Overview

In 2008/09, the Ministry of Social Development (the Ministry) spent about $1.9 billion on sickness and invalids' benefits, providing income support to people who were unable to work because of ill health or a disability. In June 2009, there were about 54,000 people receiving a sickness benefit because they were temporarily unable to work, and about 84,000 people receiving an invalid's benefit because they were permanently and severely restricted in their ability to work.

As part of the Working New Zealand: Work-Focused Support Programme, the Ministry put into practice a number of changes in September 2007 to improve how it determined eligibility for sickness and invalids' benefits, and to actively manage cases through regular and effective contact with people receiving those benefits. The aim of the changes was to provide appropriate services and support to beneficiaries so that any who might be able to work (full-time or part-time) could prepare for, make the transition to, and stay in work. By 2010/11, the changes were expected to result in savings of $49 million each year.

Around one year after the changes were introduced, my staff looked at how well the changes were operating and whether they were starting to have the intended effect. The Ministry had ensured that the systems and staff required to implement the changes were largely in place by September 2007. The systems and staff included a redesigned medical certificate to provide better information, an online medical database to help case managers assess applications, and additional staff (including regional health advisors and regional disability advisors) to support case managers in their decision-making.

At the time of our audit, however, the Ministry had yet to initiate its intended regular and effective contact with many beneficiaries. It had yet to implement a Client Management System and had not secured all the contracts for new health services. Although the changes were starting to take effect, they were not being delivered consistently.

The redesigned medical certificate, when completed well, was providing case managers with better information for determining eligibility. Regional health advisors and regional disability advisors were providing case managers with valuable support for assessing complex applications, but their practice in conducting reviews varied. These advisors and their reviews were not being used consistently.

Where regions had prepared strategies for making contact and actively working with groups of beneficiaries, such as youth on the sickness benefit, there was evidence that people were supported to return to work or participate in their communities. However, the Ministry had yet to establish contact with many long-term sickness and invalids' beneficiaries, either to better support them in the community or to discuss planning or training for a return to work. The Ministry told us that it expected to establish contact with increasing numbers of sickness and invalids' beneficiaries. It had not set a timeframe for doing so.

The economic and employment environment in which the Ministry has been supporting beneficiaries has deteriorated since it introduced the September 2007 changes, and the Ministry has had to focus on increasing numbers of recently unemployed people.

The Ministry also has a challenging task in managing large numbers of sickness and invalids' beneficiaries who require different kinds of support and services. Sickness and invalids' beneficiaries have a wide spectrum of needs. Some need income support because they are temporarily unable to work because of ill health or a disability. Others need support because they are permanently and severely restricted in their ability to work. Some beneficiaries are not able to work more than 15 hours a week, and some will never be able to work.

We encourage the Ministry to build on the progress that it has made so far. We note that the Ministry has plans to introduce – in stages – more active case management for all groups of sickness and invalids' beneficiaries. Until the Ministry establishes regular and effective contact with all beneficiaries according to their circumstances and needs – as it intended to under the changes – it will not be able to achieve the full case management benefits of the Programme.

Although it is too early to expect to see significant outcomes from the changes, the systems for gathering the monitoring data should have been in place from the outset. We have recommended that the Ministry improve how it is monitoring the effect of the changes, so it will be able to assess how well the various initiatives are working and how well the Programme is achieving its outcomes (including whether the intended savings are made).

I thank the staff from the Ministry for the assistance they have provided.

Phillippa Smith
Deputy Controller and Auditor-General

13 October 2009