The Department of Labor issued a stinging report on Wednesday that, in effect, calls for a new federal commission to review how the state-based workers’ compensation system fails. The department throws down the gauntlet, challenging defenders of the current system to show how state oversight has not deteriorated in the past 25 years in the ways that matter to it —mainly, preventing financial distress to injured workers.  

Peter Rousmaniere

The report’s title, “Does the Workers’ Compensation System Fulfill its Obligations to Injured Workers?”, signals that department is interested only in increasing worker benefits. It doesn’t want to take over managing the system. 

The body of the 43-page report barely mentions employers and insurers. It portrays itself as a vital stakeholder, in two ways. First, it cites a team of researchers with 70 years’ experience in workers’ comp who estimated that Social Security Disability Insurance spends $23 billion annually for benefits to work-injured beneficiaries. The SSDI enrollment rate for injured workers is double that of workers not disabled by work.

Second, not large in the text but strikingly so in the Wednesday morning press conference, speakers suggested that the nation’s entire economic safety net is out of kilter due to poor performance of the only part of the safety net run by the states.

There should be no doubt that ProPublica's ongoing series of articles, which commenced in March 2015 with its initial broadside, “The Demolition of Workers’ Comp,” makes DOL’s job easier to pitch its views. But DOL doesn't have much problem finding evidence, some of which is sound, some speculative, and some questionable.

The report’s power of persuasion is greatly enhanced by the fact that neither states nor private sector participants in workers’ comp seriously attempt to demonstrate that injured workers fare well, or even just no worse than in the past. The industry does not try to show factually how its immense investment in doing business, such as medical management, improve the lot of these workers.

The executive summary says, “Working people are at great risk of falling into poverty as a result of workplace injuries and the failure of state workers’ compensation systems to provide them with adequate benefits.”

The force of this sentence warns that if state regulators and private parties want to respond, it will take quite an effort. The risk of financial distress is rarely addressed, as WorkCompCentral did in The Uncompensated Worker report of January 2016. 

States need to consider the extent to which the state system is accountable, such as barring or erecting hurdles to claims for disease and post-traumatic stress disorder. Certain workers’ compensation benefits, such as for atomic weapons workers, have already been federalized due to failed efforts deliver benefits. And one needs to point out that some financial distress is beyond the scope of a workers’ compensation system, such as lower incomes years after a worker sustains a temporary medical-only claim. 

DOL’s report argues extensively that benefits have worsened since the 1980s. That’s when state reaction to 1972's so-called Burton Commission (named after its chair, John F. Burton Jr.) began to falter. States made improvements primarily out of fear of federal take-over. Since, then, per the report, it’s been only downhill. It even questions how evidence-based medicine guidelines have helped workers.

This worsening of benefits is a complex argument, arising from Burton himself, still in the game. For some 40 years, frequency of work injuries (the number per 100 workers) has steadily declined through today. This seems a spectacular gain for workers and employers.  Indemnity benefits per $100 payroll also declined by a lot. In 2010, Burton asserted that benefit payments fell far more due to restricting access to benefits than from fewer injuries.

Much in the report can be picked apart by informed critics. Does anyone want to do it? The report does not end with a crisp list of action items to critique, other than a bland one for more research. But the obvious aim is another federal commission. Those who want to drown this surfacing proposal might consider what allies they have in Washington. Will either of the presidential candidates be opposed to a commission? Would congressional Republicans want to come to the defense of a state system not ready for this battle?

The Department of Labor and others in Washington want, it appears, to federalize enough to increase benefits but not to be in charge of every wheel spinning every weekday at 9 a.m. To achieve change one has to propose something that most stakeholders well see as better or no worse. And you first have to destroy the reputation of those guarding the status quo. That’s the 50 states, and that's the goal of this report.

Peter Rousmaniere is a consultant for workers' compensation claims administrators and vendors, and a veteran observer of workers' compensation industry trends.