Should ACC be extended to illness?

Nicole Pryor at Stuff reports:

Sick people are more likely to be out of work and have money problems than injured people, says new research.

A study from the University of Otago, which has been published in Social Science & Medicine, compared over 100 stroke victims under 65-years-old with 429 people who had a similarly debilitating injury.

Both groups were followed for one year to compare their standard of living under the ACC system and means-tested benefits.

Under the Accident Compensation Corporation (ACC), injured people could get up to 80% of their weekly wages while recovering, as well as treatment and rehabilitation support.

Sick people could get treatment costs, but no compensation for lost wages beyond limited means-tested benefits.

There is a huge variation between those who have accidents and those who are sick. This even extends to situations that if you are born disabled (say with one leg) you get far less support than if you lose a leg in a car crash.

McAllister said at the very least there needs to be better income support for people with illnesses.

“For years people have been saying how unfair this is, the two quite different systems, and that just because someone has the misfortune of having an illness, rather than an injury, they have greater financial consequences.”

She said another option could be to extend ACC to cover illnesses.

While the disparity is a problem, the proposed solution could be more of a problem.

The first is that ACC premiums would increase massively. Every employer and employee would be paying more into ACC.

The second is that the whole basis for ACC was for accidents, and the no faults system was in return for removing the possibility of expensive lawsuits to determine compensation. That rationale does not apply for sickness. You can of curse get income protection insurance to cover the possibility of lost income due to illness.

Is it better to have one government run income protection scheme for illness that is compulsory or competing ones that people can choose to be in?

Finally look at the growth in even the sickness benefit by those who prefer not to work (of course not all or even most, but a significant minority). Think of the incentives if the sickness benefit is effectively set at 80% of your previous earnings? Especially consider that many people are on the sickness benefit due to alcohol or drug addiction. Do we really want to pay people 80% of their previous wages to remain an alcoholic or drug addict?

[UPDATE: According to MSD 7% of sickness beneficiaries are there for substance abuse, so not as many as I thought. Still a reasonable number. Also around 40% are due to psychological or psychiatric conditions which may have a substance aspect to them as the data records primary reasons only – not all reasons.]

So yes there is a disparity and a problem. But the solution is not extending ACC to illness. There could be merit in taking a more integrated approach to accidents and illness but it has to be an affordable one that doesn’t provide bad incentives.