Part 3: The Ministry’s new service delivery model for Work and Income
3.1
In this Part, we describe how the Ministry:
- designed its new service delivery model;
- designed its case management approach and what that approach looks like;
- put in place the changes to its service delivery model;
- managed its administrative costs through the changes; and
- needs to work with other agencies to provide services to people with complex needs.
Summary of our findings
3.2
Overall, we are positive about what the Ministry has achieved in the first year of its new service delivery model. The Ministry has more to do, but progress so far is in line with what we could reasonably expect after such a significant change.
3.3
There was enough evidence to support the initial design of the new service delivery model. The Ministry is now learning from what is working well, and not so well, in those aspects where evidence is scant.
3.4
The Ministry has met the operational challenges of implementing welfare reform well. Good planning ensured uninterrupted payments to clients on “go live” day in July 2013. Investment in training and good communication led to informed staff who are well versed in policy changes.
3.5
The Ministry is managing to make these changes while reducing administrative costs in real terms, which is good for taxpayers, providing results are achieved too.
3.6
However, the new model does not yet cater well for people with high and complex needs, and greater collaboration with other agencies is needed.
Design of the new model for service delivery
Evidence underpins the design of the Ministry’s new service delivery model, which in turn supports its approach to case management. The Ministry has embedded evaluation at the centre of the new model, so it can learn about what is (and what is not) working well.
3.7
The overall shape of the Ministry’s new service delivery model is, to a significant extent, dictated by policy and the law. Within those boundaries, the Ministry has successfully designed an operational model. The model should help deliver the investment approach outcomes sought once it has had a chance to mature.
3.8
Before the global financial crisis, the Ministry provided active, job-related case management. In September 2008, the Ministry stopped using one-to-one case management because of a sharp increase in beneficiary numbers. The Ministry’s service model changed at this time to focus on delivering high volumes of transactional services. Clients would usually see a different “case manager” each time they visited a service centre.
3.9
In July 2013, new legislation came into effect, bringing an increased focus on work outcomes for clients. The number of people who had to show they were actively looking for work rose from 50,000 to 130,000.
3.10
The Ministry’s design of a new service delivery model is in line with international evidence and government policy. The model supports the investment approach by directing resources towards interventions that promise the best results for clients and the greatest financial return on investment for taxpayers.
Key fact
Welfare reform changes mean that 80,000 more people have work obligations.
3.11
For example, the OECD researches and promotes active labour market policies. It says:
… strategies help ensure that job seekers have a better chance of finding employment. Key features of such strategies are to enforce work-availability and mutual obligation requirements, meaning that benefit recipients are expected to engage in active job search and improve their employability, in exchange for receiving efficient employment services and benefit payment. In recent years, the OECD countries have placed increased priority on the effective co-ordination of active labour market policies with the administration of benefits and make-work-pay policies, so as to implement coherent activation strategies for recipients of unemployment benefits and other working-age persons who are outside the labour market.14
3.12
In 2006, the United Kingdom National Audit Office reported that, “Independent research suggests the use of Personal Advisers (one-to-one case managers) is associated with greater numbers leaving benefits”.15 The amount of time advisors spent advising customers was crucial to effectiveness.
Introducing a new case management approach
The Ministry’s case management approach targets resources to those clients who need more support to find work, and who are more likely to be dependent long-term on benefits.
3.13
In October 2012, the Ministry began trials of a new case management model in 23 locations. The new model provided differing levels of case management intensity depending on the likelihood of clients’ long-term benefit dependency. We discuss the results of the trials in Part 5.
3.14
The new model broadly meant that people with the greatest challenges in getting into work would see the same case manager more often. People who needed less help would receive, as a minimum, a benefits maintenance service until they found work again.
3.15
The Ministry adapted the model for the 15 July 2013 roll-out, in response to further legislative and policy changes.
3.16
Figure 3 shows the case management categories as they were at the time of our audit in May and June 2014.
Figure 3
Case management categories, as at June 2014
| Client circumstances | Case management response | Method and frequency of engagement | Case manager caseload | Snapshot of clients in service 12/10/2014 |
| Clients with significant barriers to employment because of a health condition, injury, or disability | Deferred work obligations, as currently not able to work more than 15 hours each week, but expected to be able to return to work in some capacity Work-focused case management – Health Conditions, Injury, or Disability stream* |
Face-to-face with the same case manager at intervals no greater than 28 days | 100 clients for every one case manager | 4,904 |
| Clients with a health condition or disability whose condition allows for part-time work Clients with full-time work obligations who may have poor work history and be at risk from long-term benefit dependency Selected work-preparation clients, including 18,000 sole-parent clients with youngest child aged 3 or 4, and 4000 clients with youngest child aged 2 or under |
Work-focused case management, General stream | Face-to-face with the same case manager at intervals no greater than 28 days | 121 clients for every one case manager | 72,609 |
| Clients aged 18-59 with full- or part-time work obligations that need additional support in job searching activity, or may need some work preparation activity. It can also include people who are waiting allocation to a work-focused case manager | Work Search Support | Engagement differs depending on how long the client has been receiving a benefit and therefore the process differs accordingly | 217 clients for every one case manager | 26,314 |
| Former Youth Payment or Young Parent Payment recipients or clients, and those aged 18-24 who received a benefit for the first time when they were aged 18 or younger (Integrated service case managers can also optionally nominate up to 20 clients with complex needs who do not generally meet the eligibility criteria for this service) |
Work-focused case management, integrated service stream | Face-to-face with the same case manager at intervals no greater than 28 days | 80 clients for every one case manager, plus 20 optional clients | 4,841 |
| All other working-age clients not in work-focused case management or Work Search Support, including clients with no work preparation or work obligations and non-beneficiaries | General case management | Led by client contact, may not see same case manager at consecutive appointments, no set frequency | 366 clients for every one case manager | 274,220 |
* Work-focused case management – the Health Conditions, Injury, or Disability stream – is not available at all service centre locations. In July 2014, the Ministry expanded the service to 40 locations.
3.17
Alongside the new categories, the Ministry introduced a new centralised way of allocating – or “streaming” – clients to case managers. This method used some existing software to stream clients assessed as likely to incur high and long-term costs to the most intensive front-line services.
3.18
For every 11 people eligible for work-focused case management, the streaming tool diverted one into a control group. This was so the Ministry could measure the effect of its higher-intensity case management approach.
3.19
The Ministry also worked to develop the other aspects of the investment approach. The Ministry uses an actuarial approach to estimate the future long-term benefit costs for specific groups of clients. This is a statistical calculation that uses data about the claims history of other similar people in similar circumstances. It then projects what the future benefit costs would be if no intervention took place.
3.20
The Ministry used the information on long-term costs to segment its clients into smaller groups, so it could tailor its services and interventions for those clients. There are more segments (currently 17) than there are benefit types. The Ministry is learning that, within the segments, there are smaller groups of clients with different needs. This is one way the Ministry uses client outcomes data to inform the design of its services.
3.21
The Ministry uses the segmentation approach to target investment towards those people projected to incur high and long-term welfare costs. For example, it knows that people who began receiving benefits at an early age are more likely to become long term dependent on benefits.
3.22
The Ministry is also trying to get better at understanding which clients are most amenable to actively engage in job-seeking or preparation activities. This is proving to be difficult, because there is little substantive evidence from the international research community about how to predict amenability, and the available evidence is contradictory. The Ministry is using trials to learn about positive and negative changes in client behaviour so it can refine its approach.
3.23
Using trials to decide which clients get what services should lead to effective prioritisation of resources, but it carries some risks. The future liability calculation considers only the Ministry’s costs, including welfare payments. For example, some clients with complex needs and a high overall cost to taxpayers might receive only a small amount of benefit from the Ministry. We accept that, currently, the Ministry would face significant obstacles in moving to a model that reflected total costs throughout government.
Putting the changes in place
The Ministry has managed a complicated change competently. Good planning meant no disruption of benefit payments on the “go live” day in July 2013. Investment in training and good communication has led to informed staff who are well versed in policy changes. The Ministry still needs to give full effect to several plans, but progress so far is in line with expectations and prospects are promising.
3.24
On 15 July 2013, the new benefit categories went live. Benefits were paid on time, appointments were made and kept, and staff told us they were happy to be finally “getting on with it”. The fact that such a big change took place barely noticed by many and without anything major going wrong is an indication of good planning. The Ministry sent out more than 370,000 notifications to clients and received around 9250 queries. Of those who enquired, only around 3000 expressed dissatisfaction in some way.
3.25
As part of the preparations, staff received significant training on welfare reform changes over 12 weeks. Staff attended about seven workshops and training sessions each – almost 30,000 attendances overall. This was a huge undertaking, especially while maintaining front-line services. Almost every staff member we spoke to thought the training was useful.
Key facts
Preparations included almost 30,000 individual training attendances, and 22 IT projects at a cost of $50 million.
3.26
Staff we spoke to were clear about what the welfare reforms were trying to achieve and understood the technical aspects of the changes, such as the new benefit types and obligations.
3.27
However, those staff felt less equipped for the changes to their case management practice. The Ministry is heading towards more specialised front-line services. It still needs to fully align its training, development, and performance management of staff to those services.
3.28
The training plans for the new service delivery model prioritised technical knowledge over guidance and training on case management practice. The number of changes to policy, procedures, and processes after the welfare reforms limited how much the Ministry could do in the first year. Some training on case management practice did take place – for example, on engaging with clients in the work-focused case management stream. More training on soft skills has been delivered since, for example on how to manage some difficult situations, and more was planned.
3.29
The Ministry designed and completed 22 Work and Income information technology (IT) projects to support the changes to benefits and obligations. The Ministry completed the projects in less than two years, at a cost of $50 million.16 These projects included new applications and modifications that required making changes to several IT platforms. Although the Ministry completed the projects well, they highlight how complicated the Ministry’s information systems are.
3.30
The Ministry recognises that both its case management practice and IT need further development. We discuss staff guidance, training, and IT applications further in Part 4.
Managing case management costs
The Ministry is reducing spending on case management in real terms. It is too early to say whether the new service model will continue this trend, and reductions in cost are not in themselves indicators of success. However, the Ministry’s spending on case management is in line with achieving better value for money for taxpayers.
3.31
Figure 4 shows how much the Ministry spent on the case management of working-age clients from July 2006 to June 2014. The Ministry spent less money in most years on case management, after allowing for inflation.17
Figure 4
Costs of case management, 2006/07 to 2013/14
Key fact
The Ministry spends less on case management, in real terms, than it did in 2006.
3.32
Figure 4 shows that a steep increase between July 2009 and June 2010 resulted in costs catching up briefly to the adjusted 2006/07 levels. This coincided with the peak in working-age beneficiary numbers. Costs were flat during the next few years, rising during the preparations for welfare reform changes and falling again since.
3.33
In 2006/07, the Ministry spent $614.5 million administering working-age benefits. If that spending had kept pace with wage inflation, it would be equal to $758.2 million in 2013/14. The Ministry’s spending for 2013/14 was $616.8 million, $141.4 million lower than if it had kept pace with wage inflation, and only $2.3 million higher than in 2006/07.
3.34
Figure 5 shows how much the Ministry spent on case management for each working-age benefit processed in each year from 2006/07 to 2012/13. We show the actual costs and adjusted costs based on wage inflation.
Figure 5
Case management costs for each working-age benefit administered, 2006/07 to 2013/14
Note: We have used the number of working-age benefits administered, rather than the number of clients, because people can receive more than one benefit or have more than one period claiming a benefit during the year. The Ministry provided the figures, and we carried out the analysis.
3.35
If the Ministry’s case management costs had continued to rise in line with wage inflation since 2006/07, it would now be spending about $1,177 each year for each working-age benefit administered. The Ministry’s actual spending is $957.
3.36
The Ministry’s case management spending fell most sharply between July 2008 and June 2009, reflecting the significant increase in benefit claims. There was a lag of about a year before costs began to rise again, broadly in line with inflation. In 2011/12, the increase was greater than the rate of wage inflation.
3.37
Figure 5 also shows that, during 2012/13 and 2013/14, the Ministry was broadly given the same amount of funding, while client numbers started to fall. This meant that the costs of case management started to rise, but this was in line with the Government’s decisions to invest in intensive case management to help deliver the welfare reforms.
3.38
Low spending on case management is in line with providing better value for money for tax payers, but only if it is linked to achieving good results for clients. Very low spending could lead to some of the issues we describe in Part 4 – for example, service centre managers not having enough time to coach staff on their case management practice.
3.39
Our analysis of the Ministry’s costs has limitations because it measures economy and not effectiveness. Until now, the Ministry has not collected information in a way that would enable more sophisticated analysis. The Ministry is now developing a model that will give a more detailed breakdown of the cost of delivering services, down to the level of individual clients. This should help the Ministry to better understand which particular client groups it is investing in and how this is changing over time.
3.40
The Ministry commissions an annual independent valuation of future social welfare payment costs. Changes in the valuation are expected to provide evidence about whether the Ministry’s service delivery is working. The valuation considers external factors, such as economic growth or decline, to isolate the effect of welfare policy changes.
3.41
The Treasury contributed to the original thinking about the investment approach model. It also has a role as the external monitor of the Ministry’s performance against the long-term future liability in regard to the welfare reforms. To date, there has been no independent testing of the valuation methodology. We comment on the valuation in Part 5.
Helping clients with the highest complex needs
Cross-sector collaboration will be needed to address the many barriers that prevent some working-age adults from participating in the labour market.
Key fact
A cross-government investment approach might be needed to help clients with complex needs.
3.42
Currently, the Ministry’s new work-focused case management model does not cater well for adults with the highest level of complex needs. By complex needs, we mean people who have a combination of problems, such as poor mental health, substance dependency (alcohol, drugs or both), repeat offending, or low educational achievement. They might not reside for long in one location, or could be homeless or living in poor accommodation. These problems can lead to people becoming, or remaining, unemployable and socially excluded.
3.43
The Ministry’s staff work on a daily basis with some clients who have complex and chaotic lives, and some of those clients have successful outcomes. However, work-focused case management is less likely to be effective for people who might need a more long-term, cross-government investment approach. International evidence on successful outcomes for people with multiple barriers to employment is limited, and the Ministry might need to build its own evidence base to find out what works.
3.44
The Ministry’s success in reducing lifetime benefit liabilities could be limited if developing effective interventions for complex clients is not a priority for other government and non-government agencies in the social sector. A Performance Improvement Framework18 follow-up report on the Ministry in May 2013 summed up the problem as:
Getting joint action across agencies has been a long-standing problem in New Zealand. … There are complex interactions between Social Development, health, welfare, policing and employment outcomes for a sub-set of the population. These require joint actions from different professionals to solve problems … Despite various efforts over the years, there is still inertia to be overcome in getting that joint action.
3.45
The Ministry has recently appointed a Deputy Chief Executive Social Sector. This role has the task of supporting the Social Sector Chief Executives Forum (the Forum).19 The Ministry is an active partner in the Forum, and currently leads cross-agency collaboration on the Government’s priority areas.
3.46
The main focus of the Forum has been to deliver cross-agency priorities of:
- reducing long-term welfare dependency – by reducing the number of people who have been on a working-age benefit for more than 12 months; and
- supporting vulnerable children – by increasing participation in early childhood education, decreasing the number of assaults on children, increasing infant immunisation rates, and reducing the incidence of rheumatic fever.
3.47
However, the work on reducing long-term welfare dependency has not yet had a significant effect for adults of working-age with complex needs. The Ministry currently prioritises investment on “short-term high intensity” services targeted towards clients whom the Ministry expects to achieve a positive outcome in a short period.
3.48
The Ministry also contributes to the work of the Forum’s “Joint Venture Board”. For example, it participates in the youth-focused trials that have outcomes related to reducing truancy, offending, and alcohol and substance abuse, as well as increasing participation in education, training, and employment. There are no similar trials for adults with the highest levels of complex needs.
3.49
We understand that the Ministry is currently involved in discussions about how to extend and improve governance arrangements for cross-agency work. We consider it would be beneficial if the Forum consider what sector leadership and cross-agency working should look like for adults with complex needs. We understand that the Forum currently has a significant work programme under way and recognise that relative priorities are a matter for the Forum to decide. However, we expect to see some progress on this aspect when we follow up on this audit with the Ministry in 2016.
| Recommendation 1 We recommend that the Ministry of Social Development encourage the development of a cross-agency response to support working-age adults with the highest levels of complex needs into work, through its role on the Social Sector Chief Executives Forum. |
14: OECD website – www.oecd.org.
15: National Audit Office (2006), Delivering effective services through personal advisers, London.
16: Including ongoing costs.
17: We have used wage inflation because most of the Ministry’s administration costs are staff related. Figures have been calculated using the Reserve Bank inflation calculator, using Quarter 2 costs for comparison.
18: A joint central agency initiative to help senior leaders improve the performance of the agencies they lead. Performance Improvement Framework (PIF) reviews are published by the State Services Commission.
19: Members of the Forum also include the Secretaries for Justice and Education, the Director-General of Health, and senior officials from the State Services Commission, the Ministry of Business, Innovation and Employment, the Department of the Prime Minister and Cabinet, and the Treasury. Other chief executives are invited to work on relevant issues.