Oregon’s How-To Book on Repairing Workers’ Comp : Insurance: Reforms offer a model for states like California. But costs are often borne by injured workers.

For those who think California’s workers’ compensation mess is beyond repair, Oregon offers a measure of hope.

As recently as the late 1980s, Oregon’s system was in a crisis much like California’s. Businesses claimed they were being choked by rising workers’ compensation costs. Employees infuriated their bosses by seeking benefits for psychological stress and other hard-to-prove injuries.

Money gushed out of the system into the hands of lawyers, chiropractors and vocational rehabilitation counselors, who often did little good for the injured workers needing help.

But today, 2 1/2 years after the Oregon Legislature approved a sweeping workers’ compensation overhaul, many of the system’s problems have been tamed. To industry leaders across the country, Oregon’s actions stand as a model of successful reform and provide a rough blueprint for how states such as California could clean up their own programs.

Oregon employers’ insurance rates have fallen an impressive 30% over three years, workplace injuries occur less often and, by some measures, payments to seriously hurt employees have risen.

Yet the turnaround in Oregon is not a simple success story. While a wide array of Oregon’s business executives and some labor leaders praise the changes, a smaller chorus of critics says that one result is extra suffering among injured workers being unfairly shut out of the system.

“In the name of expediency and efficiency, they’ve trampled on people,” said Linda C. Love, president of Oregon Workers’ Compensation Attorneys, a group of 95 lawyers who represent injured workers and who have been the system’s sharpest critics.

Observers also predict that some of the substantial savings from the workers’ compensation overhaul will be wiped out by higher costs for conventional health insurance and, perhaps, by damaged worker morale.

The reforms took “a system that was totally out of control in terms of cost and made workers’ compensation in this state affordable,” said Bradley K. Witt, secretary-treasurer of the Oregon AFL-CIO and a member of a labor-management committee that advises state legislators on workers’ compensation. But Witt, who maintains that many injured workers have been shortchanged, added: “This cost containment has a cost of its own.”

Along with suggesting how delicately workers’ compensation changes must be balanced to avoid victimizing workers, Oregon’s experience illustrates the enormous political momentum needed to bring about significant reform. Building that momentum, some experts say, may be impossible in a state as big and fractious as California.

In fact, efforts to revamp California’s workers’ compensation system fell apart this year in the regular and special sessions of the state Legislature amid intense lobbying by warring interest groups.

Oregon’s reforms in 1990 were comprehensive and, in many cases, hard-nosed. Among the main changes, probably the most popular was the state’s hiring of roughly 40% more safety inspectors and consultants to aid the system by preventing workplace accidents in the first place. Also, some opportunities for lawyers to profit from the system were squeezed out, partly by requiring disputes to be mediated before a court appeal is allowed.

To cut costs further, the state sharply tightened standards for injuries qualifying for medical care and cash benefits. Stiff limits were slapped on the use of chiropractors. Although some health care specialists disagree, Oregon officials maintain that chiropractors and related practitioners may help make a patient feel better but do little or nothing to correct underlying medical problems.

These changes expanded on a narrower reform package, passed in 1987, that curtailed costly vocational rehabilitation and psychological stress claims.

All told, the reforms have delighted employers such as plumbing contractor Jon Egge, who says his Portland-area firm was stung in the 1980s by two allegedly bogus claims of back injuries. If those claims were filed today, Egge maintained, they probably would be rejected because insurers have been encouraged by the reforms to fight fraud aggressively.

One of the allegedly bogus claims came from a plumber who filed his case, Egge said, after only about two weeks on the job. He received disability benefit checks for 2 1/2 years. The checks stopped only after an insurance investigator spotted the supposedly hurt employee secretly working as a carpenter on a construction site.

The other allegedly bogus back injury claim came from another new employee who, unbeknown to Egge, had already filed eight workers’ compensation claims over the last 12 years.

Egge, a member of the Oregon labor-management group that drafted the 1990 reforms, said the new law gives insurers and employers solid grounds for rejecting unjustified claims. He lauded a new requirement for the workplace to be more than 50% responsible for certain injuries or illnesses to win compensation.

That rule, supporters say, prevents employees from filing workers’ compensation claims for medical problems stemming mainly from “pre-existing conditions”--that is, injuries suffered at previous jobs or ailments such as arthritis that come with age.

But there is another side to the story. Advocates for injured workers complain that the 50% rule has led to a rash of unreasonable claim denials that stretch the definition of “pre-existing conditions.”

“If you ever had anything go wrong before in your life, they deny you,” said Evohl F. Malagon, one of Oregon’s most prominent lawyers representing injured workers.

Much of the criticism from worker advocates has been directed at SAIF Corp., the state-owned company that is Oregon’s biggest workers’ compensation insurer. Oregon Insurance Commissioner Gary Weeks this year accused SAIF of rejecting an unreasonable number of workers’ claims since 1989, although he blames the company’s own procedures rather than the 1987 or 1990 reforms, and says the problem is being corrected.

Weeks said SAIF, which denies any wrongdoing, possibly used the 1990 law “to buttress their aggressive position, but it wasn’t the cause.” The reforms, he said, didn’t give “a license to insurers to play hardball.”

But it doesn’t seem that way to Max W. Madden, an injured parole and probation officer. Madden, 51, hurt his lower back in January when a heavy desk he was moving at his office in Eugene toppled off a dolly and fell into his arms.

SAIF, which handled his claim, initially paid Madden benefits to cover most of the wages he lost while nursing the injury. But in April, the money suddenly was cut off.

The insurer said it was not responsible for compensating Madden because his pain primarily stemmed from a previous work injury suffered in the late 1970s. SAIF took that position even though its records show that Madden had not received any medical care for a back problem since early 1986.

SAIF reversed itself and resumed Madden’s benefits checks after he hired a lawyer and more medical reports were submitted. But now Madden contends that he is being denied proper medical care, and he is battling the medical network where SAIF sends injured workers.

The medical group--a product of the 1990 reforms known as a managed care organization, or MCO--has twice rejected back surgery for Madden. The group contends that it’s not clear an operation would provide long-lasting relief for his pain. As such, the MCO overruled one of its own neurosurgeons who, as Madden’s principal doctor, recommended surgery.

Another doctor, an internist, said in a letter three months ago that surgery was needed urgently. “Without relief of the patient’s back pain,” the doctor wrote, Madden “will continue to have uncontrollable high blood pressure and be at high risk for consequences of this, such as premature stroke and/or heart attack.”

Injured workers and insurance company doctors have long had arguments over appropriate medical treatment, but lawyers for workers’ compensation claimants in Oregon say the problem has gotten worse. One problem, critics say, is that cost-conscious MCO doctors can drag their feet in reviewing cases, prolonging the agony of patients such as Madden.

Critics also say that lawmakers, while trying to eliminate bogus claims, made it unreasonably difficult to win compensation for such difficult-to-assess problems as repetitive-strain injuries, which are common among supermarket cashiers, computer operators and many other workers. Likewise, they say, in the state’s effort to cut down on costly bills for chiropractors, it went overboard in denying needed pain relief and other care.

In any case, some savings from reform may be short-lived. Some workers may look for ways to sue their employers outside the workers’ compensation system.

Others who can’t get medical care through workers’ compensation, experts say, will go for treatment anyway and shift the expense to their regular health insurers. In fact, insurance commissioner Weeks is working on proposals for “24-hour” health care that would merge the two types of medical coverage and end costly disputes over whether an injury is job-related.

Business and government officials say any workers’ compensation system, no matter how well-run and designed, will occasionally make mistakes. Yet they contend that most of the complaints come from interest groups such as lawyers and chiropractors interested in returning to the days when they could make more money off the system.

By some gauges, the Oregon reforms have been a huge success. The 30% reduction in rates paid by Oregon employers came during a period when premiums kept climbing in most other states.

Workplace injuries, since hitting a peak in 1988, have fallen about 20%. The improvement is largely attributed to the Legislature’s expansion of Oregon’s Occupational Safety and Health Division and a requirement for firms to set up safety committees.

Still, some figures used in the reform debate are misleading. For instance, Oregon business leaders sometimes claim that, before the 1990 reforms, seriously hurt workers received among the lowest cash benefits in the nation, and now things are far better. Yet state figures show that Oregon actually was one of the most generous states in the late 1980s. Also, while cash benefits have increased somewhat more than inflation over the last three years, the number of workers getting money is down 28%.

Back in 1990, however, an emerging workers’ compensation crisis spawned an unusual sense of common purpose among business and labor groups.

Then-Gov. Neil E. Goldschmidt responded by naming a special committee of seven labor leaders and seven business leaders to draft a reform package. Lawyers, doctors and others profiting from the system were intentionally excluded. After meeting in the basement of the governor’s mansion for four months, the committee delivered the proposals that the state Legislature approved with few revisions in a May, 1990, special session.

In theory, experts say, some of the successful cost controls adopted in Oregon, and states such as New Mexico and Alaska, could be applied in California.

Yet John H. Lewis, an authority on workers’ compensation who has done consulting work in California, Oregon and other states, said it is “much more difficult to do anything reform-wise in California than it is in any other state.”

He blamed the powerful organizations that represent California’s lawyers, doctors and vocational rehabilitation counselors, along with the lack of unity among the state’s labor and management groups.

“In Oregon, they locked up people in a room together and came up with a solution. That doesn’t happen in California,” Lewis said.

Moreover, Lewis questions whether merely changing the law is enough to correct a flawed system. The main problem in California, Lewis said, is the lax way the system is administered by judges, insurance companies and others.

Still, even in Oregon, prospects for effective reform once also appeared to be dim.

“We knew we had a problem,” said Bob Shiprack, an Oregon legislator and union leader who heads the state’s Building Trades Council. “This system was terrible for the workers.”

Shiprack, referring to the way lawyers, doctors and other interest groups were barred from the negotiations that produced Oregon’s reforms, added: “What we said is that this system is for workers and employers. Everyone else is secondary, so get out of the way. That’s what you in California have to do.”