Released nearly concurrently with the deeply critical “Demolition of Workers’ Comp” ProPublica/NPR report, the federal Occupational Safety and Health Administration (OSHA) recently published a special report entitled “Adding Inequality to Injury: the Costs of Failing to Protect Workers on the Job.”
The report provides new details regarding the “cost-shifting” that occurs in workers’ comp (see graphic above from the report) and its economic consequences, especially for the individual injured worker and his or her family. The employer/carrier community has criticized both the OSHA report and the ProPublica series on the grounds that the conclusions are oversimplified and that the authors neglect to consider the larger economic benefits afforded by low workers’ comp rates for employers. Meanwhile, labor representatives and claimant attorneys have applauded the findings, saying that the reports underscore the need to restore benefit levels so that they are in line with the original intent of workers’ comp laws, enacted first over a hundred years ago.
Louisiana Comp Blog reached out to local attorneys on both the claimant and carrier/employer side to get their thoughts about the “failures” of reform and the “roadblocks” OSHA identifies.
Truitt urges examination of original intent, further study
Local attorney Bobby Truitt, who represents both insurers and injured workers in his practice, framed the statistics in terms of the intent of workers’ comp, a move that harkens back to the 1972 National Commission on State Workmen’s Compensation Laws.
“The statistics seem to reflect that the system is not working as it was originally intended – to promptly pay injured workers indemnity, pay for their medical treatment, and return them to the workforce as quickly as possible,” Truitt explained.
However, Truitt was also quick to contextualize the larger argument about income inequality. “I would disagree with the assertion that the current state-based systems contribute to income inequality since it is based on very limited data. I think that a wider, national study would yield a better assessment of this conclusion.”
Truitt does admit that renewed public interest in workers’ comp could generate discussion about cost-shifting and government spending in the social arena. Regarding the 16 percent taxpayer burden figure, Truitt opined, “This is a huge problem in this day, when more and more governments are pleading poverty. The Federal government has recently attempted to prevent [this type of cost-shifting] with more aggressive pursuit of reimbursement of government-paid benefits, through CMS. It is unfair for taxpayers to shoulder the burden of medical expenses more properly allocable to employers and their insurers.”
“Inaccurate and unrealistic:” Fontana sees little resemblance between Louisiana system and OSHA’s report
Wayne Fontana, a New Orleans-based defense attorney and frequent face during the legislative session, was more critical of the report, especially with regards to the “roadblocks to entitlement” cited therein. Urging a dose of skepticism, Fontana said, “We have fifty different systems in fifty states…while there will be individual outcomes for individual workers and their injuries, OSHA’s broad brush attempt to paint a picture of failure, income inequality and cost shifting to taxpayers appears to not only be harsh but both inaccurate and unrealistic.”
Fontana was also quick to point out the inadequacies of the $30,000 income loss figure. “The cited New Mexico study does not address the fact that, while some workers may, in fact, have a decreased wage-earning capacity as a result of an injury, many New Mexico workers may have received payments through the workers’ compensation system which equal or surpass the referenced 15% gap or the $30,000 figure over ten years,” he said. “Workers’ compensation was never intended to fully replace lost wages as the workers’ compensation system in all states was meant to provide partial, not total, wage replacement. If there is no difference between working and not working, the incentive to re-enter the workforce would be seriously impaired.”
Fontana also noted that the figure identifying a mere 21 percent share of total injury costs attributed to workers’ comp payments did not reflect his experience in the Louisiana comp system. He pointed to the vast increases in medical expenses within the last twenty years and the cost-shifting that occurs when providers attempt to recover an income discrepancy resulting from lower Medicare and private insurance payments by overcharging workers’ comp carriers. “The wisdom of piling on to the 2 percent of the market that workers’ compensation represents for the perceived shortfalls of the rest of the healthcare industry can certainly be debated, but the existence of this practice cannot,” he said.
Again citing a discrepancy between OSHA’s findings and his experience in the Louisiana system, Fontana believes that OSHA’s “grim picture” of safety policy is inaccurate, saying that it seems to “fly in the face” of significant reductions in the frequency of accidents nationally, and, in particular, in Louisiana. To those that might contest the notion that medical cost increases have run rampant, Fontana remained strident: “[Critics on the employee side] continue to cite dividend payments, premium returns and lower rates for employers. While those same critics would argue that these facts support the criticisms of the OSHA report, the explanation for lower rates and rebates is explained, nearly totally, by the reduced number of accidents. The hard truth is that the cost per accident continues to rise at astounding rates, far in excess of inflation or other relevant factors,” he said.
Wanko: Catastrophic injuries devastate low wage earners, high wage earners suffer from low max comp rate
For his part, Steve Wanko, a claimant representative who previously worked on the defense side, believes that the OSHA report is hitting the mark. “I agree with the income inequality angle presented in the OSHA report,” he said. “Lower, hourly wage workers suffer the most when there’s a vast decrease in earnings in the ten year period after an accident occurs.”
Wanko cites especially the drastic consequences of a catastrophic injury like an amputation on a low wage earner. “If you have an amputation and someone is lower wage and unskilled or minimally skilled, that’s only about $15,000 here in Louisiana, and once they’ve had that injury with those restrictions it’s very hard for them to find decent employment again,” he explained.
Wanko is particularly eager to see changes for minimum wage employees. “I’ve handled many cases with minimum wage workers,” he said. “One example of this kind of thing that comes to mind was a case I took where a woman worked in a saw mill sweeping up dust to make sure it wouldn’t accumulate and become a hazard. She lost her hand in a freak accident, and because of the amputation type, prosthetics really couldn’t help her. Now, she was released to go back to work in about a year but she couldn’t hold a broom anymore and she really didn’t have any transferable skills, so this injury ended her career and that end was only worth a couple of thousand dollars and that’s it.”
In reference to the breakdown of workplace injury costs compiled by OSHA, which revealed that taxpayer-funded programs cover 16 percent, workers’ comp covers 21 percent, and the worker himself shoulders half the financial burden, Wanko admitted his surprise. “That data was the most shocking part. I would imagine, given that the chart includes both medical expenses and wages, that a large portion of the cost to the worker is reduced income and earning capacity during and after the injury. This is where the high earners really suffer. If you’re making minimum wage, the comp rate is pretty similar to what you were earning because it’s tax free, but for workers with a major injury that were making quite a bit before, the maximum comp rate is a huge cut that affects their family and their lifestyle enormously. As for the taxpayer-funded aspect of the statistics, I think the medical care is a major contributor. Denial of healthcare in the comp system steers injured workers without private health insurance to charity hospitals or Medicare, both of which come down to taxpayer dollars.”
Davoli warns of state comp “death rattle”
Chuck Davoli, immediate past-President of the Workers’ Injury Law and Advocacy Group (WILG) and well-respected critic of the Louisiana workers’ comp system on the claimant side, suggested that the OSHA report was something of a harbinger. “The OSHA report finally acknowledges what we on the claimant side have been saying for the last two years,” he said. “Benefit cuts, AKA ‘reforms’ throughout the nation, have seriously jeopardized the future of state workers’ comp systems. In part, this decline is the result of cost-shifting 80 percent of employers’ liability for work-related injuries/disability to other public social insurance networks (SSDI, Medicare/Medicaid, etc.), or private health insurance, or private pay options.”
Davoli has spoken publicly to the national workers’ comp community about the “reform” backlash. He explained, “As I stated in Boston, [at the most recent WCRI conference] this ‘death rattle’ of state workers’ comp systems is also being accelerated by implications of the Affordable Care Act and the spread of state ‘opt-out’ developments.”
Davoli continued, “Based on the current trends and developments, state workers’ comp as we know it probably has but a decade of life before its demise. The only factor slowing such inevitability is the reality that the so-called comp ‘industry,’ which is an $85 billion, profitable business enterprise. The system has numerous pecuniary interests ‘feeding from the trough,’ evidenced by ever-decreasing premium and frequency of claim rates at the same time as [the workers’ comp line stands] as the second-most profitable line of insurance.”
The OSHA and NPR/ProPublica reports created much controversy on a national scale. Access the OSHA report here. Read the NPR/ProPublica “The Demolition of Workers’ Comp” series here. ProPublica journalists recently responded to a well-circulated Insurance Information Institute rebuttal from the organization’s President Robert Hartwig here.