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The workers’
compensation system in the State of California is broken and needs
critical reforms. Rapidly increasing workers’ compensation costs are
requiring local governments and businesses to divert more and more
fiscal resources away from their primary mission of providing
services to local residents.
The County of Los Angeles is the second largest public sector
employer in the State of California and the largest self-insurer of
any local governmental agency. We receive approximately 12,000 new
workers' compensation claims each year. That figure has remained
relatively stable over the past decade, but the costs of treating
lost working time claims have risen from an average of $ 26,000 per
claim in 1996 to over $ 52,000 in 2002. That’s an additional $300
million per year over 1996 rates. Over the past five years, lost
working time claims have only increased by an annual average of 4.53
%; but during that same period average annual costs have risen by
17.0 %. If these dramatic cost increases continue, the County of Los
Angeles will incur an annual paid workers' compensation expense of $
1.1 billion by the year 2011.
This is a crisis that needs to be dealt with now, before it’s too
late. Major reforms need to occur in the next few years if vital
public services are to survive.
California’s workers’ compensation system was designed as a no-fault
system for employees and employers. However, because of harsh
penalties, lack of consistency in determining awards, and an
inability to enable claimants and employers to quickly receive and
provide care, claims are often moved into litigation. The system is
failing to do what it was designed to do: provide swift, quality
care to workers injured on the job and get them healthy and back to
work as quickly as possible.
Medically, we need to streamline the system toward more informed and
objective assessments. We need to adopt standardized procedures for
medical treatments, including chiropractic and physical therapy. An
independent medical review board staffed by physicians trained in
orthopedic and occupational medicine needs to be created to
equitably solve treatment issues. And generic drugs need to be used
in all circumstances where it is clinically possible to minimize
costs throughout the entire system.
Penalties for late payments and service delays are also too severe.
A reasonable minimum and maximum cap for penalties must be
established as well as a one-year statute of limitations for penalty
issues. We must revise the penalty statutes to limit the fines for
minor payment delays while maintaining the high penalties for
employers who continually fail to pay claims.
We need an objective system to calculate awards, determine health
care fee schedules, and provide for disability payments. We need to
expand the availability and use of Alternative Dispute Resolution
programs. And, we need to adopt administrative improvements that
simplify procedures and increase efficiency in the workers'
compensation service delivery system. These adjustments could result
in an estimated County general fund savings of $ 60 million
annually.
Finally, California’s workers’ compensation system is overly
compensating. Some claimants can actually make more money by staying
on disability than they can by returning to work. This disincentive
leads to false and extended claims that cost taxpayers millions of
dollars every year. Any reforms need to ensure that rates for
temporary disability do not result in a weekly compensation payment
that exceeds an employee’s actual earnings while working.
This is a crisis that has been ten years in the making. The system
has spun so far out of control that we cannot afford to ignore the
problem any longer. Every sector of California’s economy is moving
toward collapse. Real steps need to be taken locally to streamline
services and reduce fraud, and real legislative solutions need to be
implemented in Sacramento to reduce costs and standardize equitable
treatments. Our economy depends on it, our community depends on it,
and our quality of life depends on it.
DON KNABE
Supervisor, Fourth District
County of Los Angeles
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