"We've heard story after story of injured workers coming home minus a limb, or traumatized by war experiences seared into their psyche, only to face the fight of their lives with their company's insurance carrier," said Rep. Dennis Kucinich (D-Ohio), the chairman of the House government oversight and reform subcommittee on domestic policy during a hearing examining the issue.
Lawmakers were particularly alarmed that AIG, which handles the vast majority of claims under the program, and other insurance carriers, were allegedly delaying and denying legitimate claims while profiting on the taxpayers' dime.
"They get our money…then they are supposed to take care of you, and if they don't, they don't, then you suffer, and they get rich. Boy, what a game," said Rep. Elijah Cummings (D-MD), a member of the subcommittee who initially called for the hearing following a joint investigation by ABC News, the Los Angeles Times and the non-profit group ProPublica. "We have got to turn this around."
Civilian workers employed by U.S. contractors who are injured overseas are entitled to medical and disability benefits under a little-known, World War II-era law called the Defense Base Act.
Charles Schader, AIG's president for World Wide Claims, told the subcommittee that the company was "proud" of its record under the program, and blamed the system for any deficiencies.
"What we did was right with the rules and benefit levels we have to deal with," Schader told the subcommittee, specifically responding to the testimony of Kevin Smith , a former truck driver who told lawmakers that AIG had refused to approve medical treatments ordered by his doctors, and cut off his disability payments while he was still recovering.
In the case of John Woodson , the former truck driver who had to fight the insurance giant to get an improved prosethic leg, Schader said the company "did everything that we could have done."
The AIG executive recommended that lawmakers and regulators change the way contractors' workers compensation wages were calculated, and create a new notification system for informing contractors to the status of their claims.
Seth Harris, the new-appointed deputy secretary of the Department of Labor, testified that program needed "fundamental reform."
"Tinkering around the edges is not going to work here,"said Harris.
When pressed about the AIG's handling of cases involving post traumatic stress, Schader said that he endorsed a proposal to allow civilian workers with PTSD to seek treatment within the Veteran's Affairs system.
Kucinich questioned Schader about the company's use of one Houston-based psychiatrist to fight PTSD claims. Dr. John D. Grifitths has testified in at least a dozen cases for AIG, and found claimants in the vast majority of the cases to be "malingering," either faking or exaggerating their condition.