Public Radio Report Puts Spotlight on Workers’ Compensation’s ‘Grand Bargain’

By | March 9, 2015

Last week’s ProPublica/National Public Radio report putting a spotlight on the workers’ compensation system caught the attention of experts who were meeting in Boston to share research on how the system is performing at the same time the series was hitting the airwaves.

The ProPublica/NPR report claims that the state-based workers’ compensation system is failing injured workers who need it the most due to legislative changes in more than 30 states that have favored cost cutting. As a result, taxpayers are paying more of the costs, as much as $30 billion, according to the report.

The public radio report caught the attention of the head of the Workers’ Compensation Research Institute (WCRI).

“It’s hard to write a balanced article based on anecdotes,” said Richard Victor, referring to the ProPublica/NPR stories of injured workers who did not receive adequate treatment or compensation that are featured in the investigative report.

Victor, who has been researching the workers’ compensation system for more than 30 years as executive director of the WCRI, said he was not suggesting the article should not have been written or that the injured workers are not important.

“We should always strive to minimize the number of workers who fall through the cracks,” he said Friday at the annual conference of WCRI, which researches the changing costs, medical outcomes, indemnity payments, trends and laws and provides performance benchmarks.

But the public radio series of articles that he characterized as as being built on “emotional anecdotes” does not prove the system is failing and should be considered along with reports that show that the system serves a “huge number of injured workers,” according to Victor.

“Are the anecdotes the exception or the rule?” he asked, suggesting the only way to answer is through measuring because nobody can tell.

While the ProPublica/NPR report does highlight the case histories of several injured workers, it also includes a comparison of some benefits provided by states, insights into the legislative and adjudication processes in several states, and views of worker advocates, lawmakers, workers’ compensation judges and others.

Majority Served

The ProPublica/NPR authors acknowledge that the system works for most injured workers, but they focus their attention on the plights of underserved injured workers and the effects of recent changes on them.

“While the vast majority of injured workers need only minor medical care and experience little friction in getting it, the changes often affect those who need the system the most,” the authors, Michael Grabell of ProPublica, and Howard Berkes of NPR, wrote.

According to Victor, 100 percent satisfaction, while important as a goal, is not realistic in such a large economy, “although that might sound cold-hearted.”

The public radio report, “The Demolition of Workers’ Compensation,” claims that years of benefit cuts and tighter limits on medical care have resulted in “hundreds of thousands of injured workers” being denied adequate care and compensation. It contends that the costs to support these workers are being shifted onto taxpayers. The authors figure the government picks up a tab of $30 billion through Social Security Disability Insurance, Medicare and Medicaid.

Meanwhile employers are paying the lowest premiums since the 1970s, the report says.

The authors also found that many states no longer comply with the standards recommended in 1972 by a national commission established by President Richard Nixon to improve the workers’ compensation system. John Burton, a Republican economist and law professor who headed that commission, told ProPublica that the recent changes are “unprecedented” in the history of workers’ compensation. “I think we’re in a pretty vicious period right now of racing to the bottom,” Burton said.

Victor said that workers’ compensation tends to go in cycles of crisis and reform. While recent reforms are focused on cost and competitiveness, future changes might address benefits and worker issues. The ProPublica/NPR report focused on states reducing benefits but, according to Victor, some states have also been increasing benefits.

‘Race to Bottom’

The notion that states are in a “race to the bottom” was echoed at the WCRI meeting by attorney Charles Davoli from the Workers Injury Law and Advocacy Group, which represents disabled workers.

Davoli said the system may be in a transition to a civil liability system because the interests of employers and employees are no longer balanced.

“It’s nice to talk about how we compare to the median but what is the standard, what is an adequate benefit?” he asked. “If we don’t answer that, we are continuing a race to the bottom.”

Workers’ compensation is often called a “grand bargain,” in which employers agree to provide a safe workplace and cover any workplace injuries in exchange for employees giving up their constitutional right to sue their employers over injuries. Workers’ compensation is supposed to be the exclusive remedy for injured workers.

Davoli, who also calls workers’ compensation a “moral commitment,” warned that the grand bargain may have been breached and a “constitutional tipping point” reached. He pointed to court cases in several states challenging the fairness of the current system, including one in Florida that argues that the current system violates due process because the care and compensation that injured workers now get are inadequate to justify them giving up their constitutional rights to a trial by jury.

“How low can you go to where you breach the grand bargain?” Davoli asked.

“If the issue is reduce, reduce, reduce, the median keeps going down,” Davoli said.

OSHA Report

A day after the ProPublica/NPR article hit the airwaves, the federal government’s Occupational Safety and Health Administration (OSHA) issued a report that agrees with much of the criticisms. The OSHA report says that changes in workers’ compensation have made it “increasingly difficult for injured workers to receive the full benefits” and that employers provide only a small fraction of the overall financial cost of workplace injuries and illnesses through workers’ compensation.

OSHA reports that workers’ compensation payments cover only about 21 percent of lost wages and medical costs of work injuries and illnesses; workers, their families and their private health insurance pay for nearly 63 percent of these costs, with taxpayers shouldering the remaining 16 percent.

Also, several studies have found that fewer than 40 percent of eligible workers apply for any workers’ compensation benefits at all, according to OSHA.

Other Studies

The National Academy of Social Insurance (NASI), which studies workers’ compensation and other benefits systems, last August reported that workers’ compensation benefits rose by 1.3 percent to $61.9 billion in 2012, while employer costs rose by 6.9 percent to $83.2 billion. The uptick was due to increased employment.

“This growth in workers’ compensation spending reflects rising employment and earnings as the economic recovery continues,” said Marjorie Baldwin, chair of the Academy’s Workers’ Compensation Data Panel and Professor of Economics in the W. P. Carey School of Business at Arizona State University, at the time.

But despite the uptick in total benefits and costs in 2012, workers’ compensation benefits and costs per $100 of covered payroll have been lower for the years 2007 to 2012 than at any time over the last three decades, according to NASI. In 2012, benefits were $0.98 per $100 of covered payroll while employer costs were $1.32 per $100 of covered payroll.

In an earlier report, NASI found that the number of workers covered by workers’ compensation dropped by 4.4 percent in 2009, the biggest decrease in two decades, and employer costs for benefits fell by 7.6 percent, reflecting the overall decline in employment during the recession.

A NASI report in 2009 compared trends in workers’ compensation cash benefits and Social Security disability insurance benefits and found that trends in the two programs had been moving in opposite directions since 1980. When workers’ compensation cash payments rose in the 1980s, Social Security disability benefits declined as a share of payroll. After 1990, workers’ compensation cash payments declined and Social Security disability insurance payments rose as a share of payroll.

“The different trends suggest that retrenchment in one program may cause injured workers to turn to the other program for benefits to replace their lost wages,” said John F. Burton Jr., chair of the panel that oversaw that study, at that time.

Opt-Out

Davoli and other critics have questioned the growing movement to allow employers to opt out of state workers’ compensation systems and establish their own systems. A panel on opting out that was scheduled for the WCRI conference was cancelled. WCRI’s Victor said it was because one of the presenters felt there was insufficient time on the schedule to address the subject.

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