Cost savings alone don't mean the state should increase benefits.

Friday, October 19, 2007 | 0

 --Riverside Press Enterterprise

The fact California's overhaul of workers' compensation has cut costs by billions of dollars is not by itself a signal that the state should be increasing benefits to injured workers. Any changes to the system should be based on clear evidence of need -- data that simply does not exist yet.

A report last week by the Workers Compensation Insurance Rating Bureau of California found that the 2003-04 reforms of workers' compensation had lowered costs beyond insurers' expectations. The insurance industry-backed bureau, which analyzes workers' comp issues, said the reforms had trimmed $14.5 billion from the system, nearly half again as much as the $10.1 billion in savings the bureau expected. The savings came in lower medical costs and payouts, and from fewer injury claims.

Workers groups, labor attorneys and others with a stake in larger payouts seized on the report as yet one more reason to increase benefits paid to injured workers. But that claim rests more heavily on political agendas than on any objective evidence.

Advocates of increasing benefits point to the lowered payouts for workers with permanent disabilities from their injuries. The reforms adopted a new formula for determining those benefits, which has cut costs by $2.2 billion, or 60 percent, over pre-reform levels, the report said.

But what that figure means is largely a matter of political faith, not fact -- at least until the state completes a comprehensive three-year study of the reforms in 2009. The lower payouts could mean workers are being shortchanged, or the figures could indicate the reforms have reduced wasteful claims.

Before the reforms, California determined permanent disability under a system that could lead to wildly varying outcomes for similar injuries. The state now bases assessment of workplace disability on American Medical Association guidelines. Removing subjectivity from the rating of injuries also closes off opportunities to pad costs and game the system.

A May study by the Division of Workers' Compensation, for example, found that the new system rates permanently disabling injuries lower than the pre-reform schedule. A lower rating means lower benefits. But that finding may simply mean the newer rating system is more accurate -- and the report did not offer evidence that workers' benefits under the reforms did not adequately cover lost earnings.

Until the state has such information, any substantial changes to workers' comp are blind tinkering, and potentially dangerous. The reforms caged a bloated, economy-sapping workers' comp system, and California should not want to let that monster loose once again.