WASHINGTON, D. C.

July 1972

Library of Congress Card Catalog No.72-600195

NA TIONAL COMMISSION ON STA TE WORKMEN'S COMPENSA TION LAWS1825 K STREET, N. W.

WASHINGTON, DC 20006

July 31, 1972

To the President and The Congress

I have the honor to submit to you the Report of the National Commissionon State Workmen's Compensation Laws in accordance with the provisionsof the Occupational Safety and Health Act of 1970.

Although the backgrounds of the members of the Commission varied

considerably, we began with a common and profound conviction that

American workers should receive adequate and fair protection if they suffer

a work-related injury , disease, or death. The importance we attached to our

assignment was heightened by the recognition that workmen's compensation

now covers almost 85 percent of the labor force and annually provides

benefits to millions of workers.

As our year of hearings and meetings progressed, we reached a general

agreement on the potential role and actual record of workmen's com-

pensation. We have concluded that there is a significant role for a modern

workmen's compensation program and that the States' primary responsi-

bility for the program should be conserved. We also agree that the protection

furnished by workmen's compensation to American workers presently is, in

general, inadequate and inequitable. Significant improvements in workmen's

compensation are necessary if the program is to fulfill its potential.

We have indicated our prescription for needed reforms. We believe the actual

protection afforded by workmen's compensation to injured workmen and

their families can soon converge on the potential.

Sincerely

::1! ~ d~I~

F. Burton, Jr.

Chairman

The President

The President of the Senate

The Speaker of the Houseof Representatives

B.S., Cornell University; LL.B., Ph.D., University of Michigan. As-sociate Professor of Industrial Relations and Public Policy, GraduateSchool of Business, University of Chicago, Chicago, Illinois. Author,"Interstate Variations in Employers' Costs of Workmen's Compen-sation." Senior Staff Economist, Council of Economic Advisers,1967-8.

John F. Burton, Jr.

CHAIRMAN

Detroit College of Law, J.D. Chairman, The Industrial Commissionof Ohio, Columbus, Ohio. Past President and Life Member of TheAmerican Association of State Compensation Insurance Funds.Second Vice President of The International Association of Indus-trial Accident Boards and Commissions. Articles published inTRIAL, Cleveland Marshall Law Review and Ohio Monitor. Hon-orary: Ohio Commodore, Kentucky Colonel, Admiral- The GreatNavy of the State of Nebraska, and Admiral-Cherry River Navy ofWest Virginia.

M. Holland Kris~

VICE CHAIRMAN

B.S., Bradley University: 53rd AMP, Harvard Graduate School ofBusiness Administration. Executive Vice President, Liberty MutualInsurance Company. Director, Liberty Mutual Insurance Company,Liberty Mutual Fire Insurance Company, Liberty Life AssuranceCompany of Boston. Trustee of the Boston Urban Foundation.

Melvin B. Bradshaw

Administrator, Workmen's Compensation, Ford Motor Company,Dearbom, Mich. Former member of the Council of State Govern-ments Advisory Committee on Workmen's Compensation, Advi-sory Committee for Self-Insurers to the Chairman of the NewYork Workmen's Compensation Board, and the Board of Trusteesof the Silicosis and Second Injury Funds of Michigan. Past Chair-man of the Board of Managers of the Self-Insurers Association ofNew York and the National Council of State Self-InsurersAssociations.

Clarence E. Carothers

Daniel T. Doherty

James L. Flournoy

John A. Greenlee

Ph.B. cum laude, Georgetown University, J .D. Georgetown Uni-versity. Chairman, Maryland Workmen's Compensation Commission,Baltimore, Md. Past President of the International Association ofIndustrial Accident Boards and Commissions; member of the Ex-ecutive Committee of the Southern Association of Workmen's,Compensation Administrators, and Chairman of the MarylandGovernor's Commission to Review the Workmen's CompensationLaws. Member, President's Committee on Employment of the

Handicapped.

B.S., Bishop College; LL.B., Southwestern University. Commis-sioner for State Workmen's Compensation Appeals Board, SanFrancisco, Calif.

Ph.D., University of Iowa. President, California State University,Los Angeles.

LL.B., Harvard Law School, 1922. Professor of Law, Suffolk Uni-versity. Attorney, Boston, Mass. Author, "World-Wide Workmen'sCompensation Trends."

Samuel B. Horovitz

B.A., Yale University; MoD., Harvard Medical School, 1930. Asso-ciate Director, Department of Environmental Public and Occupa-tional Health, American Medical Association, Chicago, Ill.

Henry F. Howe

A.B., LL.B., Columbia University. Counsel, American Insurance As.sociation, New York, N.Y., Former member of The Advisory Com-mittee on Workmen's Compensation Studies, U.S. Department ofLabor; Committee on Workmen's Compensation and Employer'sLiability Law of the American Bar Association, and Workmen'sCompensation Committee of the Atomic Industrial Forum.

Andrew Kalmykow

A.B., M.D., Cornell University; M.A., Ph.D., Columbia University,1934. Director, Professional Education and Research, The Kessler

Institute for Rehabilitation, West Orange, N.J. Former Presidentof the International Society for Rehabilitation of the Disabled and

the National Council on Rehabilitation. Consultant to the United

Nations and the World Veterans Federation. Author, "Rehabilita-tion of the Physically Handicapped," "The Principles and Practicesof Rehabilitation," "The Knife Is Not Enough," " Acciden tial Injuries,

"Low Back Pain In Inudstry," and "Disability-Determination and

Evaluation."

Henry H. Kessler

B.A., University of Mairte; Honorary M.A., Bates College; HonoraryLL.D., Nasson College; Hon. LL.D., University of Maine. Com-sioner of Labor and Industr}' for the State of Maine, Augusta, Me.,1947- 72. Former member of the Advisory Committee on occupa-tional Health to the Surgeon General of the United States Depart-ment of Health, Education, and Welfare.

Marion E. Martin

B.S., J.D., University of Oregon. Vice President, Georgia-PacificCorporation, Portland, Ore. Activities have included extensive par-ticipation in revision of State workmen's compensation laws. Mem-her of the Governor's Advisory Committee on Vocational Rehahili-tation and the Board of Directors, Unemployment Benefit Advisors, Inc

William J. Moshofsky

B.S., M.A., University of Houston. Assistant Director, AFL-CIO De-partment of Social Security, Washington, D.C.

James R. Q'Brien

B.A., M.A., University of California, Berkeley. Director of Research,California Labor Federation, AFL-CIO, San Francisco, Calif.

Michael R. Peevey

The Secretary of CommerceHudson B. Drake, Designee B.S. , University of California, Los Angeles. Director, Bureau of

Domestic Commerce.

A.B., Loyola at Los Angeles; M,A., University of California at LosAngeles. Industrial Relations Officer (since resigned) Office ofDomestic Business Policy.

John Mulligan, Designee

The Secretary of LaborAlfred G. Albert, Designee LL.B., Rutgers. Deputy Solicitor.

B.S., University of Wisconsin; LL.B., New York University; AttorneyOffice of the Solicitor.

Eric Feirtag, Designee

The Secretary of Health,Education, and Welfare

Marcus Key, Designee

A.B., M.D., Columbia University; M.P.H. Harvard School of PublicHealth. Director, National Institute of Occupational Safety and Health

ASSISTANT TO THE EXECUTIVE DIRECTOR

Nancy L. Watkins

ASSOCIATE EXECUTIVE DIRECTOR AND CHIEF COUNSEL

John H. Lewis

ASSOCIATE EXECUTIVE DIRECTOR AND CHIEF STATISTICIAN

Wayne G. Vroman

PUBLIC INFORMATION AND HEARINGS OFFICER

W. Ward Donohoe

PROFESSIONAL STAFF

James R. CheliusRichard S. CohenIda J. CrawfordDaniel T. Doherty, Jr.Henry A. EinhomMarilyn B. EisenbergWilliam E. FleischmanMarilyn K. HutchisonLarry L. KiserGary S. KleinLloyd W. LarsonFrank L. MitchellMarion F. PittsDaniel N. PriceLouise B. RussellCarl J. Schramm

EXPERTS AND CDNSUL TANTS

Monroe Berkowitz

C. Arthur Williams

SECRETARIAL AND SUPPORT STAFFGeneva B. AbIesMartha P. BlehmMarian H. BrownMarlene L. Gantt

Michael B. GarfinkleJeffrey L. GroverJoanne D. LancasterR. Christine McKenzieJacquelyn D. PriceLouisa J. RowlandKimberly C. SowardsVera K. Yancey

EXECUTIVE OFFICERLouvia I. Creekmore

CONTRACTORS

Michael P. ArthurA.M. Best CompanyBruce BoalsBureau of the Census, U.S. Dept. of CommerceColumbia UniversityCommission on Professional and Hospital ActivitiesSam EstepGeorgia State UniversityMicha Gisser and Peter GregoryGordon Associates, Inc.Hay and AssociatesCelia HolmansInstitute of Labor and Industrial Relations, University

of Michigan-Wayne State UniversityTony KoriothArthur LarsonMarvin J. LevineWex S. MaloneArthur W. MotleyNational Council on Compensation InsuranceNew York UniversityWalter OiRMC, Inc.George F. RohrlichMarcus Rosenblum

Rutgers UniversityKeith D. SkeltonSocial Security Administration, U.S. Dept. of Health,

Education and WelfaJeState of New York Workmen 's Compensation BoardStudio PUniversity of ConnecticutUniversity of Massachusetts

EXECUTIVE DIRECTORPeter S. Barth

On behalf of the members of the National Commission on StateWolrkmen 's Compensation Laws, I wish to acknowledge the assist-

ance we received in preparing this Report.I The Department of Labor's Task Force on Structuring Independ-

entl Agencies prepared a tentative budget and arranged for our officespricbr to the appointment of the Commission. This assistancesuqstantially shortened our start-up time. Monroe Eerkowitz, by his

corttribution of expertise and time in the first weeks of the

Co~mission's activity, helped to solve the first flurry of administra-

tive and budgetary issues.I~he Commission was aide~ by a number of contracto.rs w.ho

provIded data, analyses, or advIce. Arthur Larson of Duke UnIversityan~ Sam Estep of the University of Michigan were among those whomade appearances at a meeting of the Commission. The Com-pe~dium on Workmen's Compensation, which C. Arthur Williamsedi~ed, was a valuable input to our deliberations. Marcus Rosenblumhasl added an element of felicity to the Report by his editing.

iThe staff of the Commission has exceeded any reasonable

ex~ectations as to quality and diligence. Lloyd Larson and Dan Price,twq of the workmen's compensation professionals in the FederalserJice, on loan to us for the year, contributed ideas and data andsuprressed nascent errors. Those staff members, such as Wayne

Vroman and Louise Russell, who looked at old workmen's compen-satipn problems with a new perspective, compelled a carefulrethinking of traditional assumptions. Nancy Watkins contributed tobotp the style and substance of the Report.

The administrative support for the Commission, as directed byDo~tie Creekmore, met the critical test: things ran smoothly.Particularly supportive in the preparation of the Report were JoanneLadcaster and Louisa Rowland, who transformed scribblings into

legiple copy with speed, accuracy, and good will.

IThree staff members were critical to the work of the Commis-sioI1. John Lewis was able to answer even the most technical legal

questions while also providing advice that hopefully will make theReAort accessible to those other than legal technicians. Ward

Donohoe was an all-star utility infielder: hf';, was the public informa-

tio1 officer; he wrote a paper to be published by the Commission;and he successfully arranged 20 meetings and hearings around thecourtry. Peter Earth was the most important contributor to theCommission's efforts. He provided ideas and counsel that wereesselntial. He was also the intermediary among the Commission, the

staff, and the contractors: it is a tribute to his abilities that he served

sucJessfully as three-way flak-catcher.

Johp F. Burton, Jr.Chairman

Letter of Transmittal 3

Members of the Commission 4

Members of the Commission Staff 6

Acknowledgments 7

Schedule of Tables 10

Schedule of Figures 11

Introduction and Summary of Major Conclusions and Recommendations 13

The General Objectives of Workmen's Compensation 31

PART TWO: EVALUATIONS ANO RECOMMENDATIONSCHAPTER 2

The Appropriate Scope of Workmen's Compensation 43

CHAPTER 3

The Income Maintenance Objective

CHAPTER 4

The Medical Care and Rehabilitation Objective

CHAPTER 5

The Safety Objective

CHAPTER 6

The Effective Delivery System Objective

53

77

87

99

PART THREE: THE FUTURE OF WORKMEN'S COMPENSATION

CHAPTER 7

A Time for Reform 117

Supplementary Statements by Individual Commissioners 133

APPENDIX AGlossary 137

APPENDIX BThe Cost of Adopting the Recommendations of the National Commission on State Workmen's 14]

Compensation Laws

APPENDIX cSection 27 of the Occupational Safety and Health Act of 1970 149

PART ONE: GENERAL OBJECTIVESCHAPTER 1

10

32

44

44

45

45

46

50

55

55

57

59

59

61

M

65

SCHEOULE OF TABLES

Accidental deaths and injuries of workers, 1971 1.1

Estimated number and percentage of workers covered by workmen's compensation in the 50 2.1

States and the District of Columbia, 1940- 70

Actual workmen's compensation coverage as a percentage of potential coverage in various 2.2

jurisdictions, 1970

Jurisdictions with compulsory coverage, 1946- 72 2.3

Jurisdictions providing workmen's compensation coverage without exemptions based on the 2.4

number of employees, 1946- 72

Jurisdictions covering agricultural workers on the same basis as other workers, 1946- 72 2.5

Jurisdictions with full coverage of occupational diseases, 1946- 72 2.6

Relationship of average annual total remuneration to average annual earnings in all private 3.1

industries, 1940- 70

Relation between gross and spendable earnings, 1940- 70 3.2

Workmen's compensation benefits as a percentage of spendable earnings compared with 3.3

benefits as a percentage of wages

Jurisdictions in compliance with recommended standards published by the U.S. Department 3.4

of Labor and the Model Act for waiting period and period of disability qualifying for retroactive

pay, 1966- 72

Percentage of disability days compensable with various combinations of waiting and 3.5

retroactive periods

Maximum weekly benefits for temporary total disability as a percentage of average weekly 3.6

wage: distribu tion of jurisdictions, 1940- 72

Maximum weekly benefits for permanent total disability as a percentage of average weekly 3.7

wage: distribution ofjurisdictions, 1972

Jurisdictions with compensation for permanent total disability payable for life or period 3.8

of disability

Distribution of 44 States and the District of Columbia according to cash benefits paid for 3.9 67

minor permanent partial impairments as a percentage of their total outlays for workmen's

compensation benefits, 1970

Specified maximum amounts of benefits provided for loss of arm, foot, and eye in various 3.10

jurisdictions, 1972

Jurisdictions with death benefits payable to widow until her death or remarriage and to 3.11

dependent children until 18, 1946-72

Distribution of 50 States and the District of Columbia according to estimated increase in 3.12

workmen's compensation costs resulting from incorporating our recommendations into each

jurisdiction's present laws

Distribution of 41 States and the District of Columbia according to estimated percentage 3.13

of payroll devoted to workmen's compensation premiums by employers in a representative

sample of insurance classifications

Expenditures for supplements as a percentage of basic wages and salaries in private industry , 1970 3.14

Jurisdictions allowing injured worker initial free choice of a physician or choice from a panel, 4.1

1966-72

Jurisdictions providing, without arbitrary limits on duration or amount, full medical benefits 4.2

for injuries, 1946- 72

Jurisdictions providing, without limitation on duration or amount, full medical benefits for 4.3

occupational diseases, 1946- 72

70

72

74

74

75

78

79

79

Jurisdictions with a rehabilitation division in the workmen's compensation agency, 1966- 72 4.4 80

Jurisdictions authorizing workmen's compensation agency to supervise medical care, 1966-72 4.5 80

Jurisdictions providing special maintenance benefits during period of rehabilitation, 1946- 72 4.6 82

Jurisdictions providing broad coverage of previous impairments by subsequent-injury funds 4.7 83

1946- 72

Trends in work-related deaths and injuries, 1930-71 5.1 88

Injury frequency rates in various manufacturing industries, 1950-70 5.2 90

Injury frequency and severity rates in manufacturing in 16 States, 1969 5.3 91

Distribution of insurance by size of annual premium for policies sold by private insurance 5.4 96

carriers, 38 States

Contested cases as a percentage of all reported cases in State and Federal jurisdictions, 1971 6.1 107

Jurisdictions with adequate time limit for filing occupational disease claims, 1966-72 6.2 108

Plaintifrs attorney's fees as a percentage of benefit payments in State and Federal 6.3 109

jurisdictions, 1972

Compromise and release settlements as a percentage of all cash benefit cases in State 6.4 110

and Federal jurisdictions

Num her of jurisdictions meeting 16 recommended standards, 1972 7.1 119

Distribution of 50 States and the District of Columbia according to estimated increase 7.2 128in workmen's compensation costs resulting from incorporating our essential recommendations

into each jurisdiction's present laws

Distribution of 41 States and the District of Columbia according to estimated percentage 7.3 128of payroll devoted to workmen's compensation premiums by employers in a representative

sample of insurance classifications

Estimated increase or decrease in cost, expressed as a percentage of current costs, of incorporating B.1 143the recommendations of the National Commission on State Workmen's Compensation Laws into

State laws in effect J anuary I, 1972

Estimates of the percentage of payroll devoted to workmen's compensation premiums by B.2 145

employers in a representative sample of insurance classifications

SCHEDULE DF FIGURES

Guide to discussion of 16 subjects A 16

Elements of remuneration before and after impairment from injury or disease 1.1 37

Additional cost of increasing maximum weekly benefits in workmen's compensation 3.1 63

Work injury frequency rates, 1960-70: selected industry divisions and groups 5.1 89

Ratio of injury rate for firms of various sizes in relation to the average injury rate in 5.2 92their industry. Ratios are weighted average for 39 manufacturing industries

Distribution of the 242 most important workmen's compensation insurance classes in 5.3 94Wisconsin according to the ratio of actual loss to expected loss for each class in 1969

Relation between manual rate and experience rate as firm size increases, for firms with 5.4 95

frequency rate that is 50 percent of the industry average

Relationship between State injury frequency rate and State workmen's compensation 5.5 97average benefit (indemnity and medical) per case, 1968-1969 policy year

Hypothetical organization chart of workmen's compensation agency 6.1 101

Flow of information through a workmen 's compensation agency 6.2 III

INTRODUCTIONin recen t years serious q uestions havebeen raised concerning the fairness andadequacy of present workmen's com-pensation laws in the light of thegrowth of the economy, the changingnature of the labor force, increases inmedical knowledge, changes in the haz-ards associated with various types ofemployment, new technology creatingnew risks to health and safety, andincreases in the general level of wagesand the cost of living.

Congress, in the Occupational Safety andHealth Act of 1970, declared that:

the vast majority of American workers,and their families, are dependent onworkmen's compensation for theirbasic economic security in the eventsuch workers suffer disabling injury ordeath in the course of their employ-ment; and that the full protection ofAmerican workers from job-related in-jury or death requires an adequate,prompt, and equitable system of work-men's compensation as well as an effec-tive program of occupational healthand safety regulation. ...

For these reasons, Congress establishedthe National Commission on State Workmen'sCompensation Laws to "undertake a compre-hensive study and evaluation of State workmen'scompensation laws in order to determine if suchlaws provide an adequate, prompt, and equitableCongress went on to find, however, that

4

system of compensation." The Act required thata final report, containing a "detailed statementof the findings and conclusions of the Commis-sion, together with such recommendations as itdeems advisable," be transmitted by the Com-mission to the President and to the Congress nolater than July 31, 1972.

Activities of the Commission

cians, and others specialising in workmen'scompensation and rehabilitation. More than 200documents were provided to the Commission bythe staff, including selections from previouspublications and original reports based on staffsurveys and studies.

The Commission was authorized to enterinto contracts with government agencies, privatefirms, institutions, and individuals for the con-duct of research or surveys and the preparationof reports to be published by the Commission.These publications include a Compendium onWorkmen's Compensation. a comprehensive re-view of the issues and information concerningworkmen's compensation, and a series of Sup-plemental Studies which examine selectedissues in detail. As the Compendium and Supple-menta/ Studies were prepared and edited byindependent scholars, the Commission assumesno responsibility for the ideas expressed in thesepublications. With some of these ideas theCommission disagrees. Nonetheless, the materialwas valuable to the Commission and is beingpublished in order to encourage further studiesand appraisals of workmen's compensation.

We have carefully considered the viewspresented at our hearings and by our staff andcontractors. The issues have been analyzedthoroughly in our formal sessions, correspond-ence, and conversations. Although we have givenserious attention to previous recommendationsfor workmen's compensation programs, such asthe widely approved standards published by theU.S. Department of Labor and the Model Actpublished by the Council of State Governments,we assumed as our responsibility a completereexamination of workmen's compensation inlight of the historical changes noted by Con-gress. We have evaluated the effects of thesechanges on the "fairness and adequacy" of theprogram launched more than 50 years ago. Wehave concluded there is a substantial and vitalrole for workmen's compensation in contempo-rary America.

The main body of our Report containsthree parts which lead to this broad conclusion.The general objectives of a modern workmen'scompensation program are discussed in PartOne. A detailed evaluation of the present work-men's compensation program and our recom-mendations follow in Part Two. In Part Three,we discuss the future of workmen's com-pensation.

On J une 15, 1971, the President ap-pointed 15 Commission members, representingState workmen's compensation agencies, busi-ness, labor, insurance carriers, the medical pro-fession, educators, and the general public. Inaddition, the Act designated three members ofthe President's cabinet as Commissioners.

The Commission faced a formidable task.We were asked to evaluate 56 diverse jurisdic-tions and 16 specific topics, many complex. Oureffective working period was less than a year. Weresolved at our first meeting to meet ourdeadline despite the advantages that would haveflowed from additional. time. We made thisdecision because important and pressing issuesdictated prompt action. The Congress had ex-pressed a keen sense of urgency about work-men's compensation in setting the July 31deadline. The Commission members and staffhave responded to this urgent concern with theirbest effort.

The Commission has had an active andproductive year. Since its first meeting, on July21, 1971, ten additional meetings have beenheld to develop the plan and review the sub-stance of this Report. In total, these sessionsconsumed 32 days with, on the average, 17Commissioners in attendance.

In addition to the meetings, the Commis-sion held nine public hearings for a total of 18days. These hearings included three in Washing-ton, plus regional hearings in Chicago, Boston,San Francisco, Dallas, Atlanta, and New York.Because the first hearing was scheduled on shortnotice, only 10 Commissioners were able toattend. For the subsequent eight hearings, neverwere fewer than 15 Commissioners present.More than 200 witnesses appeared. The editedtranscript of the hearings, to be published, isexpected to exceed 800 printed pages.

A full-time staff of 30 employees assistedthe Commissioners. The professional staff in-cluded economists, lawyers, physicians, statisti-

IS

PART II. EVALUATION OF STATEWORKMEN's COMPENSATIONPROGRAMS AND SELECfEDRECOMMENDATIONS

These three parts are summarized below.Many supporting data and analyses are con-tained in the corresponding sections of theReport. References for factual information inthe Report are included in the Compendium.

PART I. OBJECTIVES FOR A MODERNWORKMEN'S COMPENSATIONPROGRAM

There are five major objectives for amodern workmen's compensation pro-gram: four of them basic and an equally impor-tant one that supports the others.

The four basic objectives are:

Congress in the Occupational Safety andHealth Act of 1970 specified that our study andevaluation should include, "without being lim-ited to," 16 subjects. We believ.e this evaluationwill be most significant if those subjects arediscussed in relation to the five objectives citedabove. Accordingly the 16 subjects are listedbelow (Figure A) with reference to the objec-tives most pertinent and with a citation of thechapter in the Report which deals most exten-sively with the respective topics.

In addition to the five objectives, anotherbasis for our evaluation is the Congressionaldirective to determine if State workmen's com-pensation laws provide an "adequate, prompt,and equitable" system. We use "adequate" tomean sufficient to meet the needs or objectivesof the program; thus, we examine whether theresources being devoted to workmen's compen-sation income benefits are sufficient. We use"equitable" to mean fair or just; thus, weexamine whether workers with similar disabil-ities resulting from work-related injuries ordiseases are treated similarly by different States.(See Glossary for full definitions of these andother terms.)

Broad coverage of employees andof work-related injuries and diseases

Protection should be extended to as manyworkers as feasible, and all work-related injuriesand diseases should be covered.

Substantial protection against inte"uptionof income

A high proportion of a disabled worker'slost earnings should be replaced by workmen'scompensation benefits.

Provision of sufficient medical careand rehabilitation services

The injured worker's physical conditionand earning capacity should be promptly re~stored.

I. A Modern Workmen's CompensationProgram Should Provide Coverageof Employees and Work-Related Injuriesand Diseases

Coverage of Employees[Section 27(d)( 1 )(C)

Although the percentage of employeescovered by workmen's compensation is increas-ing, State and Federal programs now reach onlyabout 85 percent of all employees. This coverageis inadequate. Inequity results from the widevariations among the States in the proportion oftheir workers protected by workmen's compen-sation. Thirteen States that cover more than 85percent of their workers contain more than halfof the nation's labor force, but 15 States coverless than 70 percent. Inequity also resultsbecause the employees not covered usually arethose most in need of protection: the low-wage

Encouragement ofsafety

Economic incentives in the programshould reduce the number of work-related in-juries and diseases.

The achievement of these four basic ob-jectives is dependent on a fifth objective:

An effective system for deliveryof the benefits and services

The basic objectives should be met com-prehensively and efficiently.

16

FIGURE A. Guide to discussion of 16 subjects

OBJECTIVE UNDERWHICH SUBJECTIS DISCUSSED IN

INTRODUCTION ANDSUMMARY

SUBJECT LISTED IN SECTION 27 (d) (1)OF THE OCCUPATIONAL SAFETY AND HEAL TH

ACT OF 1970

I ncome protection 3A. The amount and duration of permanent and temporary disability bene-fits and the criteria for determining the maximum limitations thereon

--

B. The amount and duration of medical benefits and provisions insuring

adequate medical care and free choice of physicianMedical care andrehabilitation

4

c. The extent of coverage of workers. including exemptions based onnumber or type of employment

Coverage 2

D. Standards for determining which injuries or diseases should be deemed

compensableCoverage 2

E. Rehabilitation Medical care andrehabilitation

4

F. Coverage under second- or subsequent-injury funds Medical care andrehabilitation

4

G. Time limits on filing claims Effective delivery system 6

3I ncome protection

Coverage

H. Waiting periods

Compulsory or elective coverage 2

6J. Administration Effective delivery system

6

6

Effective delivery system

Effective delivery system

K. Legal expenses

L. The feasibility and desirability of a uniform system of reportinginformation concerning job-related injuries and diseases and the opera-tion of workmen's compensation laws

M. The resolution of conflict of laws, extraterritoriality, and similarproblems arising from claims with multi.State aspects

Coverage 2

No The extent to which private insurance carriers are excluded fromsupplying workmen's compensation coverage and the desirability ofsuch exclusionary practices, to the extent they are found to exist

6Effective delivery system

0. The relationship between workmen's compensation on the one hand,and old-age, disability, survivors insurance and other types of insurance,public or private, on the other hand

I ncome protection and

medical care and

rehabilitation

3 and 4

7P. Methods of implementing the recommendations of the Commission

Discussed in the Introduction and Summary under Part 111, The Future of Workmen's Compensation.

7

coverage should be extended to fam1workers onthe same basis as all other employees. (See R2.4)

Casual and domestic workers. Althoughseveral States cover some casual householdemployees, no State covers them on the samebasis as all other workers. The transient or casualcharacter of domestic jobs and the large numberof households argue against efforts to providecoverage by conventional means.

We recommend that by July 1, 1975, householdworkers and all casual workers be covered underworkmen's compensation at least to the extentthey are covered by Social Security. (See R2.5)

workers, such as farm help, domestics, casualworkers, and employees of small firms.

The lack of coverage is due primarily tothe statutory exclusion of specific occupationsor classes of employers. Another importantfactor is the persistence in some States of atradition that coverage be elective.

Our recommendations on coverage are inessence that coverage be extended so as toprovide protection to most employees nowexcluded and that coverage be mandatory .

Elective coverage [Section 27(d)( I )(I) ] .Despite progress in recent decades, the laws ofmore than a third of the States retain theelective feature, installed originally in deferenceto constitutional interpretations that are largelyirrelevant now.

We recommend that workmen's compensationbe compulsory rather than elective. (See R2.1 )

Government employees. The laws of 44States require coverage of some or all Stateemployees; 36 States require coverage of em-ployees of local governments; the other laws areelective.

We recommend that workmen's compensationcoverage be mandatory for all government

employees. (See R2.6)

Conflicts among State laws [Section27(d)(I)(M)]. Employees who are subject tothe laws of two or more jurisdictions are oftenuncertain as to where to file a claim: The claimmay be compensable under one State law andinvalid under another, or, in the extreme,compensable under neither .

We recommend that the employee be given thechoice of filing a claim for workmen's compen-sation in any State where he was hired, or wherehis employment was principally localized, orwhere he was injured. (See R2.1l )

(In this Introduction and Summary , in theinterest of brevity, we have abbreviated andreworded some of our recommendations con-tained in Chapters 2 through 6. Each recommen-dation in this summary contains a reference tothe full text of the recommendations publishedin these five chapters. R2.l is the first recom-mendation in Chapter 2.)

Numerical exemptions [Section27(d)( 1 )(C) ] .Barely half the States extendcoverage to firms with one or more employees,and among these are States which exemptcertain classes of employers, such as charitableorganizations.

We recommend that employers not be exemptedfrom workmen's compensation because of thenumber of their employees. (See R2.2)

Coverage of Injuries and DiseasesSection 27( d)( 1 )(D )

Substantial litigation results from effortsto determine which injuries or diseases arework-related and compensable. There are bothlegal and medical questions in each claim. Themedical question is whether there was in fact animpairment or death caused by an injury ordisease that was work-related. The legal questionis whether the worker has suffered disability,i.e., a loss of actual earnings or earning capacity

Exclusions [Section 27(d)( l)(C)] .Exclu-sions include such categories as farmworkers,casual and domestic workers, and employees ofState or local governments.

Farm workers. Only about a third of theStates cover farmworkers on essentially the samebasis as other workers. Because of administrativeconsiderations, we recommend a two-stageapproach to coverage for agricultural workers.

As of July 1, 1973, coverage should be extendedto agricultural employees whose employer'sannual payroll exceeds $1,000. By July 1, 1975,

18

attributable at least in part to the work-related

impairment.The traditional test for determining

whether an injury or disease is compensable, is

that the cause must be an "accident,"-sudden,unexpected, and determinate as to time andplace. This interpretation has served to barcompensation for most diseases and for injurieswhich were considered routine and usual in theplace of employment.

We recommend that the "accident" requirementbe dropped as a test for compensability. (See

R2.l2)

The compensability of diseases has beenhampered also by the uncertain etiology ofmany impairments. Efforts to overcome this

uncertainty by listing specific compensablediseases results in lack of coverage for somediseases.

We recommend that all States provide fullcoverage of work-related diseases. (See R2.13 )

2 A Modern Workmen's Compensation

Program Should Provide SubstantialProtection Against Interruption ofIncome

In general, workmen's compensation pro-grams provide cash benefits which are inade-quate. The majority of disabled beneficiariesreceives less than two-thirds of the lost wages. Inmost States, the most a beneficiary may receive,"the maximum weekly benefit," is less than thepoverty level of income for a family of four.Moreover, many States limit the duration or thetotal amount of cash payments.

Payments are inequitable as well as inade-quate. Benefits differ widely from State toState. Within States, high-wage workers, if dis-abled, receive a smaller proportion of their lostearnings than do low-wage earners because theyare limited by the ceiling of the maximumweekly benefits. Also, in some States, it appearsthat benefits paid for minor injuries are rela-tively more generous than payments for serious

injuries.Many programs appear to pay uncon-

tested claims with reasonable promptness. Whenclaims are contested, the record is less satis-factory .

Cash benefits are based primarily on theworker's actual loss of wages or loss of wageearning capacity. Also, whether or not theysuffer a loss of wages or of earning power ,workers in many States may receive cash pay-ments because of work-related impairments.

Benefits usually are computed as a per-centage of gross pay, rather than spendableearnings. Tax factors and the number of depend-ents contribute to inequities in this approach,and the inequities would be compounded ifhigher benefits were paid. The traditional pay-ments are two-thirds of pre-tax wages. Benefitscalculated as 80 percent of spendable earningswould better reflect the worker's preinjuryeconomic circumstances and cost the systemlittle more. The small increase in cost would inany event recognize the value of the supple-ments or fringe benefits which have been intro-duced since the two-thirds foffi1ula was estab-lished, and which are not included in gross pay.

Temporary total disability benefits [Sec-tion 27(d)( 1 )(A)] .A worker who is temporarilyand totally disabled experiences a temporaryand complete loss of wages. Benefits do notbegin unless the disability persists for a specifiedwaiting period. Usually, if the disability con-tinues beyond a specified qualifying period, theworker receives benefits retroactively for thetime lost in the waiting period. A worker'sbenefit is calculated as a prescribed proportionof his previous wages, subject to minimum andmaximum weekly benefits.

Waiting period [Section 27(d)( 1 )(H) ] .Recommendations published by the Departmentof Labor propose a 3 day waiting period and a14 day retroactive period. In contrast, the ModelAct of the Council of State Governments speci-fies a 7 day waiting period and a 28 dayretroactive period. Most States meet the stand-ard of the Model Act, but do not meet theDepartment of Labor recommendation. Al-though the Model Act would provide benefitsfor 83 percent of lost time, the U.S. Departmentof Labor standard would compensate for 93percent. The purpose of the waiting and retro-active provisions are to reduce payments fortruly minor incidents and to assure benefits foreven moderately serious injuries.

We recommend that the waiting period be nomore than 3 days and that the retroactive periodbe no more than 14 days. (See R3.5)

19

We recommend that our permanent total benefitproposals be applicable only in those caseswhich meet the test of permanent total dis-ability used in most States. (See R3.ll )

Maximum weekly benefits. Both theDepartment of Labor and the Model Act recom-mend that the maximum weekly benefit shouldbe at least two-thirds of the average weekly wagein the State. The majority of States do not meetthis standard: most did in 1940, but since thenhave not kept pace with the rise in wages. In 32States as of January 1, 1972, the maximum for afamily of four was less than 60 percent of theState's average wage. Such levels of payment are

clearly inadequate.A maximum of two-thirds of the State's

average wage, coupled with a provision thatpurports to provide disabled workers at leasttwo-thirds of their individual wages, producesthe anomaly that almost half of all disabledworkers-those who had earned more than theState's average wage-would receive less thantwo-thirds of their lost pay.

We recommend progressive increases in themaximum weekly wage benefit, according to atime schedule stipulated in Chapter 3, so that by1981 the maximum in each State would be atleast 200 percent of the State's average weeklywage. (See R3.8 and R3.9)

Our position on maximum weekly bene-fits and the proportion of wages to be replacedis identical with our recommendations for tem-porary total disability. The main issues forpermanent total disability benefits concern thetotal sum allowed and the duration of payments.

Although there is wide agreement thatpayments for permanent total disability shouldbe paid for life, we found that 19 States in 1972failed to comply with that recommended stand-ard. In 15 States, duration of payments waslimited to 10 years and in II States the grosssum payable was less than $25,000, which is lessthan the average full-time worker in the UnitedStates earns in four years.

We recommend that permanent total benefits bepaid for the duration of the worker's disabilitywithout limitations as to dollar amount or time.

(See R3.17)

Proportion of lost wages to be replaced.The decision fixing the proportion of lost wagesto be replaced must balance incentives to em-ployers to improve safety with incentives to thedisabled to take full advantage of rehabilitationservices and to return to work.

We recommend that cash benefits for temporarytotal disability be at least two-thirds of theworker's gross weekly wage. The two-thirdsformulation should be used only on a transi-tional basis until the State adopts a provisionmaking payments at least 80 percent of theworker's spendable weekly earnings. (See R3.6and R3.7)

Relationship to other programs [Section27(d)( l)(O)] .The variability 9f benefits pro-vided to disabled workers from sources otherthan workmen's compensation aggravates theinequities of the system.

If our recommendations for increases inthe maximum weekly benefit for permanenttotal disability and the removal of limitations oftime and duration are accepted, we believe thatthese permanent total benefits should be coor-dinated with other programs.

We recommend that the Social Security benefitsfor permanent and total disability be reduced inthe presence of workmen's compensationbenefits. (See R3.18)

Each worker's benefit would be subject tothe State's maximum weekly benefit. Permanent partial disability benefits. The

issues arising from benefits for permanent partialdisability are so critical to the future of work-men's compensation that the subject warrantsthe highest priority. Unfortunately, the criticalneed for corrective action is matched by theelusiveness of the proper remedy, and there is aserious danger that premature or insufficientlydetailed recommendations might only worsen

Permanent total disability benefits [sec-tion 27(d)( l)(A)] .A worker is eligible forpermanent total benefits when he experiences acomplete loss of wages for a prolonged period.In a few States, a worker may receive permanenttotal benefits merely because he is unable toreturn to his previous job.

20

We see no justification for arbitrary limi-tation of the amount or duration of benefits tosurvivors of a deceased worker.

We recommend that benefits in death cases bepaid to a widow or widower for life or untilremarriage, and in the event of remarriage werecommend that two years' benefits be paid in alump sum to the widow or widower. We alsorecommend that benefits for a dependent childbe continued until the child reaches 18, orbeyond such age if actually dependent, or atleast until age 25 if enrolled as a full-timestudent in any accredited educational institu-tion. (See R3.25)

Relationship to other programs [Section27(d)( l)(O)] .Adoption of our recommenda-tions will assure that families of those who diefrom work-related causes will have greater andmore continuous protection than they mightreceive from Social Security.

We recommend that workmen's compensationbenefits be reduced by the amount of anypayments received from Social Security by thedeceased worker's family. (See R3.27)

3. Workmen's Compensation ShouldProvide Sufficient Medical Careand Rehabilitation Services

the present problems. These problems includethe wide variation from State to State in theratio of pern1anent partial benefits to totalbenefits, and the apparent tendency in someStates for the payment of disproportionatelylarge benefits for minor permanent partial dis-abilities relative to the benefits for major perma-nent partial and permanent total disabilities.Also, in some States, evaluations of the extentof permanent partial disability often seem to bewithout consistent guidelines. Although therecently issued American Medical Association'sGuides to the Evaluation of Permanent Impair-ment are a welcome contribution, they aredesigned only for the evaluation of impairmentand do not purport to provide guidance for theevaluation of disability, as opposed toimpairment.

These apparent inconsistencies and defi-ciencies warrant a separate study and report. Wedo not deny the importance of the permanentpartial phase of workmen's compensation; wefeel our responsibility at this time is to point tothe need for the immediate commencement of athorough examination of permanent partialbenefits.

Death benefits. Death benefits consist ofpayments to the surviving spouse, minor chil-dren, or other dependents of a worker who diesas a result of a work-related injury or disease.Such benefits account for less than one percentof all workmen's compensation cases and lessthan ten percent of the total payments. Thelimits on the weekly benefits and on the totalduration or amount, as found in many States,result in little overall cost saving for the programand are particularly ill founded.

We recommend that death benefits be at least66 2/3 percent of the worker's gross weeklywage. The two-thirds formulation should beused only on a transitional basis until the Stateadopts a provision making payments at least 80percent of the spendable earnings of the worker .(See R3.20 and R3.21)We recommend that the minimum weekly bene-fit for death cases be at least 50 percent of theaverage weekly wage in the State. (See R3.26)

In death cases, we recommend that the State'smaximum weekly benefit be increased until, by1981, the maximum represents 200 percent ofthe State's average weekly wage. (See R3.23 andR3.24)

Medical care and rehabilitation servicescontribute both a monetary and a human valueto the workmen's compensation system. Medicalbenefits have a monetary value of one billiondollars a year, about a third of the charges to thesystem. Four out of five beneficiaries receivemedical services only.

In addition to medical services from thetime of injury or detection of the disease, thesystem provides physical restoration services,including surgery and physical therapy, guidanceand instruction in restoring earning capabilities,and placement in productive employment.

The record of delivering such servicesvaries. Performance of medical services is reason-ably good but, with only a few exceptions, theperformance of physical restoration is less suc-cessful. Vocational guidance and instructionservices are spotty and placement services forrehabilitated workers are generally inadequate.

payments are offered in exchange for suchwaiver of rights, we believe the agreementsshould require approval of the administrative

agency.

These services need increased attention andcoordination.

Choice of physician [Section27(d)(1)(B)1. Among the issues that relate tothe quality of medical care is the method ofselecting a physician for the injured employee.The recommended standard published by theU.S. Department of Labor would permit theemployee to select the physician freely or inaccord with rules of the workmen's compensa-tion agency. Half the States use this system. Itcan be argued that such freedom for theemployee is illusory or disadvantageous to onewith a work-related disease which may beimproperly diagnosed by a physician unfamiliarwith a specialized working environment. Con-versely it may be argued that any limitation onthe freedom of choice is an infringement onaccess to independent medical services.

We recommend there be no statutory limits onthe length of time or dollar amount for medicalcare or physical rehabilitation services for anywork-related impairment. (See R4.2)

We recommend that the worker be permittedthe initial selection of his physician, either fromamong all licensed physicians in the State orfrom a panel of physicians selected or approvedby the State's workmen's compensation agency.(See R4.1)

Supervision of quality care at reasonablecost. There are no short cuts to economicaldelivery of medical care of satisfactory quality.There is no substitute for conscientious super-vision by competent professionals in order toinsure that a job is done well. Nevertheless,fewer than half the States provide such super-vision within the workmen's compensationagency. Supervision can not be effective iflimited to a clerical review of case histories.There must be skilled observation and authorityto order provision of necessary services, to curbexcessive charges, and to recommend or requireworkmen to seek appropriate consultation.

Fewer than half of the States have amedical-rehabilitation division and only 26 pro-vide such supervision in a manner consistentwith recommended standards.

We recommend that each workmen's compensa-tion agency establish a medical rehabilitationdivision, with authority to effectively supervisemedical care and rehabilitation services. (SeeR4.5)

Amount and duration of medical benefit[Section 27(d)(I)(B)] .Limits on the amount orduration of medical care are more prevalent forwork-related diseases than for injuries. The trendhas been to remove such limits for injuries: 41States comply with the U.S. Department ofLabor standard of full medical benefits for thoseinjured on the job. The trend has been similarwith respect to diseases but only 36 States in1972 provide full benefits. The limitations applylargely to diseases activated by dust.

Where the statutes specify payment of"all reasonable" charges, this language has beeninterpreted in some States to impose limitationson the types of services used. The wisdom oflimiting services according to the merits of anindividual situation is not open to challenge, butwe oppose arbitrary rules that limit medical orrehabilitation services without regard to theirmerit. Such limits can be self-defeating if theydeny benefits, such as prosthetic devices, whichrestore a patient to a productive career. For thesame reasons we oppose compromise and releaseagreements which terminate an employee's rightto medical benefits. Even when lump sum

Vocational rehabilitation [Section 27(d)( 1 )(E) J .Medical care would be far moreeffective if well coordinated with vocationalrehabilitation services. Such coordination wouldrequire employers to report promptly to themedical-rehabilitation division on the conditionof claimants who are seriously disabled. Simul-taneously, the claimant should be informed ofhis rights and opportunities to use restorative,guidance, and instruction services. Employees ofthe medical-rehabilitation division would be heldresponsible for following the course of suchservices and for assisting in their delivery.

Although some vocational services areprovided by insurance carriers and employers,vocational aspects of rehabilitation are handledin most States mainly by agencies that rarely

contributing effects of the last injury and notfor the total. He is charged for one eyeonly: the fund pays the balance of the awardfor total blindness.

Unfortunately, many employers appear tohave little knowledge of such funds. Also, inmany States, the funds are insufficiently fi-nanced. Only 20 States have second-injury fundswith broad coverage of preexisting impairments.Coverage that is so broad as to cover virtuallyevery employee would defeat the purpose of thefund. The Model Act specifies 26 permanentimpairments eligible for coverage by a secondinjury fund and, in addition, covers any impair-ment which is equivalent to 50 percent of total

impairment.

have more than a tangential relationship withworkmen's compensation or physical rehabilita-tion services.

Many disabled workers fail to receivevocational services partly because they are notaware of their rights, partly because they lackmotivation because of a fear they will losecompensation benefits if rehabilitated, andpartly because they cannot afford the out-of-pocket costs of maintenance duringinstruction.

We recommend that the medical-rehabilitationdivision within each State's workmen's compen-sation agency be given the specific responsibilityof assuring that every worker who could benefitfrom vocational rehabilitation services beoffered those services. (See R4.7) We recommend that States establish a second-

injury fund with a broad coverage of pre-existingimpairments. We recommend that the second-injury fund be financed by charges against allcarriers, State funds, and self-insuring employersin proportion to the benefits paid by each, or bygeneral revenue, or by both sources. We urgeState workmen's compensation agencies to in-terpret eligibility for second-injury funds liber-ally in order to encourage employment of thephysically handicapped and to publicize theprograms to employers and employees. (SeeR4.10, R4.11, and R4.12)

4. Workmen's Compensation ShouldEncourage Safety

The cost of such services should beassessed against the employers, if only to assurethat rehabilitation receives appropriate attentionwithin the workmen's compensation program.Provision of special maintenance benefits duringthe period of instruction, with the sum andperiod to be detennined by the medical-rehabilitation division, would help to assurecooperation of the worker in the instructionprogram. A worker who refuses vocational assist-ance might also be subject to denial of otherbenefits.

Placement of the disabled and use ofsecond-injury funds [Section 27(d)(I)(F)] ."Hire the Handicapped" campaigns have a muchbroader base than workmen's compensation.They aim to employ not only those disabled onthe job, a small portion of the total number ofdisabled, but others, notably veterans.

The employer concerned with operatingcosts, including premiums for workmen's com-pensation insurance, tends to be dubious about,if not averse to, hiring anyone with a preexistingimpairment. If an employee with only one handloses the other, or if an employee with sight inonly one eye becomes totally blind, it isinequitable to burden the employer with thecharges for the total disability. For this reason,all but four States have established a subsequent-or second-injury fund which assumes responsi-bility for paying for the compounding effects ofa second injury .By this means, the workerreceives in full the benefits which are his right,but the employer is charged only for the

Consistent with its aims to protect main-tenance of income and to deliver services of highquality with the maximum economy, workmen'scompensation also offers incentives to improvethe safety of working conditions.

Although the supporting evidence islimited, we believe that the experience rating ofinsurance premiums can offer employers anincentive to develop safe designs, practices, andworking arrangements. It has been demonstratedin individual industries that preventive healthand safety programs dramatically improve pro-ductivity and reduce labor costs. The spur tosafety from experience ratipg is restrictedbecause 80 percent of all employers are toosmall to be eligible under present regulations.

We recommend that, subject to sound actuarialstandards, the experience rating principle be

23

extended to as many employers as practicable.(See R5.3)

In addition to the built-in stimulus tosafety provided by experience rating, workmen'scompensation also promotes safety by expend-ing substantial resources on accident preven-tion services. However, in some States there areso many carriers writing workmen's compensa-tion insurance, it is unlikely that all provideeffective safety programs. Likewise, some State-operated insurance funds and some self-insuringemployers devote insufficient resources to safetyprograms.

We recommend that insurance carriers be re-quired to provide loss prevention services andthat the workmen's compensation agency care-fully audit these services. State-operated work-men's compensation funds should providesimilar accident prevention services under inde-pendent audit procedures where practicable.Self-insurers should likewise be subject to auditwith respect to the adequacy of their safetyprograms. (See R5.2)

Legal expenses [Section 27(d) (1)(K)].Originally it was hoped that the compensationprogram would be self-administering; that em-ployees would protect their interests withoutneed for legal counselor other outside inter-vention. The no-fault concept and prescribedbenefits, it was assumed, would reduce the needfor litigation. The complexities of the law anddoubts about the sources and nature of impair-ments have dashed these expectations, although,given sufficient assistance by administrativeagencies, claimants might have relied less onprivately retained counsel and the system as awhole might have been spared the concomitant

legal expenses.

We recommend that attorneys' fees for allparties be reported for each case, and that thefees be regulated under the rulemaking authorityof the workmen's compensation administrator.

(See R6.15)

There Should Be an Effective DeliverySystem for Workmen's Compensation

Administrative organization. Disputes onclaims in five States are assigned immediately tothe general courts. Adjudicators who handleworkmen's compensation cases exclusively havethe primary duty to resolve disputes in 45States. Only if they fail are the decisionsappealed to the courts.

We recommend that each State utilize a work-men's compensation agency to fulfill the admin-istrative obligations of a modern workmen's

compensation program. (See R6.1 )

The effectiveness of workmen's compen-sation is to be judged by the program's ability todeliver the benefits and services which fulfill itsbasic objectives.

Six obligations of administration [ Section27(d)(I)(J)]. In this connection, the primaryobligations of the workmen's compensationagency are: ( I) to take initiatives in administer-ing the act, (2) to provide for continuing reviewand seek periodic revision of both the work-men's compensation statute and supportingregulations and procedures, based on researchfindings, changing needs, and the evidence ofexperience, (3) to advise employees of theirrights and obligations and to assure workers oftheir benefits under the law, ( 4) to appriseemployers, carriers, and others involved of theirrights, obligations, and privileges, ( 5) to assistvoluntary resolutions of disputes, consistentwith the law, ( 6) and to adjudicate disputeswhich do not yield to voluntary negotiation.Adjudication should be the least burdensome ofthese six obligations if the others are wellexecuted.

In line with their traditional role ofproviding a laboratory for experimentation, withvariations suited to their own experience, needs,or creativity, the States have devised a variety ofstructures to administer their workmen's com-pensation programs. It is difficult to evaluatethese structures outside the entire political andeconomic context of each State. The Stateagencies vary remarkably in their assignment andexercise of responsibilities. Some agencies dolittle but adjudicate, with small regard for theeffective delivery of workmen's compensationservices or for their other administrative obliga-tions, cited above. For this reason, we advocatea strong administrative leadership with authoritycommensurate to the responsibility, empoweredto supervise all employees except the"membersof the appeals board. One Derson should be

24

responsible for the administration of the Stateworkmen's compensation program. This empha-sis -on personnel as a crucial factor in theexcellence of the system extends to the entirestaff of the agency.

of workmen's compensation, such as promptnessof payments, the number of workers receivingthe maximum benefits, and the amount of legalfees. At the present time, most States cannotprovide this infonnation on any basis, andalmost none of the data can be compared acrossStates.We recommend that, insofar as practical, all

employees of the agency be full-time with nooutside employment, with salaries commen-surate with this full-time status. (See R6.5)

Processing of claims. A number of posi-tive recommendations on administrative proce-dure appear in Chapter 6. In this summary , wewill mention only two, which are included in thelist of subjects assigned to us for evaluation by

Congress.Time limits on filing claims [Section

27(d)( 1)(G)] .The problem for an employee inmeeting the time limit for filing his claim isparticularly acute when his impairment resultsfrom a work-related disease. A substantial lagmay occur between exposure to the disease-producing substance and the manifestation ordiagnosis of the disease. The recommendationpublished by the Department of Labor favors aflexible time limit, so that workers with longdeveloping disabilities can still receive benefits,and about one-half of the States meet thisrecommended standard.

A salutary consequence of preparationand dissemination of comparable data would bethe enhancement of one virtue of the Federalsystem, namely that States can be laboratoriesof experiment and learn from one another.

Insurance systems [Section27(d)( I )(N)] .Most workmen's compensationlaws provide that qualified employers may self-insure their obligations. Other employers arerequired to buy insurance from a private carrieror a State fund. Although private carriers areexcluded from some States, they provide 63percent of all workmen's compensation benefits;State funds, 23 percent; and self-insuredemployers, 14 percent.

The studies available to us indicate thatno type of insurance has a general advantageover another in delivering services.

We recommend that States be free to continuetheir present insurance arrangements or, if theStates wish, to permit private insurance, self-insurance, and State funds where any of thesetypes of insurance now are absent. (See R6.20)

We recommend that the time limit for initiatinga claim be three years after the date the claimantknows, or by exercise of reasonable diligenceshould have known, of the existence of theimpairment and its possible relationship to hisemployment, or within three years after theemployee first experiences a loss of wages whichthe employee knows or, by exercise of reason-able diligence, should have known was becauseof the work-related impairment. If benefits havepreviously been provided, the claim periodshould begin on the date benefits were lastfurnished. (See R6.13)

Protection against insolvency. Specialmeans are needed to protect employees in theevent the employer fails to comply with theinsurance requirements of the workmen's com-pensation law of if a carrier or employer becomesinsolvent. Insolvency is a risk of the freeenterprise system, but the penalties should notbe assessed upon disabled employees.

We recommend that procedures be established ineach State to provide benefits to employeeswhose benefits are endangered because of aninsolvent carrier or employer, or because anemployer fails to comply with the law man-dating the purchase of workmen's compensationinsurance. (See R6.21 )

A uniform system of reporting [Section27(d)( 1 )(L) ] .An active State agency, such aswe have recommended, requires the receipt andanalysis of substantial data. Most of these datamay be useful only within the particular State,but there are advantages which would resultfrom nationally uniform data on several aspects

PART III. THE FUTURE OF WORKMEN'SCOMPENSATION

Our intensive evaluation of the evidence

25

compels us to conclude that State workmen'scompensation laws are in general neither ade-quate nor equitable. While several States havegood programs, and while medical care and someother aspects of workmen's compensation arecommendable, strong points too often arematched by weak.

In recent years, State laws have improved.In 1971, more than 300 bills were enacted,about 100 more than customary in odd-yearlegislative sessions. This encouraging burst ofactivity nevertheless failed to satisfy many basicneeds. Of 16 recommendations for workmen'scompensation published by the Department ofLabor, the average State meets only eight. Thewide variation among the States also are disturb-ing. While 9 States meet at least 13 of therecommendations, 10 States meet 4 or fewer.

An appropriate response to the seriousdeficiencies of workmen's compensation hasbeen the major concern of our Commission. Arewe to conclude that workmen's compensation ispermanently and totally disabled, or is there arational basis for continuing the program?

That fundamental question has obliged usto consider the possible alternatives to work-men's compensation. We have discussed theimplications of abolishing workmen's compensa-tion and reverting to the negligence suits, aremedy abandoned some 50 years ago. Thisoption is still inferior to workmen's compensa-tion: its deficiencies include uncertainties forboth employer and worker and the substantialcosts arising from litigation over the degree andsource of impairment. Such litigation also hasserious adverse effects on efforts at rehabili-tation.

An even more radical option is the pro-posal to disassemble the program and distributethe components elsewhere. We are convincedthat the problems associated with partition areinsoluble, and that the injured workingmanwould be adversely affected. Each of the pro-grams to which the components would beassigned has at least one serious deficiencycompared to workmen's compensation. Forexample, the eligibility requirements of theDisability Insurance program under Social Secur-ity preclude benefits until the worker has severalquarters of covered employment. In workmen'scompensation, in contrast, the worker is eligiblefrom the first day he is employed. Also, we donot believe there is likely to be in the near

future a source of medical care as satisfactory asworkmen's compensation. Under most proposalsfor national health insurance, there are deducti-bles and other limitations on benefits not foundin most workmen's compensation statutes. Theultimate weakness of partition, however, is thatthere are no well established locations for thetwo most important components of workmen'scompensation: cash benefits for short-termtotal disabilities and cash benefits for long-termpartial disa bili ties.

Perhaps in another decade or two, anattractive alternative to workmen's compen-sation will emerge.

For the foreseeable future we are con-vinced that, if our recommendations for amodern workmen's compensation program areadopted, the program should be retained.

The issue then becomes the final subjectassigned to us by Congress: what are the"methods of implementing the recommenda-tions of the Commission?" As we have reviewedthe efforts for improvement by the variousStates, it has become apparent that the answerto this question is the most elusive of all thathave been raised. Our recommendations are notfundamentally different from those of earlierinvestigations; yet previous recommendationshave won no strong support.

Several reasons for the indifferent re-sponse to previous reform proposals are evident.The lack of interest in or understanding ofworkmen's compensation by State legislators andthe general public is attributable in part to thecomplexity of the program. Various interestgroups, including employers, unions, attorneys,and insurance carriers, have often allowed theirspecialized concerns to stand in the way ofgeneral reform. And State legislators and offi-cials, even when they have been genuinelyinterested in reform, have too often been dis-suaded by the irrational fear that the resultingincrease in costs would induce employers totransfer business to States with less generousbenefits and lower costs.

In view of these experiences, we havecontemplated various strategies for improvingworkmen's compensation. Among thosesuggested at our hearings were a completeFederal takeover; retention of present Stateprograms with only voluntary responses toFederal guidance or recommendations; andvarious methods of combining the basic State-

26

examined thoroughly during the brief life of thisCommission, and are critical to the overalldesign of a modem workmen's compensationprogram and to the elimination of the mostlikely sources of inefficiencies and excessivepayments in the present program.

All Commissioners believe there is anotherpotential role for the Federal government inworkmen's compensation. We have specifiedcertain of our recommendations as the essentialelements of a modern workmen's compensationprogram. We recommend that compliance of theStates with these essential recommendations beevaluated on July 1, 1975, and, if necessary,<;ongress with no further delay in the effectivedate should then guarantee compliance withthese recommendations.

The essential elements of workmen's com-pensation recommended by this Commissionare:

Compulsory Coverage (R2.1,

No Occupational or Numerical Exemp-tions to Coverage (R2.2, R2.4, R2.5, R2.6 andR2.7)

Full Coverage of Work-Related Diseases

(R2.13)

Full Medical and Physical RehabilitationServices without Arbitrary Limits (R4.2 and4.4)

Employee's Choice of Jurisdiction forFiling Interstate Claims (R2.11)

Adequate Weekly Cash Benefits forTemporary Total, Permanent Total~ and DeathCases (R3.7, R3.8, R3.11, R3.12, R3.15, R3.21R3.23)

No Arbitrary Limits on Duration or Sumof Benefits (R3.17 , R3.25)

If, after the 1975 review, Federal supportis needed to guarantee compliance with theseessential recommendations, they should beincluded as mandates in Federal legislation. Anyemployer not covered by a State workrpen'scompensation act would be required to electcoverage in an appropriate State. For all em-ployers in States where the scope of protectionof the State act does not include the essentialrecommendations, supplemental insurance orself-insurance to provide this broader pro-

run system with a more active and influentialrole for the Federal government.

Despite disagreements among the Com-missioners on some matters, such as the timingof certain methods for improving workmen'scompensation, we all agree on some points.

We agree that the States have the eco-nomic capability of responding to our recom-mendations.

Although our recommendations willincrease the costs of workmen's compensationfor most States and many employers, we agreethat employers and the States have the resourcesto meet such costs. The States have the distinctadvantage of having personnel and procedures inplace: a Federal takeover would substantiallydisrupt established administrative arrangements.Moreover, we have seen no evidence that Federaladministrative procedures are superior to thoseof the States.

We reject the suggestion that Federaladministration be substituted for State programsat this time.

Several Commissioners believe that aFederal takeover of workmen's compensationmay be appropriate in a few years if the presentdeficiencies are not corrected promptly, bu tthey also believe these deficiencies can beovercome by the States.

All Commissioners believe the virtues of adecentralized, State-administered workmen'scompensation program can be enhanced bycreative Federal assistance.

One role for the Federal government is tohelp the States learn from one ?nother. Ourhearings have impressed us that a superiormethod in one State is not adopted swiftly byother States, a lag explained partially by thecomplexity of workmen's compensation. Thislearning lag can be shortened substantially.

We urge the President to appoint a Fed-eral commission to provide encouragement andtechnical assistance to the States.

This assistance could include consultationon statutory amendments and improved dataand reporting systems. Another function of theCommission would be to develop additionalrecommendations to supplement ours. Some oftheir recommendations should be based on acontinuing review of permanent partial disabilitybenefits and the delivery system for workmen'scompensation. These topics could not be

27

tection would be required. The nonnal enforce-ment method would be the imposition of fineson non-complying employers. Most claimswould be handled by existing State workmen'scompensation agencies using their regular proce-dures, except that the scope of protectionafforded by the State must include the essenti~recommendations.

The Commission was unanimous in con-cluding that congressional intervention may benecessary to bring about the refonns essential tosurvival of the State workmen's compensationsystem. We believe that the threat of or, ifnecessary, the enactment of Federal mandateswill remove from each State the main barrier toeffective workmen's compensation refonn: thefear that compensation costs may driveemployers to move away to markets whereprotection for disabled workers is inadequatebut less expensive. There was disagreementconcerning the appropriate time for Cpngres-sional action, with a majority concl11tiing thatStates should be given until 1975 to ~ct beforeFederal mandates are enacted if States have notadopted our essential recommendations. Onereason for the delay is the feeling that an

immediate push for congressional legislationwould precipitate a confrontation which woulddelay positive action at the State level pendingthe outcome. Another reason is that manynecessary refonns in the State workmen's com-pensation programs are not susceptible toFederal mandates. If our mandates immediatelywere adopted by Congress and made applicableto the States, some States might fail to under-take the thorough review of our recommenda-tions that are not appropriate as Federalmandates.

If the Federal government guarantees theadoption of our essential recommendations, if anew Commission is established to encourage andassist the States, and, most important, if thosewho control the fate of workmen's compensa-tion at the State level accept responsibility forthe program's refonn, we believe that soon theprotection provided by workmen's compen-sation to "the vast majority of Americanworkers, and their families. ..in the event suchworkers suffer disabling injury or death in thecourse of their employment. ..[will be] ade-quate, prompt, and equitable."