PERMANENT DISABILITY PROJECT

The Commission realizes that the rating of permanent disability is one of the most difficult tasks of the workers' compensation system, often leading to disputes and litigation. The manner in which California rates and compensates injured workers for total and partial permanent disability has enormous impact on the adequacy of their benefits, their ability to return to gainful employment, the smooth operation of DWC's adjudication system and the cost of the workers' compensation system to employers.

At the urging of the community at a CHSWC Fact Finding Hearing in January 1996, the Commission chose to undertake a comprehensive study of the workers' compensation permanent disability program and benefit. The California Industrial Medical Council (IMC) also participated in and contributed to this effort. The RAND organization was selected through the State's competitive Request for Proposals process to conduct the study.

Commencing in 1996, RAND engaged in a comprehensive study of workers' compensation permanent disability. The purpose of the study was to evaluate how permanent disability benefits are currently determined and delivered in the California workers' compensation system. It examines the extent to which the current system meets the goals and objectives set forth in the California constitutional mandate and whether the system can be improved to meet these goals better. The IMC was interested in the nature of impairment and evaluation, particularly the relationship between vocational rehabilitation and permanent disability rating.

RAND's initial report, "Compensating Permanent Workplace Injuries: A Study of the California System", indicated that there was significant uncompensated wage loss for workers' suffering permanent disability. RAND also published an executive summary entitled "Findings and Recommendations on California's Permanent Partial Disability System."

An Advisory Committee comprised of members of the workers' compensation community reviewed the RAND report and urged the Commission to study several issues further. The Commission voted to continue the comprehensive study of workers' compensation permanent disability.

Continuation of the permanent disability study will be conducted in three phases.

• Phase 1 - Return to Work Analysis
• Phase 2 - PD Schedule Revision
• Phase 3 - Analysis of wage loss and return-to-work in other states

The goal of the first phase of the study is to provide policymakers with all the information necessary to implement policies that encourage return-to-work in terms of long-term uncompensated wage loss. While the impact of return-to-work programs on Temporary Disability costs are readily apparent and often estimated, the impact of improved return-to-work on long-term wage loss has never been estimated.

Second, the study will describe the programs used by California employers and identify the best practices encouraging return-to-work.

Third, a literature review and qualitative interviews will be conducted with selected administrators and firms in other states to assess the effectiveness of policies adopted by other states to encourage return-to-work.

The second phase of the continuation of the PD study will consist of a detailed evaluation of the disability rating schedule in order to provide empirical findings that can guide a revision that will be consistent with the economic losses experienced by permanently disabled workers. As part of its research, the study will empirically identify the components of the schedule that contribute to inconsistency and make recommendations to reduce it. It will also analyze the usefulness of increased reliance on objective medical findings in disability ratings, including the extent to which such an approach can improve consistency and whether it can also improve the targeting of benefits.

The third phase will compare the wage loss experience of other states to the results for California. Estimation of the wage loss experience of other states can improve the ability to understand the causes of wage loss. Differences in wage losses across states can be analyzed so that reforms can e identified that will be effective. A focus of this analysis will be on differences across states in return-to-work. In addition, the effectiveness of the policies of other states can be evaluated and the impact of other differences in the workers' compensation system can be examined.

The additional components to the study were initiated in November 1997 and are ongoing. A report is expected in the fall of 1998.