employees.

Dr Smith said he would be making changes to the ACC board - chaired by former union leader Ross Wilson - which "needed a fresh start".

There was an "underlying culture issue within ACC in that it has shifted from being an insurance operator to being more of a welfare system".

He would introduce a bill allowing the changes so it could be passed before levies were set for next year.

Labour's ACC spokesman, David Parker, said the changes would force New Zealanders to take out private accident insurance or pay from their own pockets for entitlements the Government cut.

ACC was a world-class scheme, but its fundamental safeguards - access to treatment, rehabilitation and financial support if off work - were in jeopardy.

RISING PRICE

What the Government says ACC will cost New Zealanders if the scheme is not changed:

* An average household earning $67,028 with two cars now pays $938 a year for the earner's levy and $510 for motor vehicle levy - a total of $1448.
* In 2013, National says the same household will pay $2681 for the earner's levy and $1170 for the motor vehicle - a total of $3851.
* National says the household will face a total increase of $2403 a year ($46 a week) in ACC levies.
* The average worker earning $48,000 a year and with one car now pays $864 for the earner's levy and $255 for the motor vehicle levy - a total of $1119.
* In 2013, National says that person will be paying $1920 for the earner's levy and $585 for the motor vehicle - a total of $2505.
* National says the average worker's ACC levies will rise $1386 a year ($27 a week).