By David Michaels

Yesterday’s post by Les Boden on workers’ compensation fraud by employers brings up an important question: How much fraud is there in the comp system and who is responsible?

Insurers and employers have worked diligently to convince the public that the workers’ compensation rolls are filled with malingerers, intent on ripping off the system. The evidence is always anecdotal, like surreptitiously filmed clips of the supposedly disabled workers doing the mambo. If injured workers get the message that they will be labeled as “malingerers” if they receive apply workers comp payments, they are more likely to use their own resources to cover their medical and lost wage costs, subsidizing unsafe employers.

When I reviewed the literature on comp fraud (big file here), it became clear to me that employers are responsible for far more fraud than are workers, and that, for all the outrageous anecdotes, actual investigations into worker fraud find few cases of substance.


Here’s an example:

Wisconsin has a comprehensive statewide program that encourages anonymous reporting of workers’ compensation fraud. In 1994, there were 200,000 claims for work-related injuries. In the same year, following a statewide antifraud campaign, 95 allegations of fraud were made. These were investigated and five were deemed worthy of prosecution. Three of the five were refused by the district attorney; a conviction was obtained in one case, and prosecution is pending in the other at the time of publication. The total amount of alleged fraud in these two cases is $10,146.

In contrast, when investigators examine employer fraud, they often find it involves such large sums of money it is difficult to understand how this could have been missed for so long. The new study by the Fiscal Policy Institute estimates that NY State employers underpay workers’ compensation premiums by $500 million to $1 billion annually, forcing other employers to pay higher premiums.

The study asks: How can such a large workers’ compensation coverage shortfall exist? Here’s the answer:

While workers’ compensation in the U.S. was first introduced under President Theodore Roosevelt in 1908, there is no federal oversight or regulation of state workers’ compensation programs. In New York, the administration of workers’ compensation is fragmented with private insurance companies bearing some of the responsibility and the State Workers’ Compensation Board bearing some responsibility. Between the two, there is no overall strategic enforcement capability, much less systematic coordination with the Labor Department’s unemployment insurance system, which does operate under federal oversight.

One of the basic premises in workers compensation is that the experience rating system encourages injury prevention by charging higher premiums to employers where workers have more injuries. (We won’t talk about workers with occupational disease because, other than musculo-skeletal illnesses, they simply don’t get compensated. Here’s a good paper by Paul Leigh and John Robbins on that subject. If you are really interested, check out Costs of Occupational Injuries and Illnesses, the terrific book written by Leigh, Steven Markowitz, Marianne Fahs and Philip Landrigan.)

Employer fraud makes that preventive component, questionable to begin with, even less effective. And it feeds the push to shift the costs of comp to injured workers, their families and the tax payer.

David Michaels heads the Project on Scientific Knowledge and Public Policy (SKAPP) and is Professor and Associate Chairman in the Department of Environmental and Occupational Health, the George Washington University School of Public Health and Health Services.

Comments

  1. #1 Dr. Rick Lippin
    January 27, 2007

    Workers, like all Americans, deserve good health care and I might add safe and healthy workplaces.

    The “workers comp industry” diverts huge (obscene) numbers of dollars from workers to the overhead of adminstrative costs, legal costs, and experts on both sides of the crazy often irrrelevant “did work cause it” debate.

    I say scrap the whole corrupt WC/FECA systems and spend money directly on worker health and markedly expand OSHA.

    Of course I am not the only person who is advocating this approach

    Dr. Rick Lippin
    http://medicalcrises.blogspot.com

  2. #2 David Michaels
    January 28, 2007

    There is great appeal in what you say. The major impediment to eliminating workers compensation is the absence of national health insurance and disability programs in the US. Unfortunately, if injured workers must be protected (here) when they face hospital bills or losing wages.

    In Europe, the difficult problem – attributing single causation for problems that actually have multiple causes – arises with much less frequency, since workers there are generally covered by reasonable medical and disability insurance programs.

  3. #3 Dr. Rick Lippin
    January 28, 2007

    David- agree completely-

    Thanks for your important work

    Be Well,

    Rick Lippin
    http://medicalcrises.blogspot.com

  4. #4 Thomas L. Bowser
    December 18, 2008

    I began receiving worker’s comp benefits in November of 1988 under the “Longshore ACT”. They payed me for 2 years and then withut notice stopped my benefits. I went three and a half years without any way to provide for my family. Words could never relate what goes on in a man’s mind when he is put in this position. Since then I discovered Employees at Cigna and the DOL were writing checks in my name and cashing them at Fedreal Home loan Banks. Cigna employees would turn check numbers around backwards and these checks would be returned to the same employees’ posession at Cigna. They wrote checks in different forms of my name every week between November of 1988 and March of 1992. Because of the fraternal alliances among lawyers I have not been able to get one to help me. If they did this to me there is no telling how much money they have stolen from the Federal Reserve, insurance companies, and injured workers. The DOL refuses to help me even though I can prove my case to a 5 year old. They stole over $250,000 just in my case and I would appreciate any help offered. I can prove everything I’m claiming.

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