Workers compensation fraud - vilifying workers

If you accept what the Insurance industry, Employer groups and Compensation Authorities say, fraud by employees against the Australian Workers Compensation systems is rife and is a major cost which is ultimately borne by employers and the community in general. The truth is that there is employee fraud, but this is a minor part of the problem.

There is a perception that the "compo bludgers" and "compo cheats" are common. This is reinforced by statements made by various industry groups. The Insurance Commission of Western Australia even publicises their fraud control activities through articles, television and radio. The script for the television and radio advertisements is:

Some people think insurance companies, workers comp. and third party insurance are fair game. But every time they make a fraudulent claim, your insurance premiums go up. In fact it is probably costing you more than $100.00 a year. Call Crimestoppers. Because when you think about it, it is really you who has been taken for a ride.

Despite the claims expressed by the insurance industry, employer groups and Workers Compensation authorities the 16 official Inquiries into the various workers compensation schemes in Australia in the last 15 years have found no cogent evidence to support claims of widespread fraud, malingering and malpractice.

There are ten different Workers Compensation schemes which operate throughout Australia and which cover approximately 7 million workers. Approximately 275,000 Workers Compensation claims are reported each year across Australia. But the number of fraud prosecutions against claimants are small. In the 1997/98 year there were 11 prosecutions in Victoria, 92 in Queensland and 24 in South Australia. Figures for the other states are unavailable.

The greater problem and the area where more resources should be directed is in the area of employer fraud.

In 1996 the NSW Government conducted an amnesty on underpayment by employers which produced a $15 million improvement in compliance. The Victorian WorkCover Authority has conducted audits of the remuneration declarations and WorkCover Industry Classifications of Victorian employers since 1995. In that time, the total number of audits conducted was approximately 21,000 of which 9,821 employers complied, 4,225 over-declared and 6,860 employers under-declared, resulting in an underpayment of premium to the amount of $41 million.

The Kennedy Report in Queensland mentioned that "Some employers are rorting the system but that it was not possible to calculate the extent of the evasion ... Unofficial estimates of premiums evaded by employers is as high as $50m per annum". A Queensland Performance Audit Report by Des Knight estimates that the value of outstanding premiums in Queensland is $28.8 million and $3 million is lost each year in bad debts from employers. Inquiries and reports in other states confirm the trends are consistent across the country.

Another contributing factor to the costs involved in operating workers compensation schemes is the conduct of insurance companies defending claims.

In the Victorian County Court matter of David McCubbin v MMI an injured worker who had been receiving weekly payments was invited by the insurer to go to a motel in Stawell. According to his evidence, which was accepted by the Court, he had no inkling as to the real purpose of the meeting. He was informed that his weekly payments would stop on November 30, 1993 and that he had a chance of signing a piece of paper and getting $8,000 with payments stopping on October 5, 1993 or he would get nothing. This was not true.

He gave evidence that he was told that he was not entitled to legal advice and if he did go to Court he would have a Asnowflakes chance in hell@ of winning. The worker said he felt depressed and pressured and if he did not sign it there and then he would get nothing. The Court found the Insurer's conduct to be unconscionable and set aside the agreement.

Hill v FAI and Fischer v Keys Road Clearance Centre prove that this was not an isolated incident. Judge Strong described the tactics used by the Victorian WorkCover Authority in the second case as, "... amongst the most shameful things he had ever seen." The Judge also said, "Workers Compensation cases are to some degree being conducted in a manner more akin to a criminal proceeding where a person before the Court stands accused of some serious wrong doing."

Another type of fraud occurs where a health care provider bills for a treatment that never occurred, or over-services. The level of medical costs, as a percentage of total costs, varies between the schemes, ranging from around 13 per cent to over 20 per cent of workers compensation benefit expenditure.

In Victoria a medical peer review process began in 1995 which, according to the Victorian WorkCover Authority, has led to a change in the servicing patterns of some providers. 17 physiotherapists, seven chiropractors and four psychologists were investigated regarding the number of services per claim. In the 1996-7 financial year two providers were prosecuted, one for furnishing false information and the other for obtaining property by deception. In the 1997-8 financial year two providers were prosecuted, one for obstructing an investigation and the other for falsifying 44 invoices for treatment not provided.

Dubious activities of some providers actually resulted in legislative change in Victoria with the introduction of the Accident Compensation Act (Further Amendment) Bill in 1996.

In the last 10-15 years there has been significant legislative reform across Australia in Workers Compensation which has generally resulted in either the restriction or abolition of the entitlements of injured workers. The common reason is to lower the escalating costs of the system which have been blamed to some extent on claimants who rort the system. There is simply no evidence to support the allegation.

The blame has to be directed to where it really lies, employer premium evasion.