For discussion FCR(97-98)48
on 31 October 1997

ITEM FOR FINANCE COMMITTEE

HEAD 90 - LABOUR DEPARTMENT
Subhead 700 General other non-recurrent
New item "Grant to the Pneumoconiosis Ex Gratia Fund"

Members are invited to approve a commitment of $27 million for making a one-off grant to the Pneumoconiosis Ex Gratia Fund for the purpose of improving the benefits for pneumoconiotics diagnosed to have contracted the disease before 1 January 1981.

PROBLEM

The balance in the Pneumoconiosis Ex Gratia Fund (the Fund) is inadequate to support improved benefits for pneumoconiotics diagnosed to have contracted the disease before 1981 (the pre-1981 pneumoconiotics).

PROPOSAL

2. We propose to make a one-off grant of $27 million to the Fund which is managed by the Pneumoconiosis Compensation Fund Board (the Board) for the purpose of introducing improved benefits to the pre-1981 pneumoconiotics with effect from 1 January 1998.

JUSTIFICATION

3. There are currently two schemes providing financial support to pneumoconiotics, namely a statutory compensation scheme set up under the Pneumoconiosis (Compensation) Ordinance (PCO) for people diagnosed on or after 1 January 1981 to have contracted the disease (the post-1981 pneumoconiotics), and an ex gratia scheme financed by the Fund for the pre-1981 pneumoconiotics. The statutory scheme is financed by a levy on the building and construction industry and the quarrying industry, where the bulk of pneumoconiosis cases are detected. The ex gratia scheme is totally funded by Government through grants made to the Fund.

4. Under the ex gratia scheme, the pre-1981 pneumoconiotics (or their families as appropriate) are eligible for quarterly payments at a monthly rate of $3,950 to take care of their incapacity and expenses for medical treatment. They are also eligible for payment of expenses incurred for medical appliances equivalent to that specified under the PCO. In addition, an amount not exceeding $14,000 is payable to family members of the pre-1981 pneumoconiotics who die of the disease to meet the funeral expenses actually incurred. However, pre-1981 pneumoconiotics do not receive other benefits available to post-1981 pneumoconiotics under the statutory scheme. In recognition of the fact that the health of the pre-1981 pneumoconiotics will continue to deteriorate and that they warrant extra support from the community, we propose to improve the benefits under the ex gratia scheme as follows -

1. a payment, on a need basis, for care and attention equivalent to that prescribed under the PCO, currently at $4,050 a month;
2. a payment for pain, suffering and loss of amenities equivalent to that prescribed under the PCO, currently at $2,570 a month;
3. a death grant equivalent to the minimum amount of compensation for death under the PCO, currently at $70,000, to family members of the pneumoconiotics when the latter die of pneumoconiosis;
4. reimbursement of medical expenses, in place of a medical supplement currently provided as part of the quarterly payment (see paragraph (e) below), subject to a daily maximum amount equivalent to that prescribed under the PCO, currently at $160; and
5. a revised quarterly payment for incapacity at a monthly rate of $1,530, to be adjusted annually in accordance with the movement of the Consumer Price Index (A).

Improvements to the Ex Gratia Scheme

Payment for Care and Attention

5. Under the statutory scheme, if a pneumoconiotic cannot perform the essential functions of life without the care and attention of another person, a monthly sum is payable to him for so long as the Pneumoconiosis Medical Board considers that he requires such care and attention. As the state of health of the pre-1981 pneumoconiotics will deteriorate with the passage of time, we propose to provide the same benefit to them if medical advice confirms its necessity. The current rate of this monthly payment is $4,050.

Payment for Pain, Suffering and Loss of Amenities

6. The post-1981 pneumoconiotics are eligible for a fixed monthly payment for loss of quality of life in terms of pain and suffering and loss of amenities regardless of the degree of pain, suffering or loss. We propose to provide the same benefit to the pre-1981 pneumoconiotics, currently at the rate of $2,570 per month.

Death Grant

7. At present, the family members of a post-1981 pneumoconiotic are eligible for a death grant if the latter dies of pneumoconiosis. The amount is calculated according to the age of the pneumoconiotic at the time of his death, subject to a reduction by the current value of any amount of compensation for incapacity received by him before his death. We propose to provide a similar grant under the ex gratia scheme to family members of the pre-1981 pneumoconiotics who die of the disease. However, as the ex gratia scheme has never been based on compensation, we propose to set the death grant at the minimum level prescribed under the PCO, which is currently at $70,000. This will also keep the scheme administratively simple.

Medical Supplement

8. At present, we pay a medical supplement of $530 a month to the pre-1981 pneumoconiotics as part of the quarterly payment, irrespective of whether they have actually incurred any medical expenses. To remove the difference in treatment between the pre-1981 and post-1981 pneumoconiotics and to better meet the needs of those actually requiring constant medical treatment, we propose to replace the medical supplement under the ex gratia scheme with a payment for meeting medical treatment expenses on a reimbursement basis as prescribed under the PCO. The maximum daily rate is currently $160.

Periodical Payment for Incapacity

9. All the pre-1981 pneumoconiotics under the ex gratia scheme are currently receiving a lump sum quarterly payment at a monthly rate of $3,420. As they will receive additional benefits as proposed above, we consider it appropriate to correspondingly adjust the monthly rate downwards to $1,530. To preserve the value of the revised monthly rate, we further propose to adjust it annually in accordance with the movement of the Consumer Price Index (A).

10. In summary, under the improved scheme, a pre-1981 pneumoconiotic will receive a monthly payment of $4,100 (made up of a revised lump sum payment of $1,530 and a payment for loss of quality of life in terms of pain, suffering and loss of amenities at a rate of $2,570) plus payment for care and attention, where needed, and reimbursement of medical expenses. This will improve the financial support to the pre-1981 pneumoconiotic and his family considerably. The proposed improvements will also bring the benefits available to the pre-1981 pneumoconiotics broadly in line with those for the post-1981 pneumoconiotics under the statutory scheme.

FINANCIAL IMPLICATIONS

11. We estimate that about 400 pre-1981 pneumoconiotics will benefit from the proposed improvements to the ex gratia scheme. Inclusive of these improved benefits, and based on the age profile of the pre-1981 pneumoconiotics and the average life expectancy of males in Hong Kong, the scheme will incur a total expenditure of about $170.8 million in money-of-the-day prices over a period of 14 years up to 2011. Taking into account the projected balance of about $116.4 million of the Fund at the end of 1997 and a projected return on investment, we estimate that a one-off grant of $27 million in 1997-98 will provide sufficient funds for implementing the improved benefits with effect from 1 January 1998.

12. Subject to Members?approval of this proposal, we will offset the supplementary provision required in 1997-98 by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 789 Additional commitments.

13. The proposal will create additional work in the processing of applications for payment of the new benefits which the Labour Department will absorb within its existing resources.

BACKGROUND INFORMATION

14. Pneumoconiosis is a disease of the lung which is prone to be contracted by those who have been working for a long time in a dusty environment such as a construction site or quarry. Once contracted and the lung damaged, the condition is irreversible and the health of the sufferers will deteriorate continuously. The disease may also render the sufferers more susceptible to other diseases such as tuberculosis and lung cancer.

15. In November 1980, the PCO was enacted to provide lump sum compensation on a collective liability basis for persons who were diagnosed on or after 1 January 1981 to be suffering from pneumoconiosis. The PCO provides for a Pneumoconiosis Compensation Fund which is financed by a levy on the construction and quarrying industries and administered by the Pneumoconiosis Compensation Fund Board. Separately, we allocated $72.4 million to set up an ex gratia payment scheme to provide one-off ex gratia payments to the pre-1981 pneumoconiotics. This scheme is financed entirely by Government and administered by the Labour Department.

16. The PCO was amended in 1993 and 1996 respectively to improve the compensation package for the post-1981 pneumoconiotics. As for the pre-1981 pneumoconiotics, we made a further one-off grant of $145 million in 1993 which together with the $30 million unspent balance under the former ex gratia payment scheme were put under a Pneumoconiosis Ex Gratia Fund to support the ex gratia scheme.

17. The management of the Fund and the disbursement of payment to eligible applicants are entrusted to the Pneumoconiosis Compensation Fund Board, while Labour Department remains responsible for processing all applications and determining eligibility for further ex gratia payments. In accordance with the approved guidelines, the Board invests the part of the Fund which is not immediately required in Hong Kong dollar fixed deposits placed with licensed banks in Hong Kong and fixed rate Hong Kong dollar Certificates of Deposit. As at 30 September 1997, the Fund had an accumulated balance of $123.5 million.

18. The Labour Advisory Board was informed of the proposed improvements at its meeting on 20 October 1997 and the proposals are generally agreeable to the Board.

Education and Manpower Bureau
October 1997