Workers’ Comp: Can the New Chief Fix It?

Here’s some good news. Gov. Pete Wilson has named a respected Democrat to head the state division of Workers’ Compensation, signaling his intention to try to overcome the political paralysis that has prevented a cure for what is probably the biggest single business headache in this state.

His appointee, 41-year-old Casey L. Young, knows the subject intimately. As principal consultant to the state Senate Committee on Industrial Relations, he’s been the key Senate staff expert on workers’ comp for years. And as a member of the opposition, he might be in a better position to broker the horse-trading necessary for reform.

The governor’s move isn’t just shrewd. It offers a glimmer of hope to the millions of workers and employers who know from first-hand experience that California’s system of helping injured employees is a failure.

But the relatively small group of doctors and lawyers who’ve grown rich on the system as it stands needn’t despair. Although the Wilson Administration says it is committed to reform, change won’t come easy.

Dating back to Bismarck’s Prussia, workers’ compensation as we know it is supposed to provide swift, sure aid to people hurt on the job, without costly and time-consuming litigation. Employers are required to have workers’ compensation insurance, but employees give up the right to sue.

In some states this arrangement works, but in California, where employers will spend $11 billion this year on workers’ comp (up from $3.7 billion in 1981), the system is good for everybody except honest employers, injured workers and the state’s economy.

A study by John Burton, a Rutgers University expert in the field, found that in 1988, California employers paid 3.075% of payroll for workers’ compensation insurance, 53% above the national average. Yet despite our high cost of living, California’s maximum temporary disability benefit is $336 a week, 35th in the nation.

So despite a high level of employer spending, don’t count on much help if you get hurt on the job in California.

On the other hand, we define “hurt” more broadly than many states. Thus, California ranks fifth in the proportion of its work force filing claims, and second in the proportion of permanent disability awards, according to the California Workers’ Compensation Institute, an insurance industry research group.

Perhaps the biggest reason for soaring workers’ comp expenses is soaring health-care costs. But an especially onerous burden in this department is the cost of attempting to prove or disprove a claim medically. In a system designed to avoid litigation, a major expense is--you guessed it--litigation.

This occurs not in court but in the quasi-judicial state workers’ compensation apparatus, where nearly one in seven claims end up, and where the wheels of justice grind slowly: In 1990, litigated claims took an average of 45 months from injury to resolution.

CWCI says workers’ comp litigation costs reached $1.5 billion last year, up 500% during the 1980s to a stunning $115 for every one of the 13 million workers covered. Medical testing associated with this litigation accounts for nearly half the total, exceeding even legal fees.

In fact, for every dollar of benefits that reaches a worker through litigation, 67 cents is spent on the litigation itself.

Things are even worse in Southern California, where 17.5% of new claims were litigated, versus 8.2% in the north. Attorneys provided the first notice of injury in 55% of disputed claims in Southern California last year, where expenses for such claims averaged $7,806. In the north, attorneys provided first notice of disputed claims 29% of the time, and costs averaged just $5,915.

In short, workers’ comp is a problem that gets worse every year in California, yet the state can’t seem to do much about it. A reform package adopted in 1989 hasn’t yet made much of a dent, and further reforms passed as part of a budget compromise earlier this year weren’t major.

One problem is that workers’ comp is a politician’s nightmare. Powerful special interests are arrayed on every side of an issue that the public doesn’t well understand, and any worthwhile steps will likely make a lawmaker enemies.

The silver lining is that workers’ compensation in California is getting so expensive that something will have to be done, and Wilson’s choice of Young is a sign that the governor really does mean business.

Politics aside, it’s not hard to see what’s needed to fix the system, which is why labor, business and insurers are often allies on reform. In general, we need to pay injured workers more and faster, cut the uninjured out of the system and reduce costly litigation.

Here’s how:

* Treat workers better. Injured workers need reassurance and information, not an inquisition. They turn to lawyers partly because they’re frightened and confused. And even Californians for Compensation Reform, largely an employer group, agrees that benefits must rise.

* Improve regulation. Successful states have workers’ comp regulators who ride herd on insurers to make sure benefits are paid fast. That makes workers less likely to hire lawyers, whose presence inevitably raises costs.

* Stop the “dueling docs” syndrome. California took a step in this direction with a 1989 law that set up a list of approved doctors to handle certain claims and prevent diagnosis-shopping. The system needs to be expanded to cover all claims.

* Redefine stress. All work is stressful, but stress claims are exploding because workers can collect even if most of their problem isn’t work-related. A higher threshold for stress claims might also close some of the “stress mills” that flourish in Southern California.

* Reduce injuries. If just 1% of California’s 1990 workers’ comp tab were devoted to this, it would mean $100 million for prevention. Repetitive stress injury, for example, often arises from computer work. Several radically different keyboards have been developed, along with some evidence they might help, but most still haven’t made it to market for want of capital. A consortium of insurers, employers and unions with money to spend on prevention could make a difference.

Some of these things might actually come to pass. Let’s just hope the governor’s new appointee--his Senate confirmation will be a breeze--doesn’t get so much heat he has to file a stress claim of his own.

Soaring Costs California employer spending on workers’ compensation in billions of dollars. ‘81: 3.7 ‘83: 4.2 ‘85: 5.4 ‘87: 7.8 ‘89: 9.8 ’91 projected: 11.0 Source: California Workers’ Compensation Institute