Workers Compensation: a Closer Look

March 20, 2007 — -- Every so often the American conscience becomes aware of the struggle that those who seek help from our national disability system confront. The plight of our disabled American veterans, horrifying to all of us, makes this one of those times.

While our reflex is to blame the agents of the state, the real culprits are the rules under which these agents operate -- the rules for disability determination.

Who Deserves Help?

Distinguishing the worthy injured from the unworthy injured has been a sore point in Western societies for millennia. Leaving the task to charity, to families, the rich or religious orders has an uneven historical record.

A century ago, the government of Prussia set the precedent with social legislation designed to provide for all who were physically challenged.

In nearly all resource-advantaged countries, there is a three-tiered approach to who should receive assistance in response to the claim of work incapacity.

The worker who is injured at work is the most worthy, and therefore should be compensated for any loss of wage-earning capacity. Financial compensation to this degree is the principal of workers compensation insurance, a principal that has been largely adopted by the Veterans Administration.

The disability award scale for the Social Security administration is not keyed to wage replacement but to subsistence income.

So how does one administer a wage replacement scheme?

Determining What Has Been Lost

The simplest way to quantify how much work is left in the injured worker/veteran is to ask, "Given your injury, what do you think you can still do and how much do you think you can still earn?"

The basic premise of the original German system prohibited this simple solution. The implication was that the injured (or diseased) worker would overestimate or overstate the disability. There had to be a better way.

The one chosen has the following rationale: If we are ill, it's because there's an underlying disease. The more ill we are, the more disease is ravaging us. If this is true, the opposite must hold. If we know the amount of disease, we can predict how much illness is present.

Using this logic, the German legislature felt that there was no longer a need to ask an injured worker/soldier what she or he can still do. Instead, pension would be based on the amount of damage (or impairment) suffered. Hence, "impairment-based disability determination."

For workers compensation and the Veterans Administration, this line of reasoning lead to "schedules" early on. An injured worker might get so many weeks of salary as the award for the loss of an eye, so many for the loss of a leg, etc.

Schedules were efficient but they rarely made sense. For example, the loss of the little finger causes little compromise in wage-earning capacity for most workers, unless they are professional pianists.

However, it soon turned out that basing a disability award on the quantity of impairment had an even greater shortcoming than the vagaries of the schedules.

How do you determine disability when there is no special damage? Can you simply believe what the claimant says? Isn't that a breach of the rules?

Applying "impairment-based disability determination" in the absence of specific visible damage has always led to controversy, anger and lawsuits. After all, the implementation makes the worker/veteran prove he or she is as disabled as they believe themselves to be before a bureaucracy that is charged to ignore their attestations.

Putting a Price Tag on Impairment

American companies spend, on average, 3 percent of their gross income for workers compensation insurance. About 80 percent of this money is consumed by an enormous effort to apply impairment-based disability determination to workers who ascribe their disabling backache or arm pain to the physical demands of jobs they had previously found comfortable and customary.

Often the worker has to submit to ill-conceived medical studies and treatments because to do otherwise is to seem less desperate.

The plight of the injured veterans of the current war relates to disabling post-traumatic stress disorder, or PTSD. There is no quantifiable impairment except that which relates to accepting the veteran's narrative.

It's a circumstance similar to "Gulf War Syndrome" and "agent-orange exposure" of the late 20th century wars, and "shell shock," "battle fatigue," "neurocirculatory asthenia" and the like of wars earlier in the 20th century.

The workers with back/arm "injuries" and the veterans with PTSD are suffering. Their suffering is largely a consequence of the psychosocial context in which their symptoms began.

A compelling science makes that clear for the worker with back/arm "injuries." For the veteran with PTSD, it's less obvious. There is no objective, quantifiable underlying impairment. They are not "abnormal" people with damaged bodies. There is no way for them to prove they are disabled. Trying to make them do so will predictably compromise their coping abilities; if you have to prove you're ill, you can't get better.

A Flawed System?

I have studied the process of disability determination in 10 resource-advantaged countries. All, save ours, have softened the demand to base awards on impairment. None is ready to abandon the approach entirely.

In the United States, impairment-based disability determination is so entrenched that one would think it had been inscribed on Mount Sinai rather than in Berlin. Furthermore, it supports an enormous enterprise -- literally hundreds of thousand of administrators, doctors, lawyers, even private investigators -- which is not pressing for reform.

There are other options.

We need to stop punishing disability claimants with an approach that has been shown to be harmful. In order to do that, we need to expose the process of disability determination to national debate.

Dr. Nortin Hadler is professor of medicine and microbiology/immunology at theUniversity of North Carolina at Chapel Hill, and an attending rheumatologist for University of North Carolina Hospitals.