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Workers' compensation costs are high, growing

Workers' compensation costs in Florida are the second highest among 32 states rated by a national firm, and trends show continued escalation in those costs, experts told a Senate panel Tuesday.

The cost of each major piece of the workers' compensation pie has grown dramatically over the past 10 years, William D. Hager, president and chief executive officer of the National Council on Compensation Insurance, told the Senate Select Committee on Workers' Compensation.

Wage loss payments have tripled, from $4,700 per case in 1982 to $15,700 per case in 1991. Medical costs have quadrupled, from $3,045 per case to $12,800 per case over the same period.

And, most dismaying to business and industry, premiums soared from $1.55 per $100 of payroll in 1984 to $6.09 per $100 this year.

Hager told the committee that Florida needs fundamental reform if legislators want to substantially reduce costs.

John Lewis, a workers' compensation consultant for 15 years, said Florida's record of futility gives him no confidence in the Legislature's ability to take on the special interests who make money off the system.

"I'm not impressed with where we are and where we're going, and quite frankly pretty pessimistic about this state's ability to turn itself around," Lewis said.

Doctors, hospitals, diagnostic clinics, lawyers, workers and others are feeding off a system that's spinning out of control. "Florida's gone so far down this attitude of entitlement that I think it's going to be tough to turn it back," he said.

So negative were Lewis' views that Sen. W.

D. Childers pleaded: "See if you can start a rumor because the truth's killing us."

Lewis recommended the Legislature scrap the wage loss system enacted in 1979 that pays workers a weekly wage for up to seven years. That system, Lewis said, encourages claims for on-the-job injuries in the first place, drives up medical costs and increases legal fees.

"To me, Florida is close to being back to where we were in 1978 when the crisis hit for the first time," Lewis said.

Before 1979, Florida's system paid cash claims based on an evaluation of the injury, called an impairment rating. The 1979 reform, co-authored by then-legislators Buddy MacKay, now the lieutenant governor, and Bill Sadowski, the late Department of Community Affairs secretary, set up the wage loss system then hailed as a national model.

At first, results were splendid. Rates plunged by 36 percent from 1979 to 1982. Since then, rates have risen.

Changes made in 1990 reduced this piece of the pie _ wage loss _ by cutting the amount and duration of payments. Labor went along with the changes, but it is expected to resist further wage-loss cuts.

Lewis said the wage-loss system as now structured thwarts efforts to reduce costs.

"By its very nature, we're saying if you're not working we're going to pay you money," Lewis said.

The attorney for an injured worker then recommends more diagnostic tests and medical treatment to justify that the injury prevents the employee from working.

With a lump sum payment based on the worker's impairment, the employee gets his or her payment and is free to return to work immediately.

In 1990, the Legislature reduced the amount and duration of wage loss payments by about 20 percent, Hager said. However, analysts had predicted the changes would lower wage loss costs by 40 percent.

"Florida has just about every medical cost containment known to man, and we have just about the highest medical costs in the United States," he said. "I think what we've got is a system that's learned not to say no."

Lawyers are driving up costs, too. In 1983, lawyers represented injured workers in 6 percent of the cases. Last year the percentage had climbed to 28 percent. Claimants' attorney fees soared from $69-million in 1988 to $121-million in 1991, the most recent year with available figures.

"There's not another state in the country that comes close to what we do in attorneys fees," he said. "There aren't million-dollar attorneys fees in other states."

Attorney involvement ranges widely in other states. In Pennsylvania, lawyers are involved in just 4.9 percent of the claims. Massachusetts, which has one of the most generous workers' compensation systems, attracts lawyers in 27 percent. Georgia sees workers' comp lawyers in 29.5 percent.

"Maybe the truth of the matter is, wage loss is going to have a tough time surviving," Lewis said. "There is a huge amount of inertia in trying to move a state from one type of system to another."