Part Fees

October 19th, 2009 at 7:04 am by David Farrar

The Herald reports:

The Government has confirmed that accident victims may have to pay the first $50 or $100 of their costs.

The move is under consideration as part of a second round of changes to the accident compensation scheme next year.

Accident Compensation Corporation chairman John Judge says requiring victims to pay an insurance-style “excess” of $50 or $100 for each claim would cut ACC costs by about $1.6 billion over the next 10 years, reducing the need for further levy increases.

ACC Minister Nick Smith said he had been briefed on the proposal, but no decision would be made on it until a wide-ranging “stocktake” of the scheme, led by former Labour Finance Minister David Caygill, was completed next July.

“It’s true that there is a very large transaction cost in ACC, with more than 1 million claims a year,” he said.

“The concept [of a $50 or $100 excess] would need to be carefully balanced with regard to low income earners for whom a $50 or $100 excess might prevent them getting medical attention.”

I understand the cost of processing those minor sub $100 claims is greater than the actual claims themselves, so the problem is quite clear.

However it is worth considering more generally the issue of part fees. As a starting point, I consider almost all Govt funded services should have part fees, as you get distorted decision making in their absence.

The prime example of this is the scam tertiary courses which have diverted so much tertiary funding. When the Govt pays 100% of the course costs, then the institution will simply target signing up as many people as possible, and they will sign up if there is no cost.

Now part fees should not be high enough to discourage people who would genuinely benefit from a Government service, and this is a valid concern.

And there are some situations where there should be no part fees at all. For example kids borrowing books from a library is a classic example.

In related news, 93 year old Sir Owen Woodhouse is reported as being upset with changes:

The father of New Zealand’s accident compensation scheme, Sir Owen Woodhouse, says changes announced last week are “uncaring and predatory”.

Sir Owen, 93, says proposals to double and treble levies on heavy motorbikes and mopeds, and to push accident victims back to work on much lower incomes than they earned before their accidents, breach the principles of the scheme he authored as head of a royal commission in 1967.

I think Sir Owen has just shown us the real problem with ACC. He has spoken out against both the increase in levies and the reduction of benefits. Now you can’t have it both ways. It is quite legitimate to say there should be no reduction in benefits, but then you have to accept that that levies will increase to around $45 a week for an average family. But if you do not reduce benefits, then levies have to increase even further. There is no magic pot of gold to fund the scheme.

Sir Owen’s 1967 report proposed a single flat-rate levy on all employers and another flat rate on motorists, on the basis that everyone benefited from the work of people in risky industries such as aerial topdressing.

Sorry, but wrong an unrealistic view. Firstly industries with higher work accidents should cover those costs, so that the prices of those goods or services reflect that.

I own a polling company. Over the last five years my ACC bill has been a large five figure sum. During that time not a single accident has occurred, or claim filed by a staff member. And Sir Owen is saying we should pay even higher ACC levies to cover not just workplace accidents in other clerical type firms, but workplace accidents in freezing works.

Yesterday he disputed claims by ACC Minister Nick Smith that levies needed to reflect different accident rates in different industries and different kinds of vehicles because that would give employers and motorists more incentive to be safe.

“We are saying people are willing to risk killing themselves for the sake of a few dollars of saved premiums. That’s just ridiculous,” he said.

“I think it’s simply shocking that they are proposing to load people on bicycles and this kind of thing with the extra amounts they are talking about.”

Well if you are saying you want less people killed on the roads, then yes the motorcycle premium makes sense as their injury rate is 16 times that of motorists.

Where I do have some sympathy for motorcyclists is if they own multiple bikes. What might be worthwhile is for the Government to look at a system for all vehicle registrations where the first vehicle per person pays the full license fee, while any subsequent vehicles pay a lower fee.

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