A discussion paper on disability compensation policies and options recommended by the Woodhouse Committee for Disabled Peoples’ International – Australia prepared by Richard and Becky Llewellyn as SA Disability Consultants. These early ideas and discussions later coalesced in the National Disability Insurance Scheme, brought in by Prime Minister Julia Gillard’s government with bipartisan support.

July 1984

Need for an integrated national plan of compensation

People with disabilities, acknowledging the ground swell of concern about workers’ compensation and accident compensation schemes, support the need to develop an integrated national plan of compensation. Crucial to the success of compensation policy development is the increased real participation and consultation of those most vitally involved; that is, people with disabilities themselves.

The disability compensation lottery depending on how disability is acquired

To become a person with a disability in Australia has sometimes been likened to entering a lottery. Depending on where the disability first occurred, at work, at home or on the highway, depending on your age, depending on whether the disability was the result of birth, an illness or accident; the treatment received can vary enormously.

Separate systems have grown up in parallel, accident litigation, workers’ compensation, and the social security system. Each of these three major systems has developed in response to a need for income and compensation as a result of a person sustaining a disability. Yet the end results and processes of each system bear little resemblance to one another. People with the same type and degree of disability receive vastly different compensation and rehabilitation, based solely on the chance of where,when, how the disability was first caused.

Not only do these compensation systems contain inequalities and anomalies in comparison with each other, but each one in itself has been the target of much criticism. Common law action for instance has been criticised at the philosophical level for its “fault” principle and the practical effects of such a principle, for its incomplete coverage of accident victims, the expense and delays which are associated with legal settlement. Strong evidence exists that these lengthy processes and systems interfere with the eventual rehabilitation potential.

Workers’ compensation, as State systems, vary from one location to another and do not protect all members of the community from the consequences of work-related accidents or diseases. They are adding rapidly escalating costs to industry, are costly to administer and questionably adequate in benefit and rehabilitation.

Social Security, while not normally thought of as a compensation scheme, does act on behalf of people who are not eligible for other schemes and are yet disabled. Some benefits and allowances are available to employed disabled people such as the Mobility Allowance, however, the majority of Social Security payments in this are primarily intended to serve the non-working person with a disability. The major criticism and problem for people dependent on the invalid pension is the very low level of support which it offers to people, who through their disability, incur higher extra costs in their daily living activities.

Questions of the existing systems to assist people with disabilities in the 1980s

Without some positive action, the criticism of these systems and their anomalies will continue to mount. The time is long overdue for the Australian community to look again at the area of compensation: objectives, responsibilities and costs. Answers need to be developed to the following questions:

  • What do we mean by compensation?
  • Should compensation redress inequalities or only attempt to make good the losses sustained by certain disabled people?
  • Should our compensation systems only attempt to meet basic needs?
    What form of compensation systems would answer current concerns about injustices, complexity, irrationality and negative effects on people who sustain disabilities?
  • Who is responsible for compensation – employers, insurers, State Governments, Federal Government, individuals or a combination?
  • What should be the priorities among competing groups of disabled people, given scarce resources?
  • How could the separate systems existing today begin to integrate for a more equitable and efficient program?

Finally, there are the inescapable questions of cost:

  • What is the real cost of the existing poor system to the community as a whole?
  • Is the community willing to continue the current level of funding in both direct and indirect means?
    How could such costs be minimised or redistributed?
  • What difference is Medicare making to the health care and rehabilitation of disabled people generally and to the compensation industry?
  • Should certain sections of the community bear particular costs of particular types of compensation?

First data on the Australian disability population – ABS 1981

Social and economic planning, to be fair and comprehensive, requires a clear understanding from the beginning of the people being planned for and their requirements. Arbitrary rearrangement of interests of the existing participants of the system lacks this quality of understanding and therefore will always fall short of what could be achieved.

In terms of people with disabilities, the most thorough statistical knowledge available was published by the Australian Bureau of Statistics – Handicapped Persons Australia 1981. This ABS Survey gathered together information, for the first time, over a wide range of questions and issues for disabled persons
and gave some idea of the size of the population.

It showed that although over 13% of Australians have some disability, 8.6% retain some handicap. (This group of 1,225,200 people aged 5 or more, was composed of 295,800 mildly handicapped people, 253,700 moderately handicapped, 514,000 severely handicapped, with severity not being determined for the remaining 161,600 persons.) (1) These figures included those who live at home and institutions and aged people, who statistically have increases in disabling conditions.

Extra financial costs of compensating for loss

One of the phenomena that is beginning to be understood about people who have disabilities is that for the loss of a function or capacity, they often bear a proportional extra financial cost in compensating for that loss. In the case of people with severe disabilities, there is much equipment and use of aids needed to function within the society. This equipment is not cheap, neither is the cost of paying for assistance with personal care and home help activities. People with disabilities are often excluded from normal public transport arrangements by their inaccessibility and they face extra costs or organising their own transport modifications and adaptations.

The ABS Survey quantified that people with disabilities are in the poorer range of income generally than their peers without disability. A government pension, for instance was the principal source of income for only 18.4% of all Australian income units. By contrast 61.8% of income units with a handicapped person
were in receipt of Government benefits as a source of income. (2)

Dilemmas in current compensation arrangements – responsibility and expectation

Compensation in some form or another will be a fact of our society. We readily use and enjoy the advantages of road transport and of industrial output. We cannot get away from the fact that for these privileges there are certain responsibilities, especially in regard to the casualties of these two major areas.

The conscience of the community does already accept a degree of responsibility. It seems to operate however, in a limited and discriminatory manner, with methods which were designed in a social context fairly remote from that of today. The generous response of the Australian community to charitable requests, especially for people with disabilities, is a good example of this conscience in operation.

One of the issues in community responsibility for compensation is our level of expectation, and who receives the benefit. There are many who say our lump sum compensation expectations are too high. In fact, the disabled person receives a minor portion of the payout. These headline grabbing compensation payments are for the legal and medical systems. Sir Owen Woodhouse has more optimistic expectations about our community’s ability to reorganise and rationalise for a single compensation system. In a recent address he said, “My investigations here in Australia and elsewhere leave me in no doubt that amounts already being collected in the form of insurance premiums for the purpose of servicing the existing systems would be entirely adequate to support such a comprehensive system.” (3)

Loss-shifting mechanisms

Who really pays for the cost of injury and illness? The cost of work-related injury and disease must be met by the community in one form or another. To the extent that compensation is adequate, or even more than adequate the cost in the first instance falls on employers, through the insurance system. To the extent that compensation is not adequate, the loss will fall on the individual disabled person. Ultimately however, the cost is borne by the whole community.

Equally misunderstood is how the Australian taxpayer subsidises, through the Commonwealth Department of Social Security, inadequate provision from the private employer-insurance sector of each State. The charter of Social Security is to act basically as a safety net, however, at present it is giving a de facto subsidy to people at different points of their compensation process.

In one way or another the Department of Social Security is contributing additional benefits which that person keeps at the conclusion of the compensation claim. The existence of these benefits takes away some of the pressure for giving higher compensation payments through the private sector and encourages settlement by lump sum payment.

It is possible for a person receiving a lump sum to arrange their affairs so as to continue to receive Social Security benefits. The winners in this current arrangement are those States which impose a maximum limit on smaller payouts than neighbouring States. The losers are the Australian taxpayers in every State who are subsidising this inequality.

It is generally acknowledged within the compensation industry that disabled people who settle for lump sums probably do not fare as well over time as those who receive pensions. This is another example of one group, basically the private insurance companies, minimising some of their overall responsibility and costs at the expense of the fair compensation for disabled people.

The community contributes substantially to compensation systems indirectly. Compulsory insurance which funds negligent action in relation to highway accidents and the employers’ liability scheme appears to be the cost responsibility of those who take out the insurance. These premiums however are added to the cost of transport or the cost of products purchased by the community. This loss-shifting mechanism or flow-on is a disguised form of “sales tax” which the community is already paying. What justification
can there be for this current three-pronged system, which provides completely different compensation for precisely similar disabilities, all at community expense? (4)

Power relationships around compensation sector interests

Beyond the issues of expectation and capacity to pay lie some very complex political issues which relate to State/Commonwealth relationships, and the inter-relationship between compensation systems governed by State laws, the Commonwealth Social Security and taxation systems. As suggested earlier, these sectional players in the compensation field, including State governments, have recently escalated the game of “get someone else to pay.”

Worker’s compensation schemes which impose a maximum limit to benefits tend to shift extra costs on to the Commonwealth Social Security system. In political terms, States have little incentive to remove these limits because their own employers would have to take up an area now covered by the Commonwealth.

The compensation field is characterised by the existence of powerful professional groups. These interests often appear to be polarised, as in the present disagreement of how to solve escalating costs. However, the time lost in doing nothing while waiting for these players to reach some form of consensus contributes just as much to the rising costs. There is a cost in doing nothing.

It has been assumed by many in the past that the competition among and between the various interest groups in the compensation field is enough to ensure a balance in the community interest. However,
there are some circumstances in which the interests of participants of the systems do coincide, such as the popularity of lump sum payments, which reflect more the common interest of these groups in shifting
part of the compensation burden on to the Commonwealth. In this case a consensus among the “responsible” parties does not necessarily represent the interest of the taxpayer and the public in general. (5)

Perpetuating the sick role

Structural relationships may tend to appear abstract and irrelevant in looking at reform and change needed in the system. However, the reality is that the way in which compensation is structured has a direct and profound effect on the lives and health of individuals with disabilities, their families and friends.

The delays associated with the current system and the need for people to maintain a sick role pending the outcome of their cases are two areas in which disabled people lose out. With the dangling carrot of a lump sum, rehabilitation and return to work are often delayed in the interests of success in the legal arena. Disabled people who may seem to be winners, are really one of the losers under this process, along with employers, who end up paying for an anti-rehabilitative compensation system.

The cost of non-participation and exclusion

The compensation area has traditionally been identified with several powerful and crucial groups in the community: unions, employers, legal and medical practitioners and the insurance industry. It is a historical fact in Australia and other countries that people with disabilities have been left outside of many deliberations in matters which affect them most directly. Compensation is no exception.

It is no longer acceptable in Australia to exclude women or aboriginal people for instance from structures which are planned to benefit them. Can we afford to exclude disabled people from the compensation area? The cost to Governments of the present lengthy court actions and other compensation systems which discourage people from showing their independence are heavy indeed. These costs of dependency are high in money terms with people unproductive economically while awaiting settlement, but possibly higher in human resources.

Many problems arising within the workers’ compensation field from this exclusion stem from the fact that after the matter is finalised, few people who are part of that system want to know about the person
who received the injury. The lawyer doesn’t, as they finished their relationship when the case was settled. The union doesn’t want to know about him or her because the person is no longer a member. The employer doesn’t want to know about the ex-worker because he or she is no longer working there. The doctor doesn’t want to know about the person because, who is going to pay for the bill? In reality, that person is left to his or her own devices to cope with the disability and to accept the responsibility which has been abdicated by the other parties. (6)

Reform of disability compensation policies – start with consumer choice

People with disabilities argue the case that a much more active participation from the onset of the disability by the person themselves would tend to ameliorate many of the problems experienced by themselves and the system. They see reallocating responsibility to the so-called ‘client’ in the system as the ‘user’, breaks the cycle of passivity and dependence if the user concept is fully developed.

A disabled person who uses a compensation scheme would, to a large extent, choose his or her own medical care, his or her individual rehabilitation program, his or her own aids, equipment, home modifications, etc. That person would then hopefully integrate more quickly and easily back into community life and working life than tends to be the case under the present system.

More active participation by people with disabilities in processes following injury or illness could yield many benefits. The medical care system which is often the first point of contact of a person on receiving a disability, is characterised to a large extent by decisions being made by the producers or providers rather than the consumers. This is seen in the case of hospitalisation, laboratory tests, and treatment using advanced technology. All of these are areas in which rising expenditure is contributing to the overall
expense of compensation systems. (7)

User responsibility orientation has many benefits

Disabled persons, in control of their own “case management”, may make different decisions regarding those procedures. Rehabilitation may be shortened or lengthened but would respond to the wishes of the person with the disability who would act as payer/user of the system. For employers, the sooner that workers return to work the less cost is involved. Motivation to increase vigilance on safety increases, if the disabled person is there as a constant reminder.

The total planning of compensation would benefit from a user responsibility orientation which had formal avenues for people to contribute their experience, their feedback of the system, more data on the extra problems and costs which they are experiencing. The sense of participating in helping to improve the system and reform some of its bugs may help also to alleviate the sense of frustration and helplessness which currently many individuals feel.

The involvement of people with disabilities in income and compensation systems which are designed to benefit them is a crucial precondition to adequate reform at the micro and macro levels. As well as contributing a consumer perspective of the system from the user point of view, they hold the potential of providing a counterpoint to the entrenched interests of the existing participants. Governments would need great political courage to introduce changes which threaten the interests of these participants, especially where those interests happen to coincide, but the introduction of a consumer-based process into the planning and formulation arena strengthens the chances of reform.

National compensation proposals

The political situation in Australia today seems favourable, in some aspects, to begin to discuss reform of the disability compensation area. With a Federal ALP government and several State ALP governments, there is potential for dialogue and possible co-operation which has never existed. The recently signed Commonwealth/State Housing Agreements are an example of this type of dialogue in action which has benefits for all participants.

The federal platform of the Australian Labor Party calls for a step–by-step National Compensation Scheme to emerge following substantial consultation and planning within the field. The policy document recognises that the Commonwealth and the States could agree, perhaps not simultaneously, to go ahead with the following steps, providing that the Commonwealth have appropriate financial incentives for the states at each step:

  1. “No-fault accident compensation scheme to be introduced, accompanied by abolition of common law claims arising from such accidents
  2. Increased workers’ compensation benefits under existing statutory systems to match benchmark set by motor accident scheme
  3. Extend workers’ compensation to 24-hour-a-day cover for earners, with abolition of common law claims
  4. 24-hour-a-day cover for non-earner non-road
    accident victims.” (8)

Ten years ago, a bold and comprehensive scheme was suggested in the Woodhouse Committee’s proposals for the Australian Government. The scheme was designed to be universal and comprehensive providing coverage to all members of the community at all times, regardless of the cause of incapacity or disability, with “realistic” levels of compensation.

Although these proposals were overshadowed by the larger events of politics in that year, many of the aspects in the design appear to be worth a second look. For example, Woodhouse suggested that the scheme be handled as a social service by the Government through the Department of Social Security. They estimated that the administrative savings of using the Department would run at about 3% of benefits paid, compared with the 30% figure for insurance systems. (9)

The Woodhouse Committee’s proposals for funding were based on a three-pronged funding base. A 2% levy on wages and salaries and on the net earnings of self-employed people was to replace workers’ compensation premiums which averaged more than 2% of wages. An excise tax on petrol and diesel oil at the rate of 10C per gallon was to replace compulsory thirty-party insurance. The balance of money needed to fund the scheme was to have come from general revenue, taking into account savings in relation to sickness benefits and other Commonwealth payments, so that the net additional cost of a totally comprehensive compensation system to the Government in 1974 would have been $295 million. (10)

There has been a lot of water under the bridge in 10 years. There’s a much more sophisticated understanding of economic planning, the way the taxation system interacts to achieve social policy goals, and the consequences of inappropriate systems escalating in cost with little apparent ability to control exponential rises.

People with disabilities believe that there is scope for national policy development and reform in the area of disability compensation which would be both timely and in the long run cost-saving to our community.

Policy concerns of disabled people

If national policies were to be developed there are several areas of concern which people with disabilities would like to see debated and developed:

Definition and Measurement of Disability
Crucial to the success of any forward planning is a clear understandable definition of the concepts of ‘impairment, disability and handicap.’ These definitions are imperative is setting the tools for targeting benefit to those who are most in need and in giving equity and fairness over a period of time through limit-setting on minor disability. Questions of measurement for compensation purposes are difficult enough, but there must be clear definitions set from the beginning.

Compensation Principles
Closely allied with the question of who is to benefit from a national compensation policy are the principles to which the scheme aspires. Questions of reimbursement, full or partial and taxation of benefits would flow from initial decisions taken regarding compensation principles. Current debates about litigation remaining, private insurance companies involvement, fully funded or pay-as-you-go methods, various methods of payment: lump sums, pensions, and allowances or combination, would also need to be resolved at some stage of policy development.

People with disabilities would hope to present the case for extra costs of severe disability being covered through a type of disability allowance. This could be assessed on severity of requirement in areas such as equipment and home modification, attendant care needs, transport and mobility, extra personal costs of day-to-day living, and training and education.

Incentives and Disincentives
The existing system has many layers of incentives and disincentives for spreading the share of responsibility in the area of disability. A goal for national policy development is to equalise the incentives between some of the major participants including the State and Commonwealth Governments, employers, insurers, legal and medical professionals, and individuals. It is in the interests of everyone to have a more rational system and it appears to be worth taking time to develop better balances for a more equitable long-term result.

Administrative Mechanisms
The success of a national compensation scheme would hinge to a great degree upon its administrative ability once the principles were set. The apparent success of Medicare in re-allocating roles and responsibilities previously thought unchangeable is a model for possibilities in compensation reform.


People with disabilities strongly support the need to pursue national integrated compensation policies. The ad hoc de facto integration of compensation systems at work in Australia today is in urgent need of reform. The Australian community today is well placed to develop its own mid-1980’s product, moving forward with lessons learned from the past and from other places.

It is recommended that people with disabilities be involved at all stages of policy development, through both informal consultations and formal representation in compensation policy structures.


(1) Handicapped Persons Australia 1981, Australian Bureau of Statistics, Canberra, p,3.
(2) ‘Op Cit.’, p. 167
(3) Woodhouse, Sir Owen, “The Philosophy of Compensation”, New Directions in Workers Compensation Conference, Adelaide, June 1984, p.9.
(4) ‘Op. Cit.’, p.8.
(5) Sackville, Professor Ronald, “New Directions in Compensation, A Challenge for Pragmatic Times.”, Adelaide Conference, June, 1984, p. 10.

(6) Gregory, Bob, Comments on Byrne Committee Report for “New Directions’ Conference”, Adelaide, June, 1984, p. 2.
(7) Fahy, J.L., “The New Zealand Accident Compensation System”, Adelaide Conference, June, 1984, p. 24.
(8) Sackville, Professor Ronald, ‘Op. Cit.’ p. 25.
(9) New South Wales Law Reform Commission, “Issue Paper-Accident Compensation”, 1982, p. 80.
(10) ‘Op. Cit.’, p. 81.