Reforming veterans’ affairs

Michael Klapdor, Social Policy

Key issue
In June 2019, the Productivity Commission will provide its final report on the system of compensation and rehabilitation for military veterans to the Australian Government. The Commission’s Draft Report found that the current system is not fit-for-purpose and requires fundamental reform.
The 46th Parliament will need to consider the problems identified, the Commission’s reform proposals and how best to support Australia’s veterans and their families.

Productivity Commission’s draft findings and recommendations

The Productivity Commission’s Draft Report on veterans’ compensation and rehabilitation found that the current system ‘fails to focus on the lifetime wellbeing of veterans’. The Commission used the term ‘veteran’ to cover both current and former members of the Australian Defence Force (ADF). It found that the system was:

complex—both legislatively and administratively with the three main statutes providing different entitlements and overlapping in terms of eligibility
difficult to navigate—there are a large number of different benefits with complex eligibility criteria and rate structures
inequitable—the level of support differs for those with similar needs depending on what legislative scheme they are covered by and
poorly administered—placing unwarranted stress on claimants.

The Draft Report proposed wide-ranging reforms to the governance and funding of the system including:

establishing a single Ministry of Defence Personnel and Veterans
transferring the Department of Veterans’ Affairs’ (DVA) policy responsibility to a new policy group within the Department of Defence
creating a new statutory agency—the Veterans’ Services Commission—to administer and oversee the performance of the veteran support system (replacing DVA) and
levying an annual premium on the Department of Defence to fund the expected cost of future compensation claims from veterans.

The Draft Report also proposed a move from three to two compensation and rehabilitation schemes by July 2025: one covering an older cohort of veterans with service and injuries which occurred before 2004 based on a modified Veterans’ Entitlement Act 1986 (VEA); and one covering all other veterans which would be based on a modified Military Compensation and Rehabilitation Act 2004 (MRCA).

The Commission emphasised that no veterans or dependants currently in receipt of a benefit would be worse off under its proposals.

Current system of support for veterans

There are three main Acts which provide for supports and compensation for former ADF members and their families:

the VEA for those with operational, peacekeeping and hazardous military service before 1 July 2004, and peacetime military service from 7 December 1972 up to 6 April 1994
the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA) for those with military service undertaken from 3 January 1949 to 30 June 2004 and certain periods of operational service between April 1994 and 30 June 2004 and
the MRCA for those with military service undertaken from 1 July 2004.

The VEA—which has its origins in the repatriation scheme set up following World War I—provides for compensation payments such as Disability Pension and the War Widow/er’s Pension, income support payments such as the Service Pension, health care, and additional allowances and benefits such as financial support for dependent children of veterans to study.

The DRCA and MRCA are more like modern workers’ compensation schemes. They provide permanent impairment payments, death benefits, wage-replacement incapacity payments, vocational and rehabilitation services and a large range of allowances for additional costs.

Some veterans may also be entitled to invalidity pensions from superannuation schemes. A key issue for the current system is overlapping entitlements and the way that payments may be offset as a result of another payment for the same incapacity or death.

Health care is primarily delivered via a system of health cards which entitle different groups of veterans, dependants and some civilians to health care funded by DVA. Gold Card holders are entitled to DVA-funded medical treatments for any health conditions. White Card holders are entitled to treatment for specific conditions—usually those which have arisen as a result of their service. As part of a recent push to address mental health issues, all current and former Australian Defence Force (ADF) members are entitled to a White Card to access DVA-funded treatment for any mental health condition—regardless of whether it is related to their service. This is known as ‘non-liability healthcare’.

Funding for supports

Total expenditure for the DVA in 2019–20 is estimated at $11.5 billion. Of this, around $6.7 billion will be spent on compensation payments and income support for veterans and their families. Around $4.7 billion will be spent on health services and aged care. An estimated $78.5 million will be spent on the care of war graves and commemorative activities.

The Australian War Memorial is funded separately and total expenditure in 2019–20 is expected to be $57.6 million.

Veterans and their families also receive payments through superannuation schemes and the Department of Defence funds health care and rehabilitation for serving members.

Who receives support?

As at December 2018, DVA had 282,934 ‘clients’—people receiving payments and/or health treatments under the VEA, DRCA or MRCA. There were 170,616 veterans and 113,115 dependants (with around 800 individuals being both veterans and dependants).

DVA projects that, by 2030, it will have around 30,000 fewer clients than 2018. The number of VEA Service, Disability and War Widow/er Pension recipients will drop significantly reflecting the deaths of the World War II and Korean War cohorts. However, the number of those holding a treatment card or receiving an allowance is expected to grow from around 71,000 to 129,000 by 2030—driven by the recent expansion of non-liability health care. The number of MRCA veterans will also grow from around 33,000 in December 2018 to around 78,000 in 2030, as it becomes the primary scheme for providing military compensation.

Background to the Productivity Commission inquiry

The Productivity Commission’s inquiry into veterans’ compensation and rehabilitation arose from a recommendation by the Senate Foreign Affairs, Defence and Trade Reference Committee’s 2017 report, The Constant Battle: Suicide by Veterans. This report called for a systemic review of the veterans’ system including the Statements of Principle used to determine compensation claims, governance arrangements, administrative processes and service delivery.

The Senate Committee inquiry itself arose as a result of concern at the number of suicides in the veteran community, and the question of whether the veterans’ compensation system was a contributing factor in some of those suicides.

The Productivity Commission’s inquiry is one in a long line of inquiries into systemic issues in the system of compensation and supports for ex-service personnel, including the 2011 Review of Military Compensation Arrangements and the 2003 Clarke Review of Veterans’ Entitlements.

Problems identified by the Productivity Commission

Complexity

The Productivity Commission found that the current system is complex and difficult to navigate. It found that the multiple Acts providing compensation and the complexity of those Acts is confusing, can lead to errors in estimating compensation and means that veterans may not be confident that they are accessing all of their entitlements. The Productivity Commission found that there are at least 40 different payments or benefits that veterans and their dependants may be eligible for depending on their service and impairment.

Inconsistency

The different schemes can also offer vastly different amounts of compensation for the same impairment. The Productivity Commission provided an example where a 30-year-old with a shoulder impairment could receive between $56,000 and $140,000 in lifetime financial compensation (not including medical treatment), depending on which scheme they were eligible for.

Poorly targeted supports

The Productivity Commission found that some supports are poorly targeted. For example, transition supports were not being aimed at younger veterans leaving the military who have a greater need for assistance than older veterans with experience in leadership roles and with transferable skills. The Commission also found the Gold Card for health treatments to be poorly targeted as it is being provided to those with high treatment needs (such as those with very high levels of service-related impairments) while also used as a form of compensation regardless of treatment needs (for example, being automatically provided to dependants of veterans who had died from service-related causes). There were also concerns that some benefits did not encourage ‘wellness’ or rehabilitation.

Administrative issues

The Draft Report also set out issues with processes and DVA’s administration, and the negative impacts these can have on veterans and their families. Veterans and ex-service organisations had raised concerns about poor communication, a focus on processes, high error rates, and the way trauma-affected clients are dealt with.

Lack of incentives to improve outcomes

The Productivity Commission also argued that the design of the current system means that DVA pays for the costs of compensation, rehabilitation and medical treatment for former military personnel while Defence, the employer, bears no financial responsibility. This means that Defence has less of an incentive to prevent injuries, implement early intervention strategies or measure the long-term outcomes of different support measures.

The Draft Report found that DVA and Defence had competing objectives and a shared purpose could work to promote the long-term wellbeing of veterans.

Stakeholder responses

In their post-Draft Report submissions, many ex-service organisations—including the Alliance of Defence Service Organisations, the Vietnam Veterans Federation of Australia, the Vietnam Veterans Association of Australia, some state and territory branches of the Returned and Services League (RSL) of Australia and Soldier On—rejected the Commission’s proposed changes to governance arrangements, including the reallocation of DVA’s functions to Defence.

The proposal to fund veterans’ support through a levy on Defence was broadly rejected by stakeholders with RSL’s Queensland Branch stating: ‘Price signals will drive a perverse, short-term approach to preparing personnel to defend Australia and its national interests.’

Many stakeholders supported the Commission’s broad proposals to rationalise the legislative schemes and to improve administrative processes. There were a range of views presented on some of the Commission’s detailed recommendations. However, there was a significant amount of support for recommendations that the system be wellness-focused, veteran-centric and evidence-based.

Position of major parties

Minister for Veterans’ Affairs Darren Chester has consistently stated that the Government would consider the Draft Report and would respond once the final report was completed. While the Minister would not state a position on any of the Draft Report’s recommendations, in April 2019, the Prime Minister ruled out any changes to DVA’s structure stating: ‘the veterans’ affairs Department [sic] will remain exactly as it is under the Coalition government’.

As part of its veterans’ affairs 2019 election policy, the Australian Labor Party committed to preserving DVA as ‘a single dedicated department for our veterans’.