Part 6 - Ministry of Social Development: Changes to the case management of sickness and invalids' beneficiaries

Public entities' progress in implementing the Auditor-General's recommendations.

In 2009/10, the Ministry of Social Development (the Ministry) spent about $2 billion on sickness and invalids' benefits, providing income support to people who were unable to work because of ill health or disability.

Sickness benefits are paid to people with short-term medical conditions when their medical condition temporarily limits their ability to work. In June 2010, there were about 58,000 people receiving a sickness benefit. Invalids' benefits are paid to people when their medical condition permanently and severely restricts their ability to work. In June 2010, there were about 85,000 people receiving an invalids' benefit.

Since 2006, a significant shift has been taking place in the way the state supports beneficiaries. In October 2006, the then Minister for Social Development and Employment announced the Working New Zealand: Work-Focused Support Programme (the Programme). Through the Ministry's service delivery arm, Work and Income, the Programme introduced measures designed to support and prepare beneficiaries – such as those on the unemployment benefit – to return to work as soon as their circumstances allowed.

In September 2007, the Programme was extended to include sickness and invalids' beneficiaries. Extending the Programme introduced changes that were designed to better assess eligibility for these types of benefit (for example, a redesigned medical certificate to provide more information about a beneficiary's medical condition) and required a more comprehensive case management approach to dealing with sickness and invalids' beneficiaries. Systems and processes (for example, access to 13 regional health advisors, 13 regional disability advisors, 55 new employment co-ordinators, and 13 regional health and disability advisors) were set up to ensure that case managers had access to better information so that they could make more effective decisions and could access services for these beneficiaries.

We carried out a performance audit (during the last quarter of 2008 and the first quarter of 2009) of aspects of the management of sickness and invalids' benefits. We published our report in October 2009.

The changing economic context has been a significant background factor since we started that audit, including a period of recession and significant job losses. One consequence has been that the number of people on the unemployment benefit has more than doubled between December 2008 and December 2010. This context inevitably increases the Ministry's general workload in managing the benefit system and supporting beneficiaries, and reduces the Ministry's ability to successfully support people into paid employment. The Ministry has employed additional frontline staff to help manage its workload.

The number of people receiving the sickness benefit has also continued to increase (by 17% from December 2008 to December 2010), but to a much lesser extent than the number of unemployment beneficiaries. The number of people receiving invalids' benefits has been relatively stable during the same period (the number increased by 2% from December 2008 to December 2010).

The scope of our performance audit

Our performance audit focused on how the Ministry was assessing a person's eligibility for a sickness or invalid's benefit as a result of the Working New Zealand changes in September 2007. Extending the Programme introduced changes that were designed to better assess eligibility for the sickness and invalid's benefits.

We also looked at how effective the new comprehensive case management approach was in helping sickness and invalids' beneficiaries into work or providing them with ongoing support and services. The changes included more active case management through regular and effective contact with people receiving sickness and invalids' benefits and providing appropriate support so that beneficiaries who were able to work (fulltime or part-time) could prepare for, make the transition to, and stay in work.

The Ministry initially anticipated that it would take five years for the changes to deliver results. The expected results, at that time, included a reduction in the number of sickness and invalids' beneficiaries and reduced spending on these types of benefit.

Our findings and recommendations

When we published our performance audit report (in October 2009), the Programme changes were starting to take effect but were not being delivered consistently. We found that:

  • 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 still had to initiate its intended regular and effective contact with many beneficiaries.
  • The Ministry still had to implement a client management system.


Our performance audit report contained 18 recommendations covering three main themes:

  • determining eligibility for sickness and invalids' benefits – this included obtaining better quality information through the medical certificates, and using the regional health advisors and medical disability providers more effectively when assessing eligibility (especially for long-term and complex problems);
  • comprehensive case management – this included more actively identifying and engaging with sickness and invalids' beneficiaries to provide work planning and employment-focused services if the information available suggests that they were ready to do so; and
  • monitoring and evaluating the effectiveness of the Programme.

New policy initiatives since our 2009 performance audit report

A comprehensive package of reforms has been introduced since our 2009 performance audit report. The package is known as Future Focus.

The legislation underpinning Future Focus, the Social Security (New Work Tests, Incentives, and Obligations) Amendment Act 2010, was signed into law on 23 August 2010. Most of the new provisions came into force on 27 September 2010. The package is to be implemented in two stages.

The first changes were implemented in September 2010. For sickness and invalids' beneficiaries, this involved changing the medical certificate used for applications for sickness and invalids' benefits to collect more information about the person's capacity for work and to ensure that people received the right benefit for their circumstances. The new medical certificate was issued in September 2010.

The second set of changes under Future Focus for sickness beneficiaries changes will be implemented in May 2011 and will require:

  • sickness beneficiaries to undergo an additional medical reassessment eight weeks after they start receiving the sickness benefit, so that Ministry staff can gather more relevant information about a person's progress and ability to re-enter the workforce;
  • case managers to carry out a compulsory review of all sickness beneficiaries who have received the benefit for longer than 12 months (when appropriate, this will include a second medical opinion);
  • sickness beneficiaries who have been assessed as able to work part-time (15 to 29 hours a week) will be obliged to look for suitable part-time work; and
  • graduated sanctions to be applied if sickness beneficiaries do not meet their obligations.

The Ministry of Social Development's response to our findings and recommendations

Although New Zealand was experiencing an economic downturn, the Ministry accepted and undertook to address our recommendations. We have had regular meetings with, and reports from, the Ministry on its response to our recommendations. In assessing the Ministry's progress, we have been mindful of the economic context noted in paragraph 6.6.

As at December 2010, the Ministry told us that it had:

  • completed three of our recommendations by updating the medical certificate and providing training to staff on its use, and providing staff with improved guidance on referring cases to regional health advisors and regional disability advisors;
  • made significant progress on a further seven recommendations in providing guidance and training to case managers to improve case management and better use regional health advisors and regional disability advisors. However, this work will not be completed until the May 2011 Future Focus changes are implemented and in use;
  • introduced changes so that the Medical Disability Advisor online database is available only to selected staff;
  • considered that two of our recommendations for improved monitoring and evaluation will be addressed through monitoring and evaluating the effects of the Future Focus package; and
  • partially achieved five recommendations (which include improving case management and working better with health practitioners). More work is required to complete these recommendations.

Improved case management

The Ministry is also working on improving its case management. The Ministry told us that reports for frontline staff have been prepared to identify sickness and invalids' beneficiaries who are most likely to participate in work-planning activities. The case management approach will consider a range of options for assessing work capacity, including the use of work capacity assessments and vocational assessments.

The Ministry also told us that it introduced "proactive engagement" from 1 July 2010. This "proactive engagement" was introduced in preparation for applying work obligations to domestic purposes beneficiaries in September 2010 and to sickness beneficiaries in May 2011.

A target group of 3000 sickness beneficiaries, who have medical certificates that confirm that they are currently available for part-time work, has been selected. These beneficiaries will be invited to an appointment to see a case manager to discuss what they are doing and how they might find suitable work. We were told that this work will be done as time permits and that regional staff are currently trying to schedule one hour of "proactive engagement" time during each working day.

The Ministry told us that staff will receive training on the "proactive engagement" approach, the types of conversations that need to occur, the expected outcomes, and the expectation of regular engagement with each beneficiary. We were also told that regular reporting and monitoring has been set up to support this approach, and that management reporting at national, regional, and local levels has been enhanced to provide a consistent view of employment-focused case management activity.

We consider that the Ministry should continue to improve its systems for assessing eligibility for sickness and invalids' beneficiaries, in line with our recommendations. This will help it to be confident that the right people are receiving the right forms of assistance. In particular, the Ministry should continue to strengthen the use of regional health advisors and regional disability advisors as planned.

We note that the Future Focus package continues the case management approach of the earlier reforms. Our recommendations on how to improve case management for sickness and invalids' beneficiaries remain relevant. We encourage the Ministry not to lose sight of this group of beneficiaries and to continue to improve its processes, despite the challenges of the current economic environment.

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