Economic Development

Dangerous Work

Reducing disability costs is a winner for state budgets. But there are losers, and they aren't happy.
by | April 2006

For years, California was known to businesses all over the country as the costliest place to pay for a worker's injury. Employers' insurance rates dwarfed those in other states. In the past few years, that's changed. California has radically overhauled its workers' compensation system, recovering billions of dollars and largely undoing its longstanding reputation. But the battle isn't over. By the end of this year, California might be on the way to getting its dubious distinction back.

The state's move toward workers' comp cost containment came in two stages. The first one, under former Governor Gray Davis, included a cap on visits to chiropractors and physical therapists, as well as a requirement that doctors justify the medical treatments they prescribe. Then, in 2004, Governor Arnold Schwarzenegger changed the formula that determines the overall amount of money paid to workers injured on the job. The upshot has been a savings to the state of more than $8 billion in workers' comp costs since 2003.

But that's $8 billion that hasn't been going to injured workers, and there are critics who say that while the new system is saving money, it is insensitive to genuine medical needs. The Schwarzenegger administration insists that's false--that the decrease actually shows the old system was flawed. "People talk about high disability awards like it's a good thing," says Susan Gard, of the state's Division of Workers' Compensation. "Under the old system, we saw widespread abuse of medical treatment. We saw lots and lots of treatment that didn't help injured workers get any better."

Nonetheless, the drop in worker benefits has energized an effort to repeal the workers'comp changes. Three different ballot proposals aimed at this fall's state ballot--all drafted by the same group of backers--are seeking to derail the changes and boost benefits closer to the levels that prevailed before two administrations chose to take action.

It's too early to gauge support for the ballot measures, but all three have qualified for signature-gathering, and if one of them makes it onto the November ballot and is approved by voters, workers' comp in California might once again become the budget-buster that it was in the 1990s.

Gard thinks that would be a disaster in more ways than one. "We're making a cultural shift," she says hopefully, "to a system that's focused on getting workers healthy and back to work as soon as possible." The question will be whether that shift has taken hold in the minds of voters the way it has in the minds of fiscal reformers.


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