U.S. workers' compensation payments for medical care and cash benefits for workers injured on the job increased 2.0% to $55.4 billion in 2007, according to a study released by the National Academy of Social Insurance (NASI), a non-profit group in Washington, D.C. The modest growth in national spending in 2007 (the most recent year with complete data) reflects large declines in California cash benefit payments that followed reforms enacted in 2003 and 2004.

A 10% decline in California's cash payments to injured workers in 2007 followed declines in 2006 and 2005, as well.

“The reduced spending for cash benefits reflects the continuing effects of cost containment reforms that were put in place in 2003 and 2004,” said NASI member Christine Baker, who directs the California Commission on Health and Safety and Workers' Compensation, a nonpartisan labor-management group that advises state policymakers. For more on the California reforms see the NASI brief, “Workers' Compensation in California and in the Nation: Benefit and Employer Cost Trends, 1989-2005.”

Nationally, workers' compensation payments of $55.4 billion in 2007 include $27.2 billion for medical care (an increase of 3.3% over the prior year) and $28.3 billion in wage replacement benefits for injured workers (an increase of 0.8%).

The costs to employers for workers' compensation are what they pay each year. For employers who buy insurance, costs are premiums they pay to insurance companies plus benefits they pay under deductible arrangements in their insurance policies. For employers who insure their own workers, costs are the benefits they pay plus administrative costs. In 2007, employers paid a total of $85.0 billion nationwide for workers' compensation. A sharp drop in California employers' costs (of 14.3%) led to a small drop for the nation (2.7%). Outside California, employer costs for workers' compensation were almost unchanged, (up 0.1%).

The new report compares trends in workers' compensation cash benefits and Social Security disability insurance benefits, each as a share of payrolls covered by each program. Trends in the two programs have moved in opposite directions since 1980. When workers' compensation cash payments rose in the 1980s, Social Security disability benefits declined as a share of payroll. After 1990, workers' compensation cash payments declined, and Social Security disability insurance payments rose as a share of payroll.

According to John F. Burton, Jr., chair of the panel that oversees the study, “The different trends suggest that retrenchment in one program may cause injured workers to turn to the other program for benefits to replace their lost wages.”

NASI is sponsoring a policy research seminar on November 18, 2009 to look further into how developments in workers' compensation affect Social Security disability insurance.

The new report, "Workers' Compensation: Benefits, Coverage and Costs, 2007," is the twelfth in a NASI series that provides comprehensive national data on workers' compensation cash and medical payments for each state, the District of Columbia and federal programs.

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