Re­form­ing work­ers’ comp

Bi­par­ti­san co­op­er­a­tion could fix an in­ef­fi­cient fed­eral pro­gram.

The Washington Post Sunday - - SUNDAY OPINION -

THERE ARE ob­scure but im­por­tant is­sues in Wash­ing­ton, and then there’s the re­form of worker com­pen­sa­tion for fed­eral em­ploy­ees — where the im­por­tance-to-ob­scu­rity ra­tio is es­pe­cially high. Ku­dos to Pres­i­dent Obama for re­peat­edly tack­ling the is­sue in his bud­get pro­pos­als, in­clud­ing his most re­cent one, and to Rep. Tim Wal­berg (R-Mich.), chair­man of the House sub­com­mit­tee on work­force pro­tec­tions, for hold­ing a re­cent hear­ing on the pres­i­dent’s ideas, in prepa­ra­tion for pos­si­ble leg­is­la­tion in this Congress.

The fed­eral gov­ern­ment spent $2.8 bil­lion com­pen­sat­ing em­ploy­ees, in­clud­ing U.S. Postal Ser­vice work­ers, who make up by far the largest group of work­ers’ comp claimants, for work-re­lated ill­ness and in­jury in the year end­ing June 30, 2014 (the most re­cent year for which data ex­ist). Un­ques­tion­ably, this is a vi­tal gov­ern­ment re­spon­si­bil­ity, but the law gov­ern­ing fed­eral work­ers’ comp has not been fun­da­men­tally re­vised in four decades— and there is mount­ing ev­i­dence, pre­sented most re­cently in a re­port from the Postal Ser­vice’s in­spec­tor gen­eral, that the pro­gram op­er­ates much less ef­fi­ciently than it could or should.

The first prob­lem is that, un­like most state sys­tems, the fed­eral sys­tem pays the ma­jor­ity of claimants who have at least one de­pen­dent sub­stan­tially more in dis­abil­ity com­pen­sa­tion than those with­out de­pen­dents; th­ese tax-free benefits in many cases ex­ceed a worker’s take-home pay, cre­at­ing a dis­in­cen­tive to re­turn to work. The sec­ond, re­lated prob­lem is that for many longterm dis­abled work­ers, work­ers’ comp pay­ments ex­ceed their ex­pected pen­sion benefits, so many con­tinue on the work­ers’ comp rolls long af­ter re­tire­ment age.

Such an in­cen­tive struc­ture stim­u­lates fraud; the Postal Ser­vice in­spec­tor gen­eral’s re­port says its spe­cial agents frus­trated nearly $290 mil­lion worth of at­tempted cheat­ing in 2012 and 2013. Still, re­im­burse­ments to the fed­eral work­ers’ comp fund for postal work­ers’ claims re­main a huge cost item for the fi­nan­cially strapped USPS: $1.3 bil­lion in the year end­ing June 30, 2013. Be­tween 2008 and 2013, postal em­ploy­ment fell by roughly 150,000, but work­ers’ comp costs rose by 35 per­cent.

In short, re­form­ing fed­eral work­ers’ comp should be thought of as part of the broader ef­fort to re­store the Postal Ser­vice’s fi­nan­cial sus­tain­abil­ity. To elim­i­nate the pro­gram’s per­verse in­cen­tives, the Obama ad­min­is­tra­tion has pro­posed pay­ing all claimants at the same rate and re­plac­ing post-re­tire­ment-age work­ers’ comp benefits with a pay­ment equiv­a­lent to what a worker’s pen­sion would have pro­vided. The changes would af­fect only fu­ture em­ployee claims, yet would still save $360 mil­lion over the next decade. Most of that would ac­crue to the Postal Ser­vice, whose per-em­ployee work­ers’ comp costs were $1.16 per hour in fis­cal 2013, in con­trast with 73 cents in com­pa­ra­ble pri­vate-sec­tor firms.

Changes to fed­eral work­ers’ comp have been in­tro­duced in each con­gres­sional ses­sion since 2011 but have foundered amid op­po­si­tion from postal unions. In other words, tack­ling this is­sue is not only unglam­orous but also thank­less. Here’s hop­ing that with both House Repub­li­cans and the Obama ad­min­is­tra­tion pulling in the right di­rec­tion, Congress will fi­nally crown re­form ef­forts with suc­cess.

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