By David Michaels
Yesterday’s post from 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.