An article on the ProPublica/NPR website proudly announces that a “race to the bottom” in state workers’ compensation laws has the Labor Department calling for “exploration” of federal oversight and federal minimum benefits.
This announcement is the culmination of many ProPublica/NPR stories that featured injured workers who lost their homes, were denied surgeries or were even denied prosthetic devices recommended by their doctors.
The ProPublica/NPR series prompted a letter last fall from 10 prominent Democratic lawmakers, who urged Labor Department action to protect injured workers in the wake of a ProPublica/NPR series on changes in workers’ comp laws in 33 states. The ten ranking Democrats on key Senate and House committees claimed there was a “pattern of detrimental changes in state workers’ compensation laws” that have reduced protections and benefits for injured workers over the past decade.
The response to this letter was a report from the Labor Department that calls for “exploration” of “the establishment of standards that would trigger increased federal oversight if workers’ compensation programs fail to meet those standards.”
The report claims that there “have seen significant changes to the workers’ compensation laws, procedures, and policies in numerous states, which have limited benefits, reduced the likelihood of successful application for workers’ compensation, and/or discouraged injured workers from applying for benefits. These include changes that have resulted in the denial of claims that were previously compensated, a decrease in the adequacy of cash benefits to those awarded compensation, imposition of restrictions regarding the medical care provided to injured workers, and the institution of new procedural and evidentiary rules that create barriers for injured workers who file claims. In addition, the elimination by several state legislatures of Second Injury Funds – that is, state-administered funds that provide compensation for injuries not otherwise covered – creates additional holes in the fabric of insurance and coverage.
The agency also suggests a fresh look at reestablishing a 1972 Nixon administration commission that recommended minimum benefits and urged Congress to act if states failed to comply.
To clearly understand the implications of this recommendation, it is important to know the history of the financial waste triggered by the Nixon Commission report after it was published in 1972. In essence, the report was critical of just about every aspect of the various state workers’ compensation systems, and recommended improvements or enhancements to every specie of benefits. If states did not improve their programs in conformity to these recommendations, there was a threat of a federal takeover of all state systems.
For example, the Nixon Commission concluded in 1972 that “Many disabled workers fail to receive vocational services partly because they are not aware of their rights, partly because they lack motivation because of a fear they will lose compensation benefits if rehabilitated, and partly because they cannot afford the out-of-pocket costs of maintenance during instruction.” Thus the report went on to “recommend that the medical-rehabilitation division within each State’s workmen’s compensation agency be given the specific responsibility of assuring that every worker who could benefit from vocational rehabilitation services be offered those services”.
A few years later, California, as well as many other states, appeased the federal government by adopting some of the Nixon Commission mandates. For example California adopted mandatory vocational rehabilitation. The history of that financial disaster is well documented. Rehabilitation programs easily cost more than $100,000 per claim and rarely produced a return to work outcome. A whole cottage industry of vendors grew around the program. The futility of the program became apparent about 20 years later when a $16,000 cap was placed on the costs of a rehabilitation program. That “reform” was subsequently ineffective, so vocational rehabilitation as a program was scrapped, and instead there have been various forms of training vouchers that pay for training, but no financial benefit to the worker directly. The voucher program is largely unused.
If someone were to add up the industry costs of vocational rehabilitation alone from its birth to its death, it would be a staggering amount of wasted money, spent mostly to appease the federal wonks who thought they knew what they are doing.
With this history in mind, the big question is “is the industry about to face another costly Nixon Commission redux?”