An amputated foot is not considered a "serious injury" under the O'Farrell government's changes to WorkCover, a parliamentary inquiry has heard.
In addition, it is taking WorkCover up to four months to review claims by injured workers - far exceeding its statutory limit of 30 days, the NSW Legislative Council's Law and Justice Committee heard on Friday.
The O'Farrell government's WorkCover changes, which started in 2012, were designed to lower the costs of the workplace compensation agency.
Since the changes were introduced, the number of injured workers receiving benefits under WorkCover has dropped sharply, from about 70,500 in 2012 to about 60,000 in 2013.
Gary Jeffrey, the acting general manager of WorkCover's workers' compensation insurance division, said an amputated foot did not meet the agency's threshold for a serious injury.
The Greens MP David Shoebridge said this was "extraordinary" and also criticised the length of time taken to complete WorkCover reviews.
"Prior to the reforms an injury as severe as an amputated foot would see an injured worker receive lifelong medical benefits and income support till their retirement age," Mr Shoebridge said.
"Now workers with this level of injury are losing their entitlements to medical benefits and receiving at most, five years of income support."
Mr Jeffrey said it could take four months to resolve an injured worker's review claim. A merit review is conducted when an injured worker challenges the denial of a claim for workers' compensation.
The inquiry also heard that workers could not recover any benefits lost during delays in the processing of merit reviews.
If the injured worker successfully challenged WorkCover's decision to deny them benefits, WorkCover's independent review officer, Kim Garling, said they "can never catch up" on any payments lost.
"It's a complete gap," Mr Garling said.
When asked whether his office was adequately resourced, Mr Garling said: "No."
He said the workers' compensation system was skewed towards creating a dispute with injured workers and that the cost of resolving disputes often outweighed the cost of the claim being disputed.
"We think it's time the method in which claims are dealt with needs to be reconsidered," he said.
"One of the major problems we've had is that the system appears to be skewed towards creating a dispute rather than solving the problem for the worker. The aim should be to get that worker the resources that they need to be cured and then to get back to work."
Mr Shoebridge said: "WorkCover has been given an important job in this new scheme of doing a merit review when an injured worker disagrees with an insurer's decision about their entitlement to weekly compensation.
"These are injured workers who are often desperately in need of their benefits. The average time has blown out to four months, which is unacceptable," he said.
The proportion of injured workers receiving weekly payments has fallen from 40,632 in 2012 to 32,934 in 2013.
WorkCover's general manager of the work health and safety division, John Watson, said there was a downward trend in major claims for workers' compensation.
He said in 2011/12, the major incident claim rate was 8.7 per 1000 workers, the lowest since 1987.
Work-related fatality rates were also improving with a 35 per cent reduction recorded over the 10 years to 2011/12.