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Union-Tribune Editorial
Workers' comp

Key vote comes today on overhauling system

February 11, 2004

The Assembly Insurance Committee is scheduled to vote today on Gov. Arnold Schwarz-enegger's comprehensive plan to overhaul the state's wasteful workers' compensation system. Committee Chairman Juan Vargas, D-San Diego, says the measure lacks the votes for passage, because Democratic lawmakers dominate the panel.

As a legislative leader, Vargas has an obligation to work with the governor to overhaul this costly system, which is driving jobs from California and detering companies from investing here. It is not enough for Vargas merely to preside over his committee's defeat of Schwarzenegger's plan.

How costly is California's workers' comp system? Nine years ago, the tab for treating injured workers was $9 billion. Today, it exceeds $29 billion. As the accompanying chart indicates, California has the dubious distinction of laboring under the highest workers' compensation rates in the nation. Meanwhile, benefits for injured workers here are among the nation's lowest. Little wonder other states are exploiting this problem to persuade companies to abandon or to avoid California altogether.

What is driving workers' compensation costs through the stratosphere?

Start with soaring medical bills. From 1997 to 2002, medical costs per insurance claim rose 125 percent. Contrast that staggering sum with national medical costs, which have increased about 22 percent during the same period. Toss a slew of lawsuits and administrative costs into the mix, and California's tab keeps on climbing.

What can be done to contain these obscene costs?

For starters, the state needs to curb the number of disability claims, which are three times the national average. That could be achieved by mandating the use of objective medical findings. Most states already use some form of objective medical criteria to determine permanent disability. This makes far more sense than California's subjective standard, which invites widespread fraud and soaring litigation costs. More than 25 percent of workers' compensation cases in California end up in court.

Rather than feed this litigious beast, Schwarzenegger would have disputes resolved by an independent medical review process. Workers would be able to choose their physicians from a large pool of employer-approved doctors. Instead of dismissing this good idea as being "owned by the company doctor," Vargas should seek common ground with the governor on how to reduce employer costs and increase worker benefits.

Schwarzenegger has been willing to compromise – as illustrated by the deal he struck with lawmakers on his economic recovery plan – as long as his broad objective is achieved. The governor seems determined, however, to take his case to the people with a ballot measure if the Democratic-controlled Legislature balks at overhauling the workers' compensation system by his March 1 deadline.

Vargas and his fellow Democrats would do well to work with the governor on this issue, which is fundamental to California's economic well-being. If the measure goes to the ballot in November, they could be in for another rude awakening.