Serial No. 105-83


Printed for the use of the Committee on Education

and the Workforce















Tuesday, March 24, 1998


The subcommittee met, pursuant to call, at 10:00 a.m., in Room 2175, Rayburn House Office Building, Hon. Cass Ballenger [chairman of the subcommittee] presiding.

Present: Representatives Ballenger, Fawell, Barrett, Greenwood, Owens, and Martinez.

Also present: Representative Tierney.

Staff Present: Ashley Rehr, Professional Staff; Molly Salmi, Professional Staff; Gary Visscher, Workforce Policy Counsel; Mark Rodgers, Workforce Policy Coordinator; Deborah Samantar, Office Manager, Labor Staff; Rob Green, Professional Staff; Peter Rutledge, Minority Senior Legislative Associate/Labor; Maria Cuprill, Minority Legislative Associate/Labor; Pat Crawford, Minority Legislative Associate/Labor; and Shannon McNulty, Minority Staff Assistant/Labor.


Chairman Ballenger. A quorum being present, the Subcommittee on Workforce Protections will come to order.



The subcommittee is meeting today to review the Federal Employees Compensation Act. Under rule 12(b) of the committee rules any oral opening statements at the hearing are limited to the chairman and ranking minority member. This will allow us to hear from our witnesses sooner and to help Members to keep their schedules. Therefore, if other Members have statements they may be included in the hearing record. Without objection, all Members' statements and our witnesses' written testimony will be included in the hearing record.

Today the Subcommittee on Workforce Protections is holding the second in a series of hearings to examine the Federal Employees Compensation Act. The Act is a comprehensive workers compensation law for Federal employees, and is designed to provide coverage for work-related injuries or deaths. The subcommittee held hearings last fall and witnesses from the Department of Labor's Office of Workmen's Compensation, the Department of Labor's Inspector General's Office and the General Accounting Office, testified.

The Federal Employees Compensation Act covers an estimated 3 million Federal employees and postal workers. The last major amendments to FECA occurred in 1974. This program is overdue for some congressional attention. This is especially true when you look at both the cost of the program, which has doubled in size from $946 million in 1981 to $1.9 billion by the year 1996, and the number of studies by the General Accounting Office and the Department of Labor's Inspector General, which highlight problems and areas that need attention.

We will be hearing from the Department of Defense and the Postal Service today. As you know, the total FECA costs for the Department of Defense were about $597 million in 1996, while the total costs for the Postal Service were $547 million. These two organizations represent over half of all FECA costs in a given year.

I look forward to hearing from the two organizations on their ideas for better controlling costs as well as their suggestions on ways to improve the FECA program. We will also be hearing today from a witness who will compare the Federal workers' compensation system with the major elements of similar provisions of State workers' compensation law. He notes that FECA stands out as the most generous workers' compensation program in the United States.

Finally, we will be hearing from an individual who has direct involvement with the FECA program at the U.S. Army's arsenal in Watervaliet, New York. We will also hear from Mr. Richard Boutwell with the American Postal Workers Union.

I appreciate the witnesses making themselves available today. I look forward to hearing their testimony. I turn to Mr. Owens for his opening statement.





Mr. Owens. Thank you, Mr. Chairman.

Although not always appreciated until work-related injuries and illnesses strike, the right to workers' compensation benefits, provided by the Federal Employees Compensation Act, is one of the most important protections possessed by Federal employees. However, despite the program's decreasing costs and case loads, workers' compensation is coming under attack by some who want to slash these earned benefits and make the Federal program more like those at the State level. But while Federal workers' compensation may sometimes provide more comprehensive protection for employees who become ill or injured in Federal workplaces, overall costs for State workers' compensation programs are actually higher than those for Federal programs.

According to the General Accounting Office report on workers' compensation, one of the principal reasons for establishing workers' compensation programs was to provide adequate benefits to injured workers while at the same time limiting employers' liabilities strictly to workers' compensation payments.

In evaluating the appropriate level of benefits in any workers' compensation system, it is important to realize that workers' compensation is not a gratuitous benefit paid by the employer, but that it supplants the common law tort right, which every employee had against an employer. But for the fact that the Federal Employment Compensation Act is the exclusive remedy for Federal employees and their family members for injuries sustained on the job, the tort system could allow the injured individual to recover substantial sums.

In return for not having to prove fault on the part of their employer, workers are denied the ability to sue for recovery based on employers' negligence or to recover for pain and suffering. It is worth remembering that from an employee's perspective, if benefits are neither adequate nor timely, the political trade-off is a bad one.

In the Federal system, workers' compensation serves a further vital purpose. It is the primary incentive for Federal managers to ensure that they provide safe and healthy workplaces. The FECA program, its interrelationship with other Federal compensation programs, the role of Federal agencies, of providers, and of employees within the program and the interrelation of FECA with other agency endeavors are complex and complicated subjects.

For example, efforts or the lack thereof to promote safety and health in the workplace or to rehabilitate those who have been injured typically have far more impact on the overall cost of a workers' compensation system than does the size of the benefit paid.

We will hear today that FECA costs jumped when the Congress reformed continuation of pay in 1974. This jump in cost will be used to justify repealing another provision of FECA, the additional 8.3 percent pay to those who have dependents. I hope that we will recognize this non sequitur.

We will hear that improvements in the Labor Department's administration of the program justify a reduction in the continuation of pay period. However, I note that the General Accounting Office has found that some agencies deliberately delay processing FECA claims. I am surprised and disappointed to find that in the agency's prepared statements, there is no mention as to how the agencies will deal with these problems.

There is one more aspect of this hearing that is disturbing. Testimony we will hear today is heavily focused on the cost of fraud by individual workers and the cost of providing benefits to injured workers. I strongly concur that we should do all possible to eliminate fraud and to control overall costs. However, as the experience at the State level has shown, the real savings in workers' compensation are to be achieved in preventing workers from being injured in the first place and by having effective rehabilitation programs when they are injured. Further, the costs to a workers compensation system of fraud by individual workers are less, often significantly less than the costs of fraud on the part of the providers.

I am disappointed, therefore, that we are not focusing on areas where the most significant savings are possible. Nevertheless, I am interested in what will be said today and I want to extend my welcome to the distinguished panel before us. Mr. Chairman, I ask that an announcement by the U.S. Department of Labor on the convening of a task force on the Postal Service's management to assess the current status of safety and health in the United States Postal Service be entered into the record.




Chairman Ballenger. Without objection.

[The information follows:]


Mr. Owens. I am also requesting the record be left open for additional submissions.


Chairman Ballenger. Without objection. I would now like to introduce our witnesses for the hearing today. First is Dr. Diane Disney, Deputy Assistant Secretary Civilian Personnel Policy, U.S. Department of Defense, Washington D.C.; Mr. Larry Anderson, Manager of Safety and Workplace Assistance, U.S. Postal Service, Washington, D.C.; he is accompanied by Mr. Mike Boswell, Deputy Chief Inspector Criminal Investigations, U.S. Postal Inspection Service Washington, D.C.; and Mr. Eric Oxfeld, UWC Strategic Services on Unemployment and Workers' Compensation, Washington, D.C.; Mr. Richard Oppedisano, Vice President Federal Managers Association, Chapter 88, Watervaliet Army Arsenal, Watervaliet, New York. And I understand Mr. Tierney would like to introduce the next gentlemen.




Mr. Tierney. Thank you, Mr. Chairman. I appreciate your courtesy in this regard. I am happy to be here this morning to be able to introduce a person from my home State of Massachusetts. He makes his home in Melrose, also happens to be a graduate of Boston University; he has both a bachelor of arts degree and a master of arts degree from Boston University.

Mr. Boutwell has, of course, had a long career with the United States Postal Service, but he has also had quite a bit of experience in the area of Federal injury compensation. He has been the Federal injury compensation specialist for the Northeast region, and moved on to instructor in Federal injury compensation of the National Human Relations Conferences at the APWU of the AFL-CIO, and currently serves as Special Assistant to the President for Federal injury compensation of the APWU AFL-CIO. He has additional experience as a senior arbiter, as a field instructor in this area, belongs to a number of professional memberships and associations, and has received a number of honors for his work in this field.

Mr. Chairman, I think Mr. Boutwell will provide some terrific insight into the standard of monitoring the FECA system, the low rate of fraud and abuse, and what the Department of Labor is doing about such abuses. I welcome Mr. Boutwell. I know he is going to give some enlightening testimony. I thank you, Mr. Chairman, for giving me this opportunity to greet him this morning.


Chairman Ballenger. We also thank you for the introduction. Before Dr. Disney begins her testimony, I would like to remind the Members that they will be allowed to ask questions of the panel after they are all through testifying. In addition, committee rule Number 2 imposes a 5-minute limit on all questions. With that said, Dr. Disney, you may begin your testimony.




Ms. Disney. Thank you, Mr. Chairman. I am pleased to be here today to describe the experiences of the Department of Defense in administering the Federal Employees Compensation Program. With your approval, Mr. Chairman, I will submit written testimony for the record.


Chairman Ballenger. Without objection.


Ms. Disney. By any measure, workers' compensation is an important program at the Department of Defense. In 1990, DOD paid $501 million for workers' compensation costs. By 1994, that figure had increased to $605 million. With an operation of this scale, we had to find ways of streamlining. Therefore, we consolidated administration of the programs into a single unit within our civilian personnel management service.

As a result, we have improved program management with 32 percent fewer staff members than before. In 1995, DOD's injury compensation bill decreased rather than increased for the first time. And it has continued to decrease. One of the single most valuable steps we took was to place DOD liaisons in each regional Department of Labor office. Liaisons are consultants to approximately 400 defense offices worldwide. They provide technical assistance and training, case reviews, reemployment assistance and problem resolution.

Liaisons also help the Department of Labor staff by opening communication to worldwide personnel offices through a single point of contact. These 18 individuals have streamlined coordination between the two agencies. Since fiscal 1994, they have responded to over 83,000 customer requests, reviewed more than 20,000 claims and visited about 1,500 claimants in 28 home visit projects. The latter effort has proved particularly helpful.

The visits allow us to make certain that individuals receive all the benefits to which they are entitled. But they also help us to identify situations where benefits should be discontinued or modified. Through the liaisons and home visits, we have saved $20 million in direct costs and avoided up to $760 million in lifetime costs.

Second, we have audited 178,000 unemployment compensation claims since fiscal 1994. This effort has saved the department over $6 million with another $5 million in unidentified charges still being reviewed.

Third, we manage a Pipeline Reemployment Program. Especially during times of downsizing, barriers to re-employing injured workers include a lack of positions as well as limited funds. The pipeline program solves these problems by providing the money, and if you will excuse the jargon, the overhire authority to create a position for a partially disabled worker.

Since fiscal year 1994, this program has saved more than $2.5 million, representing lifetime cost avoidance of over $100 million. Finally, there is our automated tracking system. Previously obtaining case and program information was a time-consuming manual effort. The current system, however, forms a database from three entirely different information sources: Payroll and personnel information from inside, along with external data from the Department of Labor. Never before available, this comprehensive information set can now be accessed by program managers worldwide.

There are reports embedded in the system that enable us to track specific cases or an entire workload. Further, the automated system allows managers to provide more accurate and timely service to workers and to the States. Despite its massive downsizing, DOD still employs over 760,000 civil servants. For the last full program year ending last June 30th, some 36,000 employees filed FECA claims.

The total FECA bill was $586 million, resulting from 82,000 claims accepted over the years. Since fiscal year 1994, DOD's annual FECA costs have decreased 3.3 percent, or $20 million a year. During that same period, FECA costs for the rest of the Federal Government increased over 3 percent. As a result, DOD has avoided over $20 million that it would have incurred had its costs risen at the same rate as the rest of government. It is important to note that these changes were made possible through executive and administrative actions and DOD stands ready to share its experiences with other agencies. That concludes my remarks. I thank you for the opportunity, and I will be pleased to answer your questions.

[The statement of Ms. Disney follows:]




Chairman Ballenger. Thank you, Dr. Disney. Mr. Anderson.




Mr. Anderson. Thank you, Mr. Chairman. My written statement also is submitted for the record, and I would appreciate it being included as a part of the proceeding.


Chairman Ballenger. Without objection.


Mr. Anderson. You will probably be pleased to hear that I will not read it. Rather, what I would like to do is to summarize a few of the highlights in it, then introduce my colleague from our Postal Inspection Service, and then of course, take your questions.

In 1974, Mr. Chairman, the Postal Service paid $29 million in workers' compensation chargeback costs through the Department of Labor's program. Also in 1974, Congress amended the FECA to provide, among other things, a 45-day

waiting period for continuation of pay, following occupational injury. Twenty years later, in 1994, our costs have soared to over one-half billion dollars annually.

By far, the largest percentage increases came in the period from 1975 to 1979. Since then, costs have been growing, but somewhat more moderately. We believe this is precisely the result of the 1974 amendments that caused our costs and those of all other agencies to soar. In fact, if you look in our written statement, Attachment 1, you will see a graph depicting the growth rate for those costs and it is very clear that the costs had a direct correlation to the 1974 amendments.

We have pursued many strategies to control our costs. Mr. Owens is correct in pointing out that the first and foremost strategy that any company must employ is accident prevention. We ourselves believe in this strongly. The main feature of our accident prevention program is management accountability. Any safety expert will tell you that is the key to an excellent program.

Two years ago, we rolled out a pay for performance economic value added program throughout our company, which pays bonuses to all executives, managers and supervisors based on certain performance elements that are important to the company. Safety is one of those. Our efforts in safety have paid off well in the reduction of accidents.

As we have shown over the last 3 years, a 16.2 percent and 28.2 percent reduction in two key accident indicators, motor vehicle accidents and lost workday injuries, are generally thought of as being the most severe and costly of all types of accidents. Last year, our claims filed with OWCP were down by over 4 percent in the aggregate. We also have a large full-time staff of case managers who ensure that prompt medical care is provided, that supervisors are trained, and ensure that injury compensation cases are monitored. We also have an aggressive fraud investigation program, which led to 43 arrests last year alone. Mr. Boswell will speak about that.

All of these efforts combined, however, have only served to arrest the rate of growth in workers' compensation costs. Even a healthy reduction in all claims from last year could not keep long-term costs from growing. This is because we are paying not only for individuals who went out on the Department of Labor's roles last year, but also for some who have been on for over 20 years. Without legislative change, it is unlikely that programming efforts alone, either on the part of the Department of Labor or the Postal Service, will stop the current trends. Therefore, we suggest several legislative changes to FECA. In particular, lowering the benefit level to a flat 66-2/3 percent of the pre-disability wage.

Seventy-five percent, the current level, is clearly out of step with the State statutes and provides a disincentive for our employees to return to work when they are injured. Second, we would propose the creation of a FECA annuity, which would take effect two years after an individual reached retirement eligibility. FECA was not intended to be a retirement program, but is clearly used as one.

This creates an inequity between the Federal Retirement System and the Workers' Compensation System in which we are unable to get employees to retire when they reach voluntary retirement age if they are already on workers' compensation benefits. They are simply too lucrative. We would also propose the reinstitution of a 3-day non-recoverable waiting period on the front end of COP, and reduce the COP period to 20 working days.

COP was developed in order to address a problem at the Department of Labor, which was the untimely processing of claims. That problem no longer exists and it is time to reexamine the basic premise for COP. Fourth, we would change the formula for cost of living adjustments from CPI, which is currently the limit to that available in the general schedule pay rates. We also would suggest some enhancements in the efficiency and fraud detection area, specifically providing access to Social Security wage information, to OWCP, and to appropriate law enforcement personnel to help them do their job of catching those who do intend to defraud the system.

We would exempt OWCP forms from the paperwork reduction requirements. We would add an income-reporting requirement for total disability recipients, and we would permit an employee to waive entitlement to future benefits in order to settle any outstanding government claims or to resolve a collection enforcement action.

Mr. Chairman, I would like to introduce Mike Boswell of our inspection service.

[The statement of Mr. Anderson follows:]





Mr. Boswell. I appreciate the opportunity to speak to you this morning. The Postal Inspection Service is the Federal law enforcement arm of the Postal Service and is responsible for investigating some 200 Federal criminal statutes. This includes the investigation of fraudulent FECA claims. Postal inspectors work closely with the Department of Labor's Office of Inspector General. Our investigations often lead to administrative action by the Postal Service and termination or reduction of FECA benefits by the Department of Labor.

Occasionally, investigations lead to criminal prosecution. Based on our experience, fraudulent FECA investigations generally fall into three broad categories. Approximately 50 percent of our investigations involve employees who are receiving compensation benefits who exceed the physical restrictions set by their doctor. Approximately 42 percent of our investigations involve employees failing to report income from other employment, self-employment, or family businesses as required by Department of Labor regulations. Other investigations may include situations such as the claiming of nonexistent dependents and the submitting of claims for medical conditions that occurred prior to Postal Service employment.

Postal inspectors have also investigated physicians, chiropractors, pharmacies and medical facilities where there is evidence of FECA abuse. Our investigative resources devoted to FECA fraud and abuse grew by over 75 percent since 1973. During the Postal Service fiscal year 1997 that ended in September, we opened 667 investigations into alleged FECA abuse. During this same year, we reported over $95 million in lifetime cost avoidance to the Postal Service based on our investigations. I will be happy to answer any questions you have.


Chairman Ballenger. Thank you. Mr. Oxfeld.




Mr. Oxfeld. Thank you Mr. Chairman. I also have a statement for the record. My name is Eric Oxfeld. I serve as President of the UWC Strategic Services on Unemployment and Workers' Compensation. We are the only national trade association specializing exclusively in representing employers on unemployment workers' compensation public policy issues. UWC advocates unemployment and workers comp laws that provide fair protections for workers at an affordable and predictable cost for employers.

Achieving this result requires a careful balancing of the interests of both workers and employers. I am here today not because we have a position to recommend to the committee on FECA, but at the invitation of the committee to share our expertise on State workers' compensation law and reform. We are active on other Federal issues, such as Longshore and Black Lung Programs, and we think the Longshore Program is in drastic need of this kind of attention as well.

It is noteworthy that another social insurance program for Federal workers was handled in a very different way than FECA. The Unemployment Compensation Act for Federal civilian workers, the UCFE, is quite different. Under that program, unemployment benefits are paid according to the State unemployment compensation law and the State unemployment agencies administer those benefits. FECA, on the other hand, as you know is a freestanding workers compensation program administered by DOL. I reviewed the FECA program and compared its major elements with key elements of State workers' compensation laws and would like to highlight a few points that stand out.

FECA and State laws both underwent major reform and adopted significant benefit improvements about 25 years ago, which triggered a big increase in costs. Since then, the paths of FECA and State laws have diverged. In the late 1980s and 1990s, more than 35 States enacted comprehensive workers comp reforms designed to contain costs for employers while preserving essential protections for injured workers.

Although the Department of Labor has adopted a medical fee schedule and a utilization review process which I believe are helpful, the FECA law itself, as you pointed out, has been remarkably unchanged over the past quarter century. It is a rare year in which there are not hundreds of state refinements to workers' compensation laws, which we follow. In looking at the major elements of the FECA program, there are 10 that stand out.

Number one, FECA lacks protections used by many States to ensure that coverage extends only to claims that are clearly caused by work. Number two, as mentioned, FECA lacks an effective waiting period. Number three, FECA replaces a higher percentage of pre-injury pay than most States. Under FECA there are two reasons for this: First, the benefit is increased with a dependents allowance, which is very unusual. People don't get higher wages because they have dependents. I myself have several. Second, the amount that a claimant with at least one dependent gets is 75 percent of his pre-injury gross pay. There is only one State in the country that pays the wage replacement at that level. Considering that the benefits are not subject to FICA or income tax, it is extraordinary.

Number four, the minimum benefit under FECA is two-thirds of GS-2 wages. That is higher than the minimum in all but four States. Number five, the maximum benefits under FECA is either 66-2/3 percent or 75 percent of a GS-15 wages, which is far and away the highest maximum in the country under any State workers comp law, even considerably higher than the D.C. law for private workers in Washington. Number six, FECA has no offset for Social Security retirement benefits unlike many states. Number seven, FECA provides an annual COLA without any cap. A minority of states do have a COLA, but recently several states have gotten rid of them because they are very costly, and make the cost of workers comp very unpredictable.

Number eight, the FECA schedule benefits for specific injuries is far and away more generous than provided under similar schedules in most State laws.

Number nine, benefits for nonscheduled partial disability are unusual because there is no time or dollar limit, and also because FECA uses the inherently subjective and therefore highly litigious lost earning capacity test to rate the degree of disability. This is where a lot of the costs are in workers comp.

Number ten, FECA completely lacks any coordinated managed care system using networks, negotiated fees, or treatment guidelines. Number eleven, which is not in my prepared statement, is that FECA does not provide for the opportunity to use TPAs and outside services in managing workers comp costs, which any employer the size of the agencies here would look to as an automatic part of the way they operate.

In conclusion, FECA stands out as the most generous workers comp program in the United States. Clearly, Federal employees can collect benefits far greater than those drawn by a similar worker at the same wage level, who is covered by a State law. Unlike State laws, FECA has not undergone a comprehensive legislative overhaul in a long time. More than 35 States have enacted reforms designed to take cost out of the system while preserving essential protection for workers. We are pleased to assist the committee with our expertise on workers comp jurisprudence and are happy to help in any way we can.

[The statement of Mr. Oxfeld follows:]




Chairman Ballenger. Mr. Oppedisano.




Mr. Oppedisano. Thank you. Our written statement was also prepared for the record. Mr. Chairman, members of the Workforce Protection Subcommittee, my name is Richard Oppedisano. I am Vice President of the Federal Managers Association, Chapter 88, at the U.S. Army Arsenal at Watervaliet, New York.

On behalf of the 200,000 managers and supervisors throughout the Federal Government whose interests are represented by FMA, I would like to thank you for holding this important hearing and for allowing us to present our views and recommendations to the Subcommittee regarding the Federal Employees Compensation Act.

FMA has been a long time advocate of sensible FECA reform, and we welcome this opportunity to share our views and recommendations with the subcommittee. Before I begin, I would like to make it clear that my remarks today are being made in my capacity as a Federal Managers Association Chapter Vice President and do not represent the official views of the Department of Defense or the Department of the Army.

Mr. Chairman, I would like to say that the compensation program is working well. It protects Federal employees who are injured on the job. However, with the help of Congress, the program could work better and be more cost-effective.

FMA makes the following suggestions for legislative FECA reform. We should reduce the FECA benefit from 75 percent to 66 and two-thirds percent of income, establish a FECA retirement program, assign benefit increases on employee pay adjustments rather than the Consumer Price Index, extend the right to resume employment from 1 to 3 years, and eliminate disparity in payments received by different pay grades for identical anatomical losses. I would like to elaborate.

Eliminate inherent disincentives to return to work. Mr. Chairman, the first point I would like to address is the issue of built-in disincentives for FECA recipients to return to work. To date, recipients receive 66 2/3 percent of their wages tax-free if they do not have dependents and 75 percent tax-free if they do. In addition, annual payments received by individuals working versus those in receipt of compensation are not equal.

The working employee receives their wage adjustment based on the Employment Cost Index. The compensation recipient adjustment is based on the Consumer Price Index. Historically, the Consumer Price Index has been higher than the Employment Cost Index. FMA encourages the subcommittee to change the entitlement for all employees eligible for compensation to 66 2/3 percent. In addition, annual adjustments for FECA recipients should be based on the same formula used for the active work force.

Establish FECA retirement system. Mr. Chairman, the second point I would like to address is the issue of establishing a retirement system for employees eligible for compensation. Today, according to GAO, 60 percent of all compensation recipients are 55 years of age or older. Twenty-five percent of all compensation recipients are 70 years of age or older. The system has become a premier de facto third retirement system within the Federal Government in addition to the optional and disability retirement programs.

Many FMA members work in DOD industrial-funded activities and must compete against the private sector for work. We feel it is unfair for those activities to have their costs and rates increased by chargebacks for FECA beneficiaries beyond retirement age. This causes a significant disadvantage compared to the private sector.

Mr. Chairman, there appears to be a disincentive for OWCP to have claimants transferred from the active rolls to the inactive rolls. OWCP staffing authorizations are based on active cases and therefore cases of inactive status are not counted. At my installation alone, at least 20 percent of our long-term active recipients have medical conditions that preclude them from ever working again. However, OWCP has refused to transfer these individuals to the permanent rolls.

Eliminate anatomical loss disparity. The last issue I would like to address is the disparity in compensation for anatomical loss. I have to ask this question of each member of the subcommittee: Is it any less devastating for a GS-5 to lose the use of both legs than a GS-15? FMA supports the use of a schedule that is wage-neutral. Although this may be more expensive than the present system, it is fundamentally an issue of fairness that all employees be treated equally for anatomical loss.

In conclusion, I want to thank you again for holding this hearing. I hope that the FMA's insight and recommendations have contributed to your oversight of this important program. FMA stands ready to work with you and the committee to effect common sense FECA reform.

[The statement of Mr. Oppedisano follows:]




Chairman Ballenger. Mr. Boutwell.




Mr. Boutwell. Good morning, Mr. Chairman. My name is Richard Boutwell. I hold a position with the American Postal Workers Union, as Special Assistant to the President for Federal Injury Compensation. We are certainly glad to be here today to address you. Certainly, it is appropriate for Congress and employers to evaluate FECA and its administration in order to determine if all of the aspects of the Federal Workers' Compensation Program meet the test of fiscal responsibility.

In this vein of fiscal responsibility, it should be noted that according to OWCP, benefit costs under the FECA have been going down in inflation adjusted dollar figures for the last several years. In 1996-97, in fact, for the fourth consecutive year the cost of benefits paid has decreased.

Moreover, the number of injured employees receiving workers' compensation benefits fell 2.1 percent last year. Not since 1990 have there been fewer Federal and Postal employees on workers' compensation. Short-term disability cases fell to less than 2000 in 1996, down by more than one-third since 1994.

Long-term cases have decreased by 1.3 percent in 1996 and are the lowest since 1989. As a result, FECA compares extremely well with other workers' compensation programs in regards to administrative efficiency. To quote from OWCP's fiscal year '96 annual report, despite differences between FECA benefit levels and duration parameters and those of State workers' compensation systems, FECA's overall costs are comparable, administrative costs are comparable or even lower, 1.8 percent of payroll versus 2.3 percent of payroll for the private sector in 1993.

In light of this record, we argue that fiscal responsibility and protection of the work force demand a focus on the source of workplace injuries rather than a punitive cutting of benefits for injured workers. In our experience, the Federal Government's workplace safety and health program remains inadequate and deficient. This is where the greatest savings could and should be achieved in the companies associated with workers injured on the job and in the line of duty.

Who could argue against the positive long-term budgetary impact that would result from a reduction in the number of injuries that occur or argue against the positive impact that would be reflected in an employee's quality of life, morale and productivity as a result of not being injured.

Obviously, preventing an injury not only avoids the direct cost of providing injury compensation benefits, but also avoids the extensive indirect costs that occur whenever an employee is injured. It should be noted that the FECA, unlike private sector workers' compensation programs, does not provide an opportunity for OWCP to become directly involved in the primary prevention of work-related injuries and illnesses. The absence of any FECA language addressing the utilization of common prevention strategies that could reduce the occurrence of injury incidents results in OWCP having little or no leverage with employing agencies to encourage them to reduce or eliminate workplace hazards.

Unfortunately, when concerns surface about the cost of workplace injury, it is simpler to focus on adjusting a compensation benefit reducing rather than eliminating a workplace hazard. Reducing benefits may be the easiest way of addressing a problematic injury compensation budget, but it is far from being the most equitable way of addressing the compelling human problem of workplace injuries.

It is interesting to note that many efforts that seek to reform FECA by reducing injury compensation benefits seem to be driven by an assumption that Federal employees are routinely abusing the Federal Compensation Program. Certainly there can be fraud in the Federal Compensation Program, whether from employees, physicians or others.

Just as certainly, labor unions and their members are no less interested in eliminating these occasions of fraud than is Congress. However, the facts simply do not support a presumption of injured employees as a group being intent on abusing the injury compensation program.

Notwithstanding very active injury compensation investigation programs at various Federal agencies, the number of claimants convicted of FECA-related fraud is minuscule when compared to the total number of compensation recipients. We just heard from the Inspection Service that forty-six fraud cases were taken to court. This is hardly a large number.

Experience indicates that the vast majority of injured employees are as anxious to recover from their injuries and return to work as are the employer and OWCP.

A clear indication of this fact is reflected in the rate of voluntary participation of injured employees in various medical invention programs offered by the employer and OWCP. Simply stated, to believe that the Federal Injury Compensation System is a haven for employees who are faking injuries and getting a free ride on compensation benefits is to believe in a myth.

OWCP applies both a strict standard of proof in its adjudication of claims and a vigorous oversight of the continued payment of benefits once a claim has been accepted. Similarly, the employing agencies actively challenge claims that they believe do not meet the necessary criteria and zealously review a claimant's medical condition in order to offer them medically suitable employment as soon as possible.

The FECA, as currently written and as currently administered by OWCP, is emphatically not a profligate benefit program. It is a law that precludes injured employees from suing their employer, establishes FECA benefits as an exclusive remedy and dispenses reasonable benefits to those injured employees. In my experience these employees are truly injured. I have never spoken to a single one that would not trade all of his or her compensation benefits for a chance to be made whole and return to work as an able-bodied employee.

We argue that it is inequitable to pose FECA reforms that are based on a presumption other than this. Workers and their unions are anxious to discuss the improvement of workplace protections both with Congress and with our employers. Improving safety in the workplace and reducing hazards on the work room floor offer a broad area of common interest for all parties. There are many examples of union and management jointly investigating opportunities to improve safety and health in the work environment.

We suggest that oversight, which seeks to encourage opportunities and to enhance the abilities for employers and employees to address safety and health issues, is the most productive long-term method for reducing the cost to all parties of workplace injuries. Taking action to compensate an employee after they are injured is a poor substitute for taking action to prevent that injury from occurring.

[The statement of Mr. Boutwell follows:]




Chairman Ballenger. There are a couple of questions that I would like to ask especially when I ran into the idea of offsets. I had no idea that if you are disabled and work for the Federal Government and receive FECA benefits that you could collect everything in the world to go along with it. I was wondering, Mr. Anderson, you mentioned an annuity. That was just to replace the FECA benefits?


Mr. Anderson. Yes, sir. What we are proposing is that you have two categories of employees. You have an employee who works his whole life and never gets injured. Our experience is that 90 percent of those employees will retire within 2 years of reaching voluntary retirement eligibility age, which is 55. So, by the time they reach 57, normally they retire.

If you are on FECA, however, you get injured sometime during your tenure of employment. Our experience is that those employees never leave FECA. They stay there forever. What we are saying is that because our experience is that only over 90 percent of the employees will retire, there should not be two systems. There should only be one Federal Retirement System. And if you are on a FECA annuity or a FECA benefit at the time you reach voluntary retirement age plus 2 years, we would give them the 2 years during which people normally make that decision. Then their computation for their benefit for their disability benefit would change to equal that which they would have gotten had they voluntarily retired. We are saying you could leave them on OWCP's rolls, but change the computation or they could be transferred to OPM's rolls, which is where they would be if they had voluntarily retired.


Mr. Boutwell. Mr. Chairman, just to clear this up, an employee, on receiving total wage loss compensation for FECA, cannot get other benefits.


Chairman Ballenger. Social Security?


Mr. Boutwell. No, sir. There is an offset on Social Security. If he is a FERS employee who is qualified for Social Security, he cannot receive Social Security disability and full FECA benefits at the same time.


Chairman Ballenger. Let me ask Mr. Oppedisano, you mentioned that.


Mr. Oppedisano. I will give you a perfect example. We had a gentleman who was 82 years old until he died last year, who was receiving compensation since 1963. There was no fraud intent, nothing of that nature. I think Mr. Anderson is saying that we want to establish a retirement system so that the individuals who, at a certain period in time, and not including any other entitlements, would be entitled to similar benefit that the average Federal employee. Whether it is 55 and 30 years, 60 and 20 or 62 and 5, they would receive a normal benefit from the normal retirement system and not just be a continuation of cost back to the installations.


Chairman Ballenger. You brought up offsets in your discussion. That is the reason I asked the question.


Mr. Oppedisano. It was Mr. Anderson.


Chairman Ballenger. Let me ask Mr. Oxfeld.


Mr. Oxfeld. Mr. Chairman, I believe that although it is true that for Social Security disability insurance there is an offset, the SSDI law itself provides that you cannot collect SSDI and comp and have combined more than 80 percent of your wages. I don't believe that the Social Security retirement benefits, if you qualify for those as well as Federal employee retirement benefits, that there is an offset under FECA. It is a problem under State laws as well that people collect retirement benefits and also collect workers comp. It is not as much of a problem because in those States there is a duration limit on partial disability benefits so that at some point benefits do run out, except in cases of people who are permanently and totally disabled.


Chairman Ballenger. Let me ask Mr. Oppedisano, you mentioned that it was something like 25 percent of the people involved were over 70 years old.


Mr. Oppedisano. According to the GAO study, yes, sir.


Chairman Ballenger. That is a great job. I might try that one time.


Mr. Boutwell. Mr. Chairman, could I answer that?


Chairman Ballenger. Let him first and then you next.


Mr. Anderson. There is a reason for that. The reason is that staying on compensation is so lucrative. We have had an outreach program to meet with especially aged FECA recipients to try to convince them to transfer to OPM rolls in which they would get a lesser benefit, but there are some survivor enhancements under the OPM retirement system that are not available in workers' compensation. Invariably, we cannot convince people to take voluntary retirement. The reason is FECA benefits are simply too lucrative.

I have had a claimant tell me, this was in fact a young claimant when I worked in one of my prior jobs, laugh in my face when I proposed that he turn to OPM benefits. He said, with what you are paying me, I can buy a million-dollar life insurance policy over and above what I would get if I were on OPM's retirement rolls. I have no interest. That is typical.


Mr. Boutwell. Mr. Chairman, I don't believe anecdotal information really advances the discussion here. The fact of the matter is that there is a very good reason why employees who are totally disabled from a workplace injury remain on workers' compensation. It is because they are entitled to. That is a benefit they are entitled to.

Remember, the thing that employees lose when they continue to receive total wage loss disability: two-thirds of three-quarters of an employee's salary is locked into the base pay they were getting at the time of injury.


Chairman Ballenger. There is no increase in benefits.


Mr. Boutwell. No, sir, only COLA.


Chairman Ballenger. Only COLA. That is an increase right there.


Mr. Boutwell. But it certainly doesn't make up for the wage loss that they have lost in the last 10 or 15 years. If they have locked into time of injury wage loss, as time moves on, that two-thirds of three-quarters reduces in their net income what they would have had if they had continued to work.


Chairman Ballenger. If you start off with 75 percent that is tax exempt, and you are in a fairly moderate tax bracket, you are better off than when you were working. Then you have got a COLA coming on top of that. It doesn't make any difference how long you are out. You are going to be better off then if you were working.


Mr. Boutwell. I respectfully disagree on being better off than if you were working. As the figures show, is that only one 1 percent of FECA recipients are in a high tax bracket. Most of them are in the average worker category of $30,000 salary. Remember it is locked in at the time of injury. When you talk about two-thirds or three-quarters and compare to State systems, you to have look at what the base salary is.

The State systems are pre-taxed by and large. The majority of the two-thirds or three-quarters, is based on pretax income. If it was two-thirds of after tax earnings, then there is a real decrease in the net pay that an employee takes home.


Chairman Ballenger. Before I quit, am I mistaken in the fact that the 75 percent in FECA is tax-exempt?


Mr. Boutwell. It is tax-exempt.


Chairman Ballenger. I thought you just said that_


Mr. Boutwell. You are comparing it with the State system, which takes its percentage off pretax income. So the net pay is larger for the State system than for the Federal system.


Chairman Ballenger. One more question, then, I will shut up. Mr. Oxfeld, I can see your head moving in the opposite direction. For what purpose was that?


Mr. Oxfeld. I respectfully disagree with my colleague to my left. Most States replace two-thirds of gross pay. There are six States that replace a percentage of net pay, and that is something that the committee may want to consider because it is a way of providing more equitable wage replacement for people at different income levels. Like FECA, the States replace a percentage of gross pay for the most part.


Chairman Ballenger. That is what I thought.


Mr. Oppedisano. Mr. Chairman, being a Federal employee, I disagree with Mr. Boutwell. I went through and I deducted the normal withholdings that I would normally take home, backed them out of my gross income and within State, Federal and retirement benefits, my take home is 67 percent, 67.2 percent. That is number one.

Number two, Mr. Boutwell is talking about the idea that an employee is locked in. They are locked into the grade that they left at the time. In other words, they are going to lose promotional opportunities or anything else. But if you look at the Consumer Price Index, which has been traditionally higher than the employment cost index and my employees, who are WG-10s and less are coming to. And my unions are coming to me and saying they cannot believe that an individual on compensation is getting a higher COLA than they are by working.


Chairman Ballenger. Right. Thank you. Mr. Owens?


Mr. Owens. On that point, Mr. Boutwell, could you just explain the implications of being locked in? A 35-year-old suffering an injury, which locks him into that salary plus his COLAs, has lost the opportunity for promotions between 35 and maybe 60. If that employee were on the job, he or she would probably get promotions to a much higher grade. If the employee went to court, wouldn't the court take into consideration the capacity of the individual to earn income for the rest of his life? Whatever position he is in, some estimate of how much he would have earned had he not been injured would be a major factor in figuring the cost that the court might award him.


Mr. Boutwell. Yes, I am not an attorney, but that is my understanding of tort action. One of the things that would be evaluated would be total life earnings and the portion of that the employee would be entitled to based on the injury.

Certainly, when a person is injured and is locked in at that base pay, that is the base pay earned. That is not based on the position. In other words, that does not keep going up as the pay for that equivalent position goes up through wage increases or through the steps.


Mr. Owens. Most important of all, they will get no promotions.


Mr. Boutwell. There is no future increase other than the COLA.


Mr. Owens. Thank you. Dr. Disney, I was impressed at the series of reforms that you want to take in your department. You didn't mention anything about dealing with health and safety conditions that create or foster injuries in the first place. Did you look at a pattern of injuries and ailments at any time and pinpoint where the problem is in terms of what is causing the injuries in the first place, which lead to the necessity for the person to be on FECA?


Dr. Disney. We are very concerned about health and safety. In fact, we have a number of FECA working groups where we have safety, health, management and labor personnel working together to look at problems. Every time there is an injury claim filed, it goes to the safety people for investigation to try to make certain that the workplace is made safer so that such things do not recur.


Mr. Owens. Did you discover any pattern of phony ailments and fake injuries?


Dr. Disney. No, sir.


Mr. Owens. Was that investigated? Did you look for that? I will ask all the other panelists. Is there a pattern of phony illnesses? Are we dealing with people who are legitimately injured, legitimately ill, and deserve compensation?


Mr. Oppedisano. I would like to respond, if I could. We looked at our long-term recipients, and I think it was something like 3 percent were suspected abusers. I don't think the system is fraught with abuse. I have been monitoring the program for 13 years.


Mr. Owens. Abuse is a big word. I am talking about at the point of origin where they first entered the FECA system, is there any pattern of injuries or illnesses that has been uncovered to show that there was a problem there?


Mr. Oppedisano. I think you would have to look at each activity at the time. We do heavy metal processing. The majority of injuries are back and hand and arm injuries. So you would have to look at the actual installation. But we talk about what do we do to avoid accidents. OSHA has written up, and I am in a small installation in upstate New York. OSHA has written us up for the BBP program, one of two Federal agencies throughout the whole United States. We are doing everything we can. Dr. Disney alluded, there are employee safety programs and comp_


Mr. Owens. While you have the mike, could you tell me, could it be that this pattern of compensation cases being older people over 75 is related to the fact that OSHA standards were not being enforced 20, 30 years ago; that so many more people were being injured years ago that you have now a burden on the government as a result of the failure to provide safe and healthy workplaces?


Mr. Oppedisano. I would not say it is an abuse of, a lack of following OSHA's procedure.


Mr. Owens. The number of injuries has decreased. Everybody says the number of people coming on has decreased. The burden, the heavy cost is the result of the large numbers being carried from past years.


Mr. Oppedisano. For my installation, I can refer back to that because this is my personal experience. I believe in the '70s, that the compensation program was used to displace the disability program because there was no control over the compensation program at that time. I think the compensation program was used as a program for individuals who were injured on the job just to be placed on there and there was no follow-up.


Mr. Owens. Mr. Boutwell, you mentioned zealous challenges. Can you explain what zealous challenges should mean?


Mr. Boutwell. As I am sure you realize, FECA provides an opportunity for the employing agency to challenge any claim that it believes is inappropriate. The Postal Service, which I am familiar with, takes advantage of that opportunity and controverts or challenges a large number of claims that are filed. It is perfectly acceptable as a process because it tests the process as far as the injury goes.

As you know, there may be some complaint about the 45 days of continuation of pay, but remember added to that is administrative leave within the first 10 days, based on acceptable medical evidence establishing disability. So there is a test immediately as to the disability of the employee. The Postal Service contacts the doctor as soon as possible to inform the employees as the law requires that the employer can give the injured individual medically suitable work.


Mr. Owens. We could conclude that more than 95 percent of the people that get FECA are there legitimately after this process is over?


Mr. Boutwell. Yes, sir.


Mr. Owens. Would you say your outfit conducts zealous challenges?


Dr. Disney. I think it is fair to say that our home visit program is indeed the kind of program that you would cite as an example, because it does identify individuals to make certain that they get all the benefits they deserve. But it also identifies those where either they can be put back to employment or other action can be taken.


Mr. Owens. I just wanted to make certain that I establish the fact that at least 90 or 95 percent of the people who are getting FECA benefits deserve them?


Dr. Disney. Yes, sir.


Chairman Ballenger. Mr. Fawell.


Mr. Fawell. Thank you, Mr. Chairman. It does seem to me that there are some clear changes that ought to be made and certainly for somebody who is 82 years of age to still be drawing benefits when retirement years have long since passed is something that I think should be altered. We always think of no fault insurance as, well, there are different views about no fault insurance, but it can be, as Mr. Owens pointed out, you could, with a tort remedy, maybe get a better recovery.

But on the other hand, if you were contributorily negligent, and there was no cause of action, you wouldn't get anything. So the no fault coverage of workmen's comp is something that can work both ways. It seems to me, if I hear correctly, that most of you seem to be saying the States are doing a better job in updating their procedures, in updating their programs.

I gather that what we have with the Federal Government is self-insured, the employer is self-insuring. The States, by and large, I gather, though, maybe have self-insured plans, but basically don't you have private insurance coming into play here?


Mr. Oxfeld. States have both self-insurance and private insurance. I don't think this is really an issue of whether the Federal Government is, in effect, as you say, self-insured. It is really a question of are the right incentives built into the program. Is it administered properly? Are people getting back to work promptly as soon as they could?


Mr. Fawell. I guess my question would be: Why have the States, though they apparently moved ahead and have put the right incentives and readjusted and modernized, whereas the Federal Government tends to have been fossilized a bit over the last 25 years. I gather I am drawing the conclusion that it just has fossilized a bit over the last 25 years?


Mr. Oxfeld. At the State level there is a huge constituency for reform because the people who pay for it, who contribute to the jobs and the economy, the business community, the employers and the insurance industry itself insisted on it. At the State level, States examine their workers' compensation laws every year.

There are amendments enacted almost every year of one degree or another, usually fine-tuning kinds of changes. I would only observe that the Congress has devoted its attention to other more weighty issues than it has to workers' compensation issues.

The Longshore Act has not been one that has been examined at regular intervals either. I would say that is due more to the fact that the States concern themselves directly with workers' compensation, don't have to worry about all the other issues that you as Members of Congress have to deal with, with the foreign relations and so on.


Mr. Boutwell. Could I respond?


Mr. Anderson. We had an expert come in and look at our program a while back. In that process they told us that there were six States that almost went bankrupt because of their workers' compensation statutes, Maine and California ring in my mind as two of those. And that caused the State legislatures to make rather sweeping changes, as Mr. Oxfeld indicated.


Mr. Fawell. Were they self-insured plans?


Mr. Anderson. I think they were both, actually. But I know that California and Maine were virtually on the verge of bankruptcy being weighted down by their workers' compensation systems. So they tightened the system up. I think there isn't a perceived financial crisis here in the Federal Government, and that is why this problem has not been addressed as quickly as perhaps it could have.


Mr. Boutwell. Could I respond?


Mr. Fawell. May I just throw this out? I am assuming that when you are in private enterprise, there is a bit more of a concern because as a practical matter, the employer is picking up the pay in private enterprise. And with all due respect to all the efforts that have been made by various public entities within the Federal Government, the general tendency is perhaps there is not as much incentive to do the economizing and modernizing that might otherwise apply. Mr. Boutwell?


Mr. Boutwell. I think we should make a note of caution in believing that the States are doing a much better job than the Federal Compensation Program. Yes, there is a lot of legislative activity, but under the FECA, OWCP has a lot of regulatory leeway when they can make adjustments, as they have done with their various administrative oversight programs, periodic roll management programs. Code of Federal Regulations was just published recently where a number of changes took place. They don't need legislative action on the Federal level.

Remember, the major drawback to States' systems is that there is a cost of doing business. 46 percent of the benefits paid by the State, or the cost of those programs on average, go to legal cost because there are lawyers involved in the process. That is the beauty of this process, the Federal employees' compensation. There are no lawyers involved and there is no legal cost to the program. The administrative cost is lower in FECA than it is in comparable State programs. So the States are not across-the-board doing such a wonderful job.


Mr. Anderson. If I can make one more point in this area, I don't really disagree with Mr. Boutwell. I think that we should not throw the FECA system out. That is certainly not our proposal. We think the FECA system has some benefits.

We think the non-adversarial nature of it is a plus. That is an aspect of the State programs that we would not be in favor of. The Postal Service is, I believe, the only employer at this table that does, in fact, pay their own way. We pay our workers' compensation costs out of revenues, out of stamps. We have to sell more stamps for every employee that gets injured, and who receives benefits so we are very sensitive to the safety and health aspect of this, as Mr. Owens has pointed out, the costs involved, and we monitor it extremely closely.

What we think is needed is some fine tuning of the statute that brings it more in line with the benefits that are more commonly seen in the State systems. We would not be in favor of giving up the non-adversarial nature of it.


Mr. Fawell. The State of Illinois is non-adversarial in nature. It is no fault. It may well be that, as in Illinois, our private attorneys being involved, and there is, there are legal fees, I gather that is not the case with FECA. But it is no-fault insurance; all of workmen's comp is basically no fault.


Mr. Oppedisano. Mr. Fawell, my installation is charged back for all of the costs that are paid out for FECA. What happens is that increases the cost of my product going out the gate. That means my customer can afford to buy less, not more. What that results in is me having reductions in force for the permanent work force because these costs are added into our business. We do pay for it back in the field aspects.


Mr. Fawell. Mr. Chairman, my time has expired. I would suggest this might be a good area where there can be a star-studded commission that can really take a look at this and try to catch up. 25 years not to have any significant legislation on this subject, just makes no sense whatsoever, the world has changed a great deal.

We have people drawing their benefits in their 80's and have no offset on Social Security retirement, no real incentive to go back to work if you are going to be basically making more than what you would get if you go back. This might be the case where it is all your fault, too. It is not a case where you could have gotten a bigger and better tort recovery. It is something we should be looking at, and I think perhaps a good commission study here. We in Congress have an awful hard time, I think, clinking and clanking away to make some of these changes on our own. But a good commission might be of help.


Chairman Ballenger. Mr. Martinez.


Mr. Martinez. Thank you, Mr. Chairman. It is interesting. I was just reading in a letter from the Department of Labor. Mr. Oppedisano, I understand that you say that Major Owens is right. I hope you do agree that the area of health, the area of safety is one that could reduce a lot of the costs that we are talking about here. It seems like the Postal Service represents about 29 percent of the total Federal workers and yet in your lost time cases, you represent 42 percent. Beyond that, your charge back bill was over a half-billion dollars for 1997 over 1996, which was 547.

Sometimes in these debates we lose sight of the main thing here. The main issue here is how much it is costing. When you are talking about State plans versus Federal plans, you are comparing apples and oranges because the State plans are private enterprise. They are not paid for by tax dollars.

In the Federal Government, the system is paid for by tax dollars. We also lost sight of the fact that when this program was developed, the employees, in order to get these benefits this way, gave up the right to sue. So I would say, forget the State, forget their plans and the comparisons. Just on the Federal level, has anybody done any studies? Has anything been done to see if the employees were able to sue for lost wages, because it seems to me that Mr. Oppedisano is talking about those people that are 70 or 75 years old that are still on FECA.

I am sure that they did not go on yesterday or the day before, they are 75 years old. In most cases, these people must have been injured anywhere from the time they started to 55, age of retirement. I have no idea. Maybe you do.


Mr. Oppedisano. Late 1960s, early 1970s.


Mr. Martinez. That these people that are 75 now_


Mr. Oppedisano. Yes, sir.


Mr. Martinez. If you take 70 from '98, you have 28 years, right?


Mr. Oppedisano. There was a figure shown_


Mr. Martinez. So they were still before retirement age when they were injured.


Mr. Oppedisano. Absolutely. There is a figure that shows that if an individual GS-7 who was injured at 35 years of age with the actuary tables would collect $1.25 million over their life.


Mr. Martinez. On the FECA benefit?


Mr. Oppedisano. Yes, sir.


Mr. Martinez. What would he have_


Mr. Oppedisano. That is with dependents.


Mr. Martinez. What would he have gained if he were able to sue?


Mr. Oppedisano. I am not an attorney, sir. I can't answer the question.


Mr. Martinez. That is the question. Would it cost us more or cost less?


Mr. Oppedisano. You also have to remember there has to be a reason for the suit. No one is questioning that the individual got injured, but whether the government was at fault would be the question.


Mr. Martinez. Let us assume that if what we have seen from the government work sites and what OSHA has reported, that it would more than likely be the government's fault.


Mr. Oppedisano. I take exception to that. I look at my installation and my installation is a_

Mr. Martinez. I am not talking about your installation personally. The reports that we have seen, show that there have been a lot of inadequate safety precautions taken in the workplace.


Mr. Anderson. If I could address that, since you have mentioned the Postal Service specifically, there are some facts that you don't apparently have in front of you. A couple of them are included in my statement. Here is the point of this statute. Our safety program is viable. It is strong. It is working. Our injury rates are down. I gave you the numbers. In lost workdays alone in the last three years, down 28 percent. I didn't include this year's numbers because they are not completed yet. We are only through seven accounting periods. We are down another 10 percent. In every single one of those years workers comp costs went up.


Mr. Martinez. Let me ask you along those lines. You reduced your FECA claim by 4 percent last year. How much money did that save?


Mr. Anderson. It cost us money. Workers comp costs went up last year, not by as much as they had historically, but they went up by 1.6 percent total cost. These costs are so luxurious, and they are so pivotal on the old, the aged injuries, injuries that happened 20 years ago.


Mr. Martinez. I think we are getting into a semantic argument here. The fact is that if the costs went up and you would have had 4 percent more.


Mr. Anderson. That would have been worse. That would have been more costly to us, yes. We are saving money. You are right. We are saving money by reducing the injuries, but we can't even hold the costs to last year's level even with the most success in safety we have ever had.


Mr. Martinez. Let me ask one more question. You were very concerned, as was Mr. Oppedisano, about the people that are 70 or 75 years old that are still on FECA benefits. It is your contention they should be forced to retire; right?


Mr. Oppedisano. Yes.


Mr. Martinez. If they did retire, let us say they were injured, as Mr. Owens said, at 25, 35 and would have worked and would have gained promotions and been at a different level. Let us say they went out a GS-5 and they might have attained GS-13, who knows, would you say if you did force them to retire that they ought to receive credit due for that potential that they might have reached in the years that they did not work?


Mr. Anderson. No, I think we are in an area of speculation. I don't know how you would calculate what someone's potential is to reach.


Mr. Martinez. Should they even receive compensation for the actual years they would have been able to serve to retirement?


Mr. Anderson. They do. They do receive benefit. When you are on workers' compensation, you receive time credit as though you were at work. There is no difference when you are out on disability. They get that. The problem is, the real problem is that when these people come to the end, they are 70 or 80 years old, on long-term workers' compensation rolls and then they die. You have to go to their wife and tell the wife that they have no survivor annuity benefits. She didn't know that. In many cases they don't know that there is a difference between the workers comp program. That is payment for the disability during the lifetime of that employee and when that lifetime ends, guess what? The benefits are gone.


Mr. Boutwell. Could I just respond? I am a little bit surprised. We have spent a lot of time talking about people in their seventies. I am really surprised that somehow we are assuming that if they were not injured, they would not continue to have a productive life. Look at this institution. Look at the seniority that is reflected here. To assume that the people of a certain age should somehow be forced out because they are no longer productive, I think is not an equitable way to evaluate the system.


Chairman Ballenger. You are getting close to being personal there.


Mr. Boutwell. I would also point out that these people are not just put off in a category and left alone. These are actively reviewed. Postal Service has their review program, OWCP has their periodic review program. It is focused on people who are long-term disabled. Their medical documentation is closely analyzed. They must show that they continue to be totally disabled by an injury that can be compensated for.

Every year OWCP asks for an update on financial information. It is a very strict accounting that they have to come up with. These people are not hanging out there just drawing in money. They must demonstrate medically and financially that they are still entitled to it. We should not assume that people in their seventies and eighties no longer have a productive work life.


Mr. Oxfeld. May I respond to your point about the tort system? I think there is a general consensus that the tort system would not be to the best interests of either workers or employers. There are exceptional cases where people get hurt at work, and it is possible that in some instances people might do better in the tort system. But I think most people are better off under comp, whether it is at the State level or under FECA, than they would be in the tort system.

We know of one industry that is still under the tort system. That is the railroad industry. We wouldn't want to see American industry find itself in the position the railroad industry is today. I think the real question is not whether tort would be better, but how can we get people back into productive employment where they are earning wages and contributing to our society rather than drawing transfer payments of various kinds.


Chairman Ballenger. Let me switch to Mr. Greenwood now.


Mr. Greenwood. Thank you, Mr. Chairman. I want to thank all of the panel members for their very excellent testimony. I think that in the discussion, we have a tendency to make this issue more complicated than it needs to be. I want to address this to Mr. Oxfeld, if I may. Fundamentally, we have a program that pays Federal employees more to stay home than it does to come back to work. It raises their salary on average faster to stay at home than it does when they come back to work, and pays them more in retirement under this system if they never come back to work than if they had. Isn't that right?


Mr. Oxfeld. Absolutely correct.


Mr. Greenwood. And given the fact that some of what it takes to report back to work is a subjective determination on the part of the injured employee with regard to: how much pain are you in, or how strong are you feeling, or how much anxiety you have about going back to work. You would have to be a fool to go back to work under those circumstances?


Mr. Oxfeld. I don't think this is most people. I have been a Federal employee myself. I don't think most people in the FECA program or anywhere else are consciously abusing the program. I do agree with Mr. Boutwell that outright fraud is really a small part of the problem.


Mr. Greenwood. That is the point. We are not changing the law. We are not trying to change the law because people are breaking the law. We are trying to change the law because the law in itself fundamentally makes it more valuable to stay at home for year after year than it does to come back to work. People are obeying the law, committing no fraud, but they are much better off financially at home than they are going back to work.


Mr. Oxfeld. That is what I was about to add, but not as articulately as you just expressed it. The problem is that the incentives within the existing law to stay home are so great, it is not a case usually of conscious abuse, but simply of responding to the program that is in effect.


Mr. Boutwell. Could I respond?


Mr. Greenwood. Sure.


Mr. Boutwell. I have not seen any figures that establish that an employee on long-term disability is financially better off, on average, by being disabled and out of the workplace than if they were working. Because they are not getting the raises that their co-workers are getting, and they are not getting the promotions. I disagree with the fact that an employee is receiving more by not working if they are injured than if they were working. Second of all, employees do not_


Mr. Greenwood. All the testimony that we have had today says that this program is the most generous program in the country, that you can make 75 percent of your gross wages on this program if you have one dependent. Tell me how that is not taking home more money every week, up to 66,000 a year, than you would be taking home if you were working?


Mr. Boutwell. Because the employee who is working continues to get raises, continues to get promotions, but if the employee is injured, his pay is frozen at the time of injury.


Mr. Greenwood. Don't you get COLAs that are larger on average than the employee cost of living or the employee inflation rate?


Mr. Boutwell. Last year it was 1.5 percent. It is based on the compensation, not the COLA, which a current employee is getting. Individuals who are employed have a higher base because they are employed and earning more money. They have a higher pay schedule. An employee is not financially advantaged by remaining on long-term disability even if it was their choice to do that. They do not remain as the consequence of a subjective decision.

OWCP will not pay total disability based on pain. It will not pay based on the subjective opinion of the employee. They only pay total disability based on clear medical evidence that the individual continues to be totally disabled as a result of the compensable injury. It is not a subjective program. They must demonstrate that. Again, virtually every one of them would rather be back working than sitting at home. They are truly injured. They are truly disabled.


Mr. Anderson. If I could address that question from an employer's standpoint. I think it is. I think you are both right actually. What happens is that the employee gets injured. There isn't a lot of fraud in feigning the injury. Usually an injury actually occurs. But once they get out, what we find is if we don't get the employee back to work immediately, which is why we work very hard on the front end of the injury, that in a very short time we lose that employee. They are gone. They find that sitting home on these benefits, or in many cases doing other things, and sometimes they start dabbling in other kinds of work that may earn them a little bit and may actually be volunteer work, they wind up not wanting to come back to work. That doesn't happen initially. There isn't a lot of fraud right up front. Over time it becomes fraudulent.


Mr. Greenwood. Mr. Anderson, I think you brought some videotape with you, didn't you?


Mr. Anderson. Mr. Boswell.


Mr. Greenwood. I wondered if, before my time is out, we could have you show us what the Postal Service has done to find and investigate fraud in the FECA program using your individual videotape.


Mr. Boswell. This is a video surveillance tape.


Mr. Boutwell. I hate to be rude, but let me object right off the bat. I think this type of thing is really non-productive. It is anecdotal. You heard the figures, 44 or 46 frauds. Let it go at that. What are we going to show? Some horror stories? You can show horror stories on either side. It is really not a persuasive rationalized argument as to why a system may or may not be changed. I apologize for being rude, but it just upsets me quite a bit to rely on surveillance videotapes to try and make a legislative point.


Mr. Greenwood. We will look at the videotape and then we will see why it is so upsetting.


Mr. Owens. Mr. Chairman, the gentleman's time is up.


Chairman Ballenger. I realize that. We let everybody else run over. I understand what you are trying to do.


Mr. Owens. It went over about 2 minutes. Is it going to take 2 minutes?


Chairman Ballenger. I don't know how long it will be. The TV has been sitting there.


Mr. Owens. How much is planned for this one Member?


Chairman Ballenger. I was planning on going around again. Why don't we just let him go ahead and show the picture? Then we can object to it after we have seen it.


Mr. Owens. Can we hear how long it is going to take? How long is it?


Mr. Boswell. I believe it is 3 minutes.


Chairman Ballenger. I can give that much. Thank you very much.

[Videotape shown.]


Mr. Boswell. In July 1996, this former part-time letter carrier reported a job-related injury to his left elbow, left shoulder, neck, and the middle of the lower back and right knee. He returned to work approximately 2 weeks later. In January 1997, about 6 months later, he reported another disabling injury to his right ankle, this time from stepping in a hole on his mail route.

In March 1997, an investigation by postal inspectors revealed he was self-employed, had a baby furniture and accessory store, which he owned and operated with his wife. Business records indicate they opened the business in June of 1996. On April 16, 1997, the day after this videotape was shot, the Postal Service offered to bring this worker back to work and to limit the duty capacities. However, he refused stating that he was totally disabled. He also denied to the Department of Labor any employment or self-employment. In November 1997, he was convicted in a jury trial of 11 counts. The long-term cost avoidance projected by the Postal Service as a result of this investigation is over $680,000.


Mr. Owens. Was this a scientific sampling?


Mr. Boswell. No, this was an investigation.


Mr. Owens. He is one of how many?


Mr. Boswell. I have no idea.


Mr. Boutwell. Forty-three last year.


Mr. Boswell. That is not exactly correct. In 1997, we identified 375 postal employees for compensation abuse or fraud. True, 43 of those were arrested, but there were 375 people that we identified for compensation fraud.


Mr. Owens. How many people in the post office are on FECA?


Mr. Anderson. That is a complex question. Last year we had 82,000 claims.


Mr. Owens. Thank you.


Chairman Ballenger. Eighty-two thousand claims, but how many people are still_


Mr. Anderson. That is for an individual year. We look at and cut the data several ways, Mr. Chairman. But one way is for the long-term periodic rolls. These are people who are out long-term that really Department of Labor doesn't even look at. All they require is a physical once a year. That is around 10,000. We have another core of employees that grows that number to about 20,000, which we call our daily rolls. Those are people, they are still out on long-term comp, but they get some greater degree of look. So I will say in the neighborhood of 20,000 who are out on a long-term basis.


Chairman Ballenger. Major Owens, it is his turn.


Mr. Owens. I think the United States Postal Service was listed on Fortune or one of the ratings as the world's largest corporation in terms of employees. What is the total number of employees you have?


Mr. Anderson. It is approximately 850,000. I don't have the exact number. It fluctuates on the basis of seasonal factors. Christmas-time is a heavy hiring period for us. We have more employees on the rolls during December than at any other time of the year.


Mr. Owens. What percentage of your employees are engaged in health and safety concerns or making the workplace a safe and healthier place?


Mr. Anderson. I would say all of them, but more realistically probably we have about 60,000 supervisors in various categories of jobs. All of them have a safety component in their job responsibility.


Mr. Owens. You have a department similar to Dr. Disney's department. She is in civilian personnel policy. Do you have a department that is engaged in trying to take care of the health and safety needs of the postal employees?


Mr. Anderson. Certainly. I run that from the headquarters level. We have about 500 full-time safety professionals deployed throughout the country, if that is what you are looking for, full-time throughout the Nation.


Mr. Owens. For these, how many employees?


Mr. Anderson. Eight hundred fifty thousand employees approximately. But every supervisor has safety responsibility in their job description and is monitored periodically by their supervisors for compliance with that. As I said, we put in a pay for performance bonus system that has safety as one of the foremost factors in terms of paying our supervisors. It an expression from our company to the supervisors of what is important to us, what our values are, safety is right up there.


Mr. Owens. I think this is the place where you can cut costs drastically. Another place is investigations of providers. In the case of providers, Mr. Boswell, you mentioned, you are Chief of Investigations. Have you recently focused any projects on providers and fraud with respect to providers?


Mr. Boswell. We do investigate provider fraud, yes. Also the newly formed Inspector General for the Postal Service is looking at provider fraud.


Mr. Owens. Can you give us some examples of a program that you have focused on provider fraud?


Mr. Boswell. Programs that we have? Recently, we conducted an_


Mr. Owens. I know you have a videotape program. I wonder in case of providers how are you proceeding?


Mr. Boswell. Recently we conducted an audit of providers in, I think it was in the State of Colorado, I believe. We did find over-billing and unbundling of charges, things like that.


Mr. Owens. Do you have any figures on what percentage of the problem of the high cost, what percentage of the problem is fought by providers?


Mr. Boswell. I did not bring anything like that with me. I will be happy to provide it later.


Mr. Owens. Mr. Oxfeld, I would like to just revisit the question of State costs versus Federal costs. There is loose language here about the States' systems costing less. We had testimony last fall, which said that FECA costs were 1.8 percent of covered payroll. When you look at covered payroll, the States had a higher cost at that time.

Are there any figures or comparisons available in terms of a percentage of payroll that make these comparisons so we can have a harder set of figures to deal with?


Mr. Oxfeld. An honest answer is that there are no good comparisons that I have seen. The gentlemen to my right and left may have compared. It is very important to compare apples with apples in making such a test. It is very hard to measure the cost of FECA compared to the cost of workers comp because a lot of elements of what gets counted as a State workers comp cost may not be counted. You have to look at for the same type of employee and the same geographic area the same wage level, what the costs would be under State comp. We have not attempted to do that.


Mr. Owens. I thought members of the panel made comparisons. Several people have said the States are doing a better job and the costs are lower.


Mr. Boutwell. Let me offer a comparison. This is from the Office of Workers' Compensation Programs, who did a comparative cost analysis. By their figures, the overhead cost for OWCP was 4 percent of benefits. For State self-insured it was 14 percent of benefits. And for private insurance compensation plans it was 25 percent of benefits. There is a comparison.


Mr. Oxfeld. You can have low overhead costs if you pay everyone. I don't think that is a fair comparison.


Mr. Boutwell. It is clearly demonstrated, we are not paying everyone.


Mr. Oxfeld. The managers at the Department of Labor, I think, have been doing an excellent job.


Mr. Owens. States have higher overhead costs.


Mr. Oxfeld. Some States have higher overhead costs because there is more litigation in the program. But also the States include a lot of other elements in the costs of the programs. The costs of preventing the second injury front, things like that.


Mr. Owens. We can all conclude that making the comparison with the States is irrelevant. It is not valid because we are comparing apples and oranges?


Mr. Oxfeld. I wouldn't agree at all. I think you have to look at comparable wages. I think that the operating cost of the Department of Labor is not the same thing as the cost of the employing agency for the cost of the benefits.


Mr. Owens. We should not toss around notions like the ones that we have been tossing around here: that States obviously are doing a better job. They are not. Thank you.


Chairman Ballenger. I would like to quickly say that I am an employer who watched my own workmen's compensation costs go right out the roof. And I live in a State where we basically have what I would call an accurate system. As long as I am paying all the expenses and all the legal costs, it is no wonder the overhead is high. The expenses are obviously borne by the private world. I yield the rest of my time to Mr. Greenwood.


Mr. Greenwood. I want to go to the issue of Mr. Boutwell, speaking on behalf of the union. He has essentially said that there is a pretty rigorous process in place and that you have to demonstrate regularly that, in fact, your disability persists and that you can't readily stay out if that is not the case.

We just looked at that video and looking at the Postal Service's testimony. I read that efforts were made to return this worker in a limited duty capacity. He claimed that he was totally disabled and denied all employment and self-employment activities on the OWCP forms he submitted.

What I am interested in knowing is, how rigorous is this process by which we regularly are able to ascertain certainly whether someone's injuries truly prevent him or her from returning to work or not? I will address to it Mr. Anderson.


Mr. Anderson. I would say that that is a cumbersome process. What happens is that when an employee is injured, we have a very small period of time to gather up the medical information. What usually happens is that they go to their own doctor. The statute provides for physician of choice. If that is not clear, the information there is not clear, we try to get an opinion from one of our local contract doctors, usually a local clinic, to specify the limitations that the individual has so that we can make a job offer.

Once, however, the case goes forward to OWCP, which happens in a 10-day period, we don't always make that time frame and there was some testimony on that, but we tried to, once the case goes to OWCP, we are precluded from getting further medical information without their permission. They have a series of regulations and processes to do that, to even referee medical opinions to determine what the limitations are, but it is very cumbersome, so it is not nearly as simple as Mr. Boutwell was suggesting.


Mr. Boutwell. I am surprised to hear that. I thought the Federal employer at any opportunity could send someone for a fit-for-duty examination and provide that medical documentation to OWCP in support of his or her opinion that the person is able to return to work. My understanding is that the employer at any time can have the employee go for a fitness-for-duty and provide that information to OWCP for consideration.


Mr. Oppedisano. It is the employee's responsibility to document the disability or continuing medical disqualification, not the employer's, number one. Number two, I send an employee who works for me down to the Office of Workmen's Compensation in New York City at least quarterly, that is the only way we have access to the employee's record to see if there is medical certification in there.

OWCP is supposed to send out certification every year for an employee's continued disqualification. They do not follow it up. We cannot even find out whether or not there is continued medical disqualification. We have gone as far as to say for our employees we want to see a copy of your disqualification. OWCP does not do a good job on follow-up. That may be because of lack of staff. I don't know.


Mr. Anderson. On the fit-for-duty procedure, we do have an internal fitness-for-duty procedure. The problem is OWCP does not recognize it. It is information generated for our own internal use. We do provide it to OWCP. And they routinely tell us that unless it is an independent medical evaluation or a second opinion evaluation done under their procedures with their doctors, meaning doctors that they have approved, which may or may not be the same doctors that we use, they don't recognize it. That turns out to be a problem because if we go into the community and contract with a doctor to do work for us, then we essentially exclude them from being able to do work for OWCP. They view that as a conflict. So yes, we have an internal procedure. Does it help us in this regard in terms of defining medical limitations? No.


Mr. Boutwell. It is true that any fitness-for-duty medical documentation sent to OWCP cannot be the single defining determination by the Department of Labor to alter or amend benefits. They will take it under advisement as any other medical documentation. They may determine, then, as a result of that fitness-for-duty result that they are going to undertake additional medical examination and that could, indeed, be the compelling information that will reduce or adjust benefits. They don't disregard the fitness for duty examination. They just cannot act solely upon it.


Mr. Greenwood. I would like to simplify things. On a scale of 1 to 10, with 10 being very difficult to stay out, whether one is truly injured and cannot work or not, and one being really hard to do that. How easy is it for Federal employees to stay out on disability on this program for a long time whether or not their injuries preclude them from working?

Let me start with Dr. Disney and ask you to just go down the panel. If it really is easy in your view, to stay out for long periods of time given the system, the answer would be 10. If it is very difficult to stay out, the answer would be one.


Dr. Disney. I feel perhaps 5.


Mr. Boswell. I would say about an 8.


Mr. Anderson. It is a 9 and only because the difficulty is posed by us, not by OWCP.


Mr. Oxfeld. It is not a question I can address.


Mr. Oppedisano. I will say 9 also.


Mr. Boutwell. It is a 1 based on my direct personal experience with people who are constantly monitored. I don't know where we get the 9 and the 10 from the Postal Service. They have their own program to monitor long-term disabilities. Again, there is no dispute. We have no problem with that. OWCP has a program. Those are two programs that do nothing but monitor long-term disability cases and ask for updated medical documentation. How could it be a 9?


Mr. Greenwood. Thank you.


Mr. Owens. Maybe we can leave on a note of agreement. Would you also all agree that OWCP needs more resources?


Mr. Anderson. Yes.


Mr. Oxfeld. Yes.


Mr. Owens. Thank you. To deal with the 5 percent of the cases, which might be abuse, they need more resources.


Chairman Ballenger. I would like to thank all of you. As far as I am concerned, you have dedicated your time. I would like to ask Dr. Disney a question. Since you are downsizing in the Department of Defense, in fact the largest reduction in workers in the Federal Government has been in the Department of Defense, what do you do with an injured employee, and you want to bring them back, but meanwhile you are downsizing. It is kind of a fascinating question that having been a manager of business myself, what do you do in a situation like that?


Dr. Disney. That is where something such as our pipeline reemployment program is so very helpful because we can provide a centrally funded position that can enable a partially disabled person to go back to work and not upset the budget of the hiring organization.


Chairman Ballenger. Let me thank you all again for bringing forward some information that I think we need. I think in spite of Mr. Boutwell's fabulous defense, I think almost all of us agree it needs some work on because it has not been touched in 20 years. Let me thank you again for taking the time.

The committee is adjourned.

[Whereupon, at 11:50 a.m., the committee was adjourned.]