MINISTER PORTFOLIO DEADLINE. Hon Dr Nick Smith Minister for ACC 8 April 2010

Transcription

1 BRIEFING MINISTER PORTFOLIO DEADLINE Hon Dr Nick Smith Minister for ACC 8 April 2010 Action sought Title For your decision ACC LIABILITY FOR INJURY-RELATED HEARING LOSS Date 1 April 2010 Security Copied to For referral to Agencies consulted N/A Hon Pansy Wong, Associate Minister for ACC N/A ACC, Ministry of Health, Ministry of Social Development, Veterans' Affairs, Treasury Contact information Policy Advisor DDI: MB: N/A Senior Advisor DDI: MB: N/A Authorising manager ACC Policy Manager DDI: MB: Tracker number 10/92615 Minister s comments Minister s feedback Very Poor Poor Neutral Good Very Good Quality of advice Writing style Quality of analysis Completeness of information

2 10/92615 Department of Labour briefing ACC LIABILITY FOR INJURY-RELATED HEARING LOSS Executive summary 1 ACC currently pays the full costs for hearing loss treatment where a claimant has cover even though the claimant s hearing loss may be due in part to non-injury related causes. 2 This paper asks you to consider three options for determining ACC s liability for injury-related hearing loss and to agree to a preferred option: These are: Option 1: Option 2: Option 3: Contracts as in the status quo Regulations to specify the injury-related contribution Regulations to specify a subsidy 3 This paper evaluates the options against a set of criteria. Officials would like to discuss the options you wish to progress. Should you decide on a regulatory option, the Department will prepare a consultation document and Cabinet paper. Should you decide on the status quo, ACC advise that this is unlikely to result in significant further gains for ACC. 4 Once decisions are taken, officials will progress any regulatory work along with the work on amending the Accident Insurance (Occupational Hearing Assessment Procedures) Regulations 1999 to clarify and update procedures used in assessing noise-induced hearing loss caused by work-related gradual process. If consultation is required as a result of this paper it can occur on both issues concurrently. 5 It is important to note that the issue of cost apportionment on the basis of injury related and non-injury related causation is not simply limited to hearing loss. It has implications across the relationship between ACC and Vote: Health. The paper recommends that officials from ACC, the Ministry of Health and the Ministry of Social Development be directed to undertake cross-agency work to determine how to address issues of relative responsibility generally. Recommended action 1 Note ACC currently pays for hearing loss entitlement claims using purchasing contracts and pays for non-injury related components of hearing loss when they coexist with injury-related hearing loss. Either 2 Agree that ACC will renegotiate contracts to obtain better prices and services with the hearing sector without regulations (Option 1) AGREE / DO NOT AGREE 2

3 OR 3 Agree to consult on regulations to allow ACC to apportion payments based on the degree of injury-related hearing loss (Option 2) OR 4 Agree to consult on a regulation to specify a subsidy (Option 3) AND AGREE / DO NOT AGREE AGREE / DO NOT AGREE 5 Note there are three pricing options for the regulation to set a subsidy in Option 3. You may wish to discuss with officials which of these options are included for consultation. The pricing options developed by ACC are on page 8 of this paper. 6 Note that once decisions are taken in this area, officials will progress this work along with the work on amending the Accident Insurance (Occupational Hearing Assessment Procedures) Regulations Note that the issue of ACC s responsibility for only injury-related components of hearing loss has implications for other areas. 8 Request that officials from ACC, Ministry of Health and the Ministry of Social Development undertake cross-agency work to determine how to address issues of relative responsibility for all non-injury-related components in other areas. 9 Discuss the contents of this paper with officials should you wish. AGREE / DO NOT AGREE AGREE / DO NOT AGREE 10 Discuss with your Ministerial colleagues should you wish as the proposals in this paper have implications for other votes- in particular Health and Social Development. AGREE / DO NOT AGREE ACC Policy Manager for Secretary of Labour Hon Dr Nick Smith Minister for ACC... /... / /... /... 3

4 Department of Labour Briefing ACC LIABILITY FOR INJURY-RELATED HEARING LOSS Purpose 1 This paper asks you to consider options for determining ACC s liability for injuryrelated hearing loss and to agree to a preferred option or options for consultation. Current Practice 2 Under the Accident Compensation Act 2001 (the Act), claimants with work-related noise induced hearing loss are required to establish that their injury is wholly or substantially caused by non-work related gradual process, disease or infection. This is the same test for cover used for all work-related gradual process, disease, or infection claims. 3 ACC relies on Ear, Nose and Throat (ENT) specialists to provide a breakdown of causes of a claimant s hearing loss. Using clinical evidence, professional judgement and testing, ENT specialists provide a medico/ legal report to ACC that attributes hearing loss claims according to injury, age and other factors. ENT specialists also make recommendations about any clinical need for a hearing aid based on the percentage of injury related hearing loss only. Where this recommendation is provided, ACC in most cases funds hearing aids. As hearing loss devices cover all hearing loss, ACC funds all the hearing needs of the client including age related hearing loss, but it does not use it to apportion costs as it is difficult to consistently apply the ENT breakdown and such a decision is unlikely to be robust under current legislation. 4 Where claimants have hearing loss which is both injury-related and non-injuryrelated, ACC consider that it is not defendable to decline the claimant hearing aids if the injury related need warrants aids in its own right. This is because ACC currently treats work-related noise induced hearing loss as a separate injury under the Act. 5 ACC currently uses contracts with audiologists and hearing aid manufacturers to determine the amount to be paid for hearing loss claims. 6 Since 2007, ACC has been in a partnership agreement (the Accord) with the New Zealand Audiological Society (NZAS) and the Hearing Instrument Manufacturers and Distribution Association (HIMADA). This has led to reduced hearing aid costs, but audiology fees have not reduced. ACC has continued to pay for the non-injury related component of hearing loss where cover is accepted for injury-related hearing loss. Problem 7 ACC s hearing loss expenditure provides entitlements (hearing aids, fitting fees etc) required for both injury-related and non-injury-related needs. Once cover has been accepted, ACC is unable to apportion costs due to other causes under current 4

5 legislation and regulations. Hearing aids are fitted to meet the needs of overall hearing loss, so ACC pays the full cost. ACC only provides entitlements once the degree of injury-related loss requires a hearing aid. ACC consider that it would be difficult to apply the ENT specialists breakdown of the component reasons for hearing loss consistently and decisions could be unpredictable. This means that they do not consider that apportionment is possible using current tools. 8 For work-related noise induced hearing loss claims, the employers pay the full cost, even though a proportion of the hearing loss is not work related. As the growth in claims continues ACC still has to fund hearing losses to the maximum extent practicable under current legislation, this leaves the hearing loss claims with no clear funding limits relative to what the levy payer can afford. 9 Also, ACC interprets the social rehabilitation requirements of the Act to mean that they are required to provide full hearing services for claimants with hearing loss. In most cases ACC is providing all hearing loss entitlements to the claimant for their lifetime regardless of the fact that their injury-related loss has not changed and their non-injury related hearing loss is increasing. 10 ACC considers that the Act s requirement for social rehabilitation 1 means that using an apportionment method to calculate the amount ACC pays without regulations would be challenged in the review process. The Department agrees with this assessment. The Department s legal advice is that where ACC is liable to provide a hearing aid, it must pay the full cost of that aid unless regulations made under section 324 of the Act provide otherwise. Regulations may set out costs that ACC is liable to pay for rehabilitation, including prescribing the percentages of costs or specified amounts of costs that ACC will pay. 11 Both the volume and cost of hearing loss claims is increasing significantly. At 1 July 2009, ACC calculated the net present value of existing hearing loss claims at $489 million 2, with an extra $880 million estimated as the liability for future claims yet to be made. This is mostly from the Work Account (mostly the residual amount). ACC faces increases in both the numbers of injury-related hearing loss claims and increases in the amount they pay out. As employers fund the Work Account this means increasing pressure on the levies they pay. While the Accord between ACC and the hearing sector has reduced the average amount paid per hearing aid, the total costs and rate of hearing loss claims growth continues to increase. This is illustrated in the following graphs: 1 Hearing loss entitlements (hearing aids) come under aids and appliances in the sections of the Act which require ACC to provide the key aspects of social rehabilitation. The Act also requires ACC to assist in restoring a claimant s independence to the maximum extent practicable. This makes it difficult for ACC to limit its contribution to injury-related hearing loss. 2 These calculations do not include cash handling expenses nor a risk margin. 5

6 Graph 1: Growth in new claims all ACC claims versus hearing loss claims % Growth 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% All ACC Claims Lodged Hearing Loss Claims Lodged Financial Year (ending 30 June) Graph 2: Hearing loss claim volumes and annual expenditure (actual and projected) Number of claims receiving entitlements 120, ,000 80,000 60,000 40,000 20, Year (30 June end) $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 Cost (GST excl) Total number of claims receiving entitlements New claims Cost (excl GST) 12 The graph below shows the proportion of injury-related hearing loss to total hearing loss from a sample of 500 claimants. This shows that the median proportion of hearing loss is 49%. 6

7 13 ACC assumes that the current trends of increasing hearing loss claimants will continue. The key driver is work-related gradual process claims where there are significant time lags between the activities that caused the injury and when the claim is made. The average age of a new claimant is 65 years old. ACC expects claim numbers to increase as more of the population ages and have hearing loss needing treatment. The Options 14 As ACC is not liable for the non-injury-related portion of hearing loss, it is reasonable to find a way of determining ACC s liability for injury-related hearing loss. Doing this could result in substantial savings to the scheme. The options will apply to 100% of hearing loss claims not just work-related gradual process hearing loss. The following are possible options for achieving this: Option 1: Contracts, as in the Status quo 15 Option 1 envisages that the contract format would be retained but that greater gains would be sought through contract negotiations. ACC would continue to use the Hearing Accord or other means to reduce costs through a new contract. ACC and the Department of Labour consider it is not possible to contract for apportionment of costs according to causation as it is very likely such practices would be successfully challenged through the disputes resolution process. It is unlikely that ACC could set up a defensible apportionment in a contract. ACC is currently in contract negotiations on reducing hearing aid fees. These negotiations are not part of the Accord. There is also expected to be continued reduction in hearing aid price as the hearing sector continues to adjust to hearing needs assessment and targets. Option 2: Regulations to Specify Injury-related Contribution 16 Under this option, regulations would specify the ACC s contribution to the total cost of a claimant s hearing loss, based on the claimant s level of injury-related hearing loss. ENT specialists would be used to provide opinions on the degree of injuryrelated hearing loss. An ENT workbook (currently being developed) would provide detailed information on how to diagnose the causes of hearing loss in a more 7

8 consistent manner. This would mitigate the risk of ENT specialists providing inconsistent assessments on the proportion of injury-related hearing loss. 17 ACC s contribution would be standarised into bands, reflecting different levels of injury-related hearing loss. A sample of ACC claims showed the median proportion of hearing loss caused by injury to total hearing loss is 49%. This means around half the sample had hearing loss where injury-related hearing loss made up more than half of their hearing loss. Option 3: Regulations to Specify a Subsidy 18 Under Option 3, regulations could specify that ACC would contribute a set amount towards claimants hearing loss costs. All claimants eligible for entitlement would receive the same level of entitlement regardless of the level of injury-related hearing loss. Amounts would be set taking into account the median level of injury-loss in proportion to total hearing loss and the average cost of basic hearing aids for people with that median level of hearing loss. This is simpler to apply than an apportionment approach. It is in keeping with how other government agencies fund hearing loss. 19 For Option 3, ACC have devised a range of possible pricing scenarios for the subsidy regulation based on current rates, adjusting for different levels of aiding (low, medium and high options) and impact on ACC s hearing loss liabilities. If you select this option you may want to consult on one of these pricing scenarios: Pricing Option per aid Scenario A: Binaural Monaural Hearing aid each $1500 $1500 Fitting fees $1200 $900 Other fees / services $1101 $1101 Binaural: $5301 Monaural: $3501 Scenario B: Binaural Monaural Hearing aid each $1200 $1200 Fitting fees $1200 $900 Other fees / services $1101 $1101 Binaural $4701 Monaural $3201 Scenario C: Binaural Monaural Hearing aid each $1000 $1000 Fitting fees $1200 $900 Other fees / services $1101 $1101 Binaural $4301 Monaural $ These costs are made up of three components: hearing aids, fitting fees, and related fees. ACC also pays for hearing aid consumables such as batteries. 21 ACC estimates that cost savings of between $42m and $71m over the next three years could be achieved depending on which scenario is chosen. 8

9 Criteria for evaluation 22 We have developed the following criteria for determining which options should be used when setting treatment costs: a b c d e ensuring levy stability and cost containment, for both levy payers and for the Government, via the Non-Earners Account protecting claimant certainty of entitlement, including price transparency maintaining claimant access to rehabilitation financially and geographically encouraging improved treatment through innovation and flexibility minimising transaction and compliance costs, while encouraging competition between providers. 9

10 Summary of Analysis 23 The table on the following pages compares the options against the criteria listed in paragraph 19. Note that there is much uncertainty in ACC s model about future cost savings 3.Criteria Option 1: Status quo current contracts Option 2: Regulations to specify injury related contribution Option 3: Regulations to set a subsidy Cost savings: Small further cost savings possible. $69m cost savings over the next three years. A regulation is more Between $42m and $71m cost savings over the next three likely than a contract to make years. A regulation is more likely decisions defendable. than a contract to make decisions defendable Impact on As at present. Residual Reduces residual claims liability Reduces residual claims liability residual claims outstanding claims liability by $147m and new claims by by $111 - $165m and new liability $500m and new claims valued at $267m. claims by $186m -$277m, $806m. depending on option Residual claims cash-flow of $59m, $67m and $77m per annum for June 2011 June Impact on Levy costs will increase as claim Could reduce need for large levy Could reduce need for large levy Levies numbers increase. increases. May result in fewer increases. May result in fewer people becoming claimants. people becoming claimants. Average Costs Binaural: $ Binaural: $2,088 to $4,200 Binaural: $4301 to $5301 per claimant Monaural: $ Monaural: $1,344 to $2,400 Monaural: $3001 to $3501. Depending on degree of injury Depends where subsidy set. related hearing loss. Consumables (batteries etc) Consumables (batteries etc) Consumables (batteries etc) $59.75 per quarter. $59.75 per quarter. $59.75 per quarter. 3 The ranges of estimated cost savings in the options has been developed by ACC using actuarial modelling techniques to calculate the financial impact of the various options. Sampling techniques were used to calculate the effect of the six percent injury-related hearing-loss threshold that comes into effect from 1 July The model has been reviewed by the actuarial firm Finity. They recommend ACC investigate the merit of undertaking epidemiological studies of hearing loss claims. This has not been done due to timing and resourcing constraints. It is assumed the average claimant is 65 years old when they make their claim. Department of Statistics projected population of New Zealand by age and sex has been used to predict new claims, and past trends rates used in the forecast. No allowance has been made in the model for reductions due to injury prevention activities, as this would not affect claim numbers for the next 20 to 30 years. 10

11 .Criteria Option 1: Status quo Option 2: Regulations to Option 3: Regulations to current contracts specify injury related set a subsidy contribution.claimant certainty and price transparency Claimants get everything paid for by ACC. Prices not transparent as confidential price list used Claimants or other agencies may need to make co-payment. Depends on degree of injuryrelated hearing loss. Potential for inequity that someone with low overall hearing Claimants or other agencies may need to make co-payment. Amounts would be in regulations enabling certainty and transparency. loss may receive more than someone with a higher proportion of hearing loss (depending on degree of injury and non injury related hearing loss). Maintaining claimant access No change audiologists in short supply in some areas. No problem with affording hearing May affect supply of audiologists in rural areas. (ACC is not aware of claimants having problems May affect supply of audiologists in rural areas. (ACC is not aware of claimants having problems aids. Makes ACC the first port of accessing the hearing sector). accessing the hearing sector). call. Co-payments may make aids Co-payments may make aids unaffordable. May result in fewer unaffordable. May result in people claiming from ACC, and fewer people claiming from ACC, renewing their hearing aids less and renewing their hearing aids frequently. less frequently. Encourages improved treatment Yes, based on clinical needs and best technology available, includes peer reviews. Has a requirement for performance monitoring/ peer reviews. Proportionately more funding would be available for higher degrees of hearing loss. Lack of quality factors that can be built into a contract Everyone treated the same irrespective of degree of hearing loss may mean more under or over payment. Similar approach to Health and Veterans Affairs. Minimises transaction/ costs while encouraging competition Contracts complex Currently with Hearing Accord Group. Does not require regulation. Claimants can appeal decisions. Similar reporting requirements to contract. Complex invoicing, ENT assessment linked to band of funding. Regulations required so less flexible. Claimants can appeal decisions and are likely to Particularly lower compliance costs. Regulations required less flexible. Claimants unlikely to be successful at appeal. Easy to administer. appeal determination of degree of injury-related hearing loss. ( ACC considers reviews and appeals would assist the implementation process). 11

12 Conclusion of the Analysis 24 There is uncertainty about how each of the models will perform in practice, although it is likely that the regulatory options will provide a greater certainly of decision making. 25 Contracts have the advantage of being more flexible than regulations, can set standards and are more responsive to individual circumstances to provide a cost effective rehabilitation for claimants without impinging on levy affordability. A contracting option is also in keeping with the Government s commitment to better regulation; less regulation. 26 However, Option 1 cannot be used for apportioning cost according to the cause of hearing loss as ACC must pay for the cost of the aid unless regulations specify that it can pay only the hearing related component. However, ACC has a large market share in the hearing sector (50 percent by cost), and in the current economic environment has been able to negotiate cost savings but advises that the limits of this have probably been reached. 27 Options 2 and 3 would produce greater cost savings than Option 1. Regulations could set the portion of injury related hearing loss (Option 2), or provide a subsidy (Option 3). Regulation would be more robust than contracting in enabling ACC to only pay for the injury-related component of hearing loss, providing the ENT process is robustly set out. Regulations to specify the injury-related component would have the advantage of giving ACC more certainly and defensibility in its decision-making if it were to pay only for the injury related component. It would require a significant process to develop a defensible regulation to apportion by cause of hearing loss and to change the current regulations. Reviews would be likely as claimants seek to maximise their entitlements. 28 Option 2 could result in substantial reductions in residual outstanding claims liability, provided that ACC can successfully apportion the injury related component and remove payment for the non-injury component of hearing loss. But it may result in claimants lodging their claims earlier before non-injury related hearing loss occurs. However as age-related hearing loss increases with time, while the injuryrelated component remains stable, the proportion paid to claimants would decrease over time. 29 Option 3 would be easier to implement than Option 2, and a subsidy approach is consistent with how other agencies fund hearing loss for New Zealanders. 30 The costs related to hearing aids are not necessarily linked to the degree of hearing loss. The type of hearing loss and the claimant s lifestyle are the main determinants of the hearing aids currently recommended. Impact of any change to remove the non-injury-related component. 31 Irrespective of the method used to remove non-injury-related components from entitlements, it could have the following impacts: New Zealand is a signatory to the ILO 17 Workmen's Compensation (Accidents) Convention, 1925 (No. 17) but does not comply with this convention. As at least 90% of hearing loss claims are work-related, New Zealand may risk further noncompliance with ILO 17 if the amounts paid by ACC for hearing loss 12

13 rehabilitation do not cover the full costs of hearing aids and related costs. The Department of Labour will be briefing you separately on ILO 17 in the next month. options 2 and 3 are likely to involve cost shifting to the health and welfare sectors as this is where the costs should lie. Some groups are likely to be adversely affected, in particular, older people who are most likely to suffer from hearing loss and people who are unable to afford any part-charges that result. These groups are most likely to include Maori and other ethnic groups. the issue of cost apportionment on the basis of injury related and non-injury related causation is not limited to hearing loss. It has implications across the relationship between ACC and Vote: Health. The paper recommends that officials from ACC, the Ministry of Health and the Ministry of Social Development be requested to undertake cross-agency work to determine how to address issues of relative responsibility for all non-injury related components in other areas. Ministry of Social Development View 32 The Ministry of Social Development notes that the implications of the change proposals (option 2 and 3) will be to increase costs in Vote: Social Development. 33 The reduction of ACC assistance will reduce ACC costs in two ways. It will reduce the proportion of hearing costs that ACC pays for. Secondly, it will reduce the number of hearing loss claims that are addressed, as people who are unable to cover any additional costs beyond the regulated payment by ACC may not make a claim. 34 These changes will flow through to MSD. Firstly, the reduction of hearing costs that ACC pays for will flow through to increase costs in MSD programmes: Recovery Assistance Payments and Advance Payment of Benefit. These programmes are available to help with immediate needs, including the cost of hearing aids (up to $1,000). Secondly, to the extent that the proposal results in people being unable to fund the costs of their hearing needs, this will result in continued hearing loss, reducing employment opportunities, which will add to beneficiary numbers. Ministry of Health View 35 The Ministry of Health notes that, on the basis of the information presented in the paper, Option 3 appears likely to involve lower transaction costs than Option 2 in terms of (a) administration, and (b) the risk of reviews and appeals. This is a key advantage for ACC as well as DHBs and Vote: Health in general. However, the Ministry also notes that any increase in costs to be borne by individuals (rather than ACC) is likely to increase the risk of health inequalities. Both the subsidy and the apportioning of costs are likely to result in people with hearing loss paying a higher proportion of the cost of hearing aids than is currently the case. This may have the effect that some people who currently receive fully-funded hearing aids may be unable to access hearing aids in the future - particularly if they are on low incomes. 36 Finally, the Ministry is concerned that both Options 2 and 3 may create increased costs for Vote: Health. 13

14 Option Two: with lower levels of subsidy by ACC there would be a greater incentive for people to seek funding through Vote: Health. Option Three is likely to result in people seeking assistance from Vote: Health for the proportion of the costs of hearing aids that are not covered by ACC. The actual cost to Vote: Health will depend on such issues as the methodology used for apportioning costs, the number of people who are affected, and the extent of contribution made through Vote: Health when people also receive some funding for a related condition from ACC. ACC View 37 The policy objective of these proposals is to see a significant reduction in the liability for hearing loss claims. To achieve this, ACC recommends introducing regulations. While ACC can negotiate with manufacturers and audiologists seeking reductions in the current hearing aid prices and fitting fees paid under contract, there are no guarantees that the sector would agree to terms and conditions that would deliver savings to the degree that have been earmarked under the regulatory options. 38 In addition, the policy objective is to limit employers liability to only those costs directly associated with the occupational noise-induced hearing loss. To achieve this objective, regulation change introducing apportionment is required. The benefit of apportionment is that it recognises that employers liability for the injury-related costs naturally diminishes as clients age-related hearing loss increases. However, apportionment, as currently proposed, creates an inequity where a person with only low levels of injury-related hearing loss would potentially receive more financial support then a client with higher levels of both injury and non-injury related hearing loss (although most clients tend to have a mixture of injury and non-injury hearing loss). Apportionment would be subject to intense scrutiny and challenge, particularly from certain groups within the hearing loss sector who will vigorously challenge the assessments with the goal of discrediting the approach. 39 Introducing into regulations a flat subsidy that recognises that employers are only liable for a portion of the hearing loss costs mitigates the issues that confront apportionment. However, a subsidy is a one size fits all approach and does not recognise that, proportionally, injury-related hearing loss decreases over time as clients hearing gradually deteriorates as they get older. Hearing sector concerns 40 The hearing sector 4 understand the Government s need to more efficiently manage health costs within in New Zealand and has signalled a willingness to work with ACC to find solutions that contain costs for injury-related hearing loss. 41 The hearing sector considers: 4 Comments from audiology vendors. 14

15 a b c d e the numbers of new claims is likely to decrease as the numbers of noisy industries decrease rural hearing services are already facing stress and will be adversely affected by withdrawal of visiting clinicians the ENT specialists current measurement of hearing loss is subjective co-payments would be a breach of ILO conventions a subsidy would be unworkable and expensive to administer and would also breach ILO conventions. 42 Their concerns are outlined in Appendix 1. They indicate a willingness to work with ACC to develop a purchasing strategy that will deliver overall savings to the service costs. Process from here 43 Officials would like to discuss the options you wish to progress. Should you decide on regulatory options, the Department will prepare a consultation document and Cabinet paper for this and the proposed changes to regulations relating to noise induced occupational hearing loss processes. Should you decide on the contracting options, ACC will advise you on how it will achieve the objectives by contracting. 44 Should you agree that cross-agency work be undertaken, it is recommended that you request officials from ACC, Ministry of Health and the Ministry of Social Development to undertake cross-agency work to determine how to address issues of relative responsibility for all non-injury related components in other areas. 45 Once decisions are taken, officials will progress any regulatory work along with the work on amending the Accident Insurance (Occupational Hearing Assessment Procedures) Regulations 1999 to clarify and update procedures used in assessing noise-induced hearing loss caused by work-related gradual process. If consultation is required as a result of this paper, it can occur on both issues concurrently. 46 As the proposals in this paper have cost implications for the Ministry s of Social Development and Health you may wish to forward the paper to the Minister of Social Development and the Minister of Health for their information and possibly for further discussion. 15

16 Appendix 1: Response from Audiology Vendors The first definitive research on the full impact of hearing loss in Australia was published in 2005 Listen Hear! 5. This study calculates the real economic cost of hearing impairment at $11.75b or 1.4% of Australian GDP. The largest cost contributor is lost productivity, which runs at 57% of the measured economic cost, or $6.7b. Whilst this level of detailed research has not been completed in NZ, outcomes would be similar. Failed rehabilitation has true economic cost. Representative groups within the NZ Hearing Industry understand the Government s need to more efficiently manage health costs within NZ whether that be illness or injury spend. The industry has signalled a willingness to partner with the ACC to find a solution that addresses cost containment for hearing injury management. Hearing claims to ACC have increased over the last decade. Core contributors are increased accessibility to clinical services for an aged population with noise induced hearing loss (ONIHL). It is questionable whether the rate of claims to ACC is a true reflection of the extent of the current problem. Using census data, modelling suggests that the incidence (the rate of new cases) is declining and will continue to decline, if for no other reason than the participation rates in noisy industries are declining. The hearing industry representatives are currently meeting with the ACC in respect of contract negotiations. The prima facie for these meetings is a reduction in audiology fees. These fees have remained static for the past decade. The Hearing Industry has a strong track record in delivering solutions: o The Hearing Accord has delivered a $10m cost reduction. In 2006 the projected hearing impairment liability was $78m. In 2009 this has been trimmed to between $55m $65m. o Unlike other healthcare sectors where growth rates are continuing to climb, the growth rate in hearing expenditure has fallen off markedly. o Cost growth in claims with hearing aids has been flat since While cost of claims without hearing aids has continued to grow. This is an after effect of growth as entrants into the claimant pool from continue to claim for batteries, repairs, etc. This growth trajectory is expected to subside and is in fact being seen in the latest statistics. Importantly, volume of claims with a hearing aid has been flat since 2006, as a result of more stringent claim review and maturing penetration of regional areas 6. We understand that there are three options being tabled to the Minister. A reduction in audiology fees, co payment in respect of the ONIHL component of the individuals total hearing loss and a subsidy scheme. Fee reduction for clinical services. Should the fact that fees have in effect dropped by 2.8% with the impact of annualised inflation for the past decade, not be taken into consideration, we believe that in the very near future rural services will be adversely affected by the withdrawal of visiting clinicians. This will result in cost shift to the public health service; already under considerable pressure due to the lack of available staff to meet demand. Current waiting lists are 18 months for hearing devices. Co Payment. The industry understands that the individual will bear the cost of their hearing loss over and above that which was ONIHL. This assumes that the calculation used to measure the incidence of ONIHL is not subjective. This is presently not the case with the reference to the ENTs subjective measure of idiopathic cochlear degeneration and we believe co payment will breach the terms of the ILO Conventions 7. 5 Access Economics commissioned by CRC HEAR and the Victorian Deaf Society HIMADA ACC Hearing Market Data 7 Helen Aikman QC Opinion on right to sue 14 December

17 Government Subsidy. The industry believes that this option, for incidents of ONIHL would be unworkable and expensive to administer, as has been seen in the difficulties faced by Enable and Accessable. Again, we believe this option would breach the ILO Conventions. Participants within the Hearing Industry are requesting a holistic approach is applied to managing both the working account and the residual claims issue. This approach must realistically assess cost to service clients to provide effective rehabilitation that minimises the negative impact on the nations economic productivity. We request open consultation that enables a transparent analysis of the full costs of servicing across the public and private sector. Such a partnership approach with an industry with clear understanding of the financial requirements to deliver value, would offer the Minister long term savings against an accurate picture of the current liabilities, without jeopardising the quality of service provided to the New Zealand public. This approach also meets the ACC s commitment to provide a comprehensive, nofault personal injury cover for all New Zealand residents and visitors to New Zealand. 17