One of the many incendiary messages in this show is in the
announcer's very first line when the viewer is informed that "money is
taken right out of their pocket." Seconds later, the announcer again
informs viewers that the supposedly injured man was throwing hay bales
"while collecting money from you."
Money does not mysteriously float out of viewer's pockets as
portrayed by the sensationalized lead into this segment. First, money
paid to workers' compensation claims, including fraudulent ones, comes
directly from insurance industry profits. Only after dipping into
insurer profits does the cost get passed onto employers purchasing
workers' compensation insurance. Then, the costs are spread over the
entire group of policyholders; costs are not charged back to each
employer dollar for dollar with their injuries. If employer rates do
increase, the employer pays for it by one or more of the following ways:
taking it out of the company profits; reducing wages; and passing it on
to consumers. For the smaller number of companies that choose to
self-insure, they pay the claims directly rather than pay premiums for
workers' compensation insurance. Then, and only then, does it come out
of the general public's pocket IF the public chooses to purchase
the specific products made by companies with high workers' compensation
rates. In neither case does money flow out of unsuspecting people's
pockets as portrayed by the insurance industry. ...
The show neglected to mention that in 1998, workers' compensation
costs were only 1.35% of payroll down from a peak of 2.17% in 1993. It
also failed to explain that between 1992 and 1998, workers' compensation
costs to employers decreased 38% as a percentage of payroll while
benefits to workers declined 35%.
Instead, in the middle of the segment, reporter John Larson asserts,
"After all, workers' compensation fraud is quite common. The industry
estimates it adds up to $5 billion a year." The American Federation of
Labor and Congress of Industrial Organizations (AFL-CIO) has heard this
$5 billion claim before. The union's workers' compensation newsletter
explained, "These allegations have absolutely no relationship to fact
but are based on 'attitudes' about fraud (when respondents say they
'know' of someone supposedly on workers' comp even though he or she
might be capable of working). A similar claim put workers' compensation
fraud at 20 percent of the total of all claims in California in 1996;
the truth was that suspected fraud that year, according to the state's
Department of Insurance, was three-tenths of one percent!"
In the summer of 2000, an independent team of experts -- J. Paul
Leigh, Ph.D., Steven Markowitz, M.D., Marianne Fahs, Ph.D., M.P.H., and
Philip Landrigan, M.D. -- published a book titled, "Costs of
Occupational Injuries and Illnesses." In it, they estimated the national
price tag for fraudulent claims to be 1.2 billion dollars, roughly
one-fourth of the insurance industry estimate. Conceding that $1.2
billion is still a lot of money, the Leigh team put it into perspective
by explaining that it was only about two-percent of all workers'
compensation dollars spent in their sample year of 199. Whether the
true fraud rate is less than one-percent or as high as two-percent, it
is hardly "quite common."
The Dateline show provoked a response from the AFL-CIO Department of
Occupational Health and Safety, which wrote:
On May 29th NBC Nightly News and its program
Dateline chose again to focus on an instance of worker
fraud in workers' compensation. Despite the fact that
studies show that claimant fraud in this system is minimal
-- in California, worker fraud is less than 3 tenths of 1 percent
of all claims; and in Wisconsin, it is less than 1 tenth of 1 percent
of all claims, these exposés, encouraged by irresponsible
allegations from the insurance industry, feed the myth that
workers injured on the job are frauds, cheats, and malingerers.
From the opposite side of the country, Robert Stern of the Washington
State Labor Council, AFL-CIO also sent a letter to Dateline reporter Tom
Brokaw. He received no response.
Dear Mr. Brokaw:
Approximately a week and a half ago, you broadcast a
report on fraud by an injured worker in California. I frankly do
not know whether or not this worker in fact committed fraud.
I have no sympathy for workers who defraud the Industrial
Insurance system. What is astonishing to me is that your
report focused on what is acknowledged by the vast majority
of academic experts to be, by far, the source of the lowest
amount of fraud in the Industrial Insurance system. In every
study that has been done on fraud in Workers' Compensation,
employer, insurer, and provider fraud are found to be a
dramatically greater problem than claimant fraud. At a time
when injured workers throughout this nation are suffering
enormously from "deform" of the system driven primarily by
insurance providers, your report gave a seriously skewed
presentation on the problems with the system.
I do not believe you have a serious interest in what is happening
to injured workers, but if by chance you do, I urge you to take a
look at the recommendations that were made by the National
Commission on Workers' Compensation during the Nixon
administration (an administration not particularly sympathetic to
workers), then have your staff compare those recommendations
to today's reality for injured workers. We should be ashamed of
what we are doing to injured workers throughout this nation.
I wish I did not feel cynical about sending you this e-mail. I am
sorry that you have bitten the insurance industry bait, hook, line
-- Robert Stern, Special Assistant to the President,
Washington State Labor Council, AFL-CIO
In the 1970s, benefits to injured workers sunk so low that President
Nixon appointed the National Commission on State Workmen's Compensation
Laws to study the issue. It recommended that all states pay totally
disabled workers at least two-thirds of their salary up to a maximum of
the state's average weekly wage. Still, 17 states have not complied with
the Commission's recommended standard wage.
Studies support Stern's assertion that employer fraud is much greater
than claimant fraud. In Florida, a 1995-1996 compliance audit found that
of 22,758 employers contacted, 13.1% were operating without legally
required workers' compensation insurance. In just the next year, the
auditors found the rate grew another half percent. Stating that 13.6% is
probably an underestimate, the audit report explained that in addition
to the large number of employers making no attempt to buy the insurance,
still others cheat the system by intentionally under-reporting or
misclassifying its payroll and by falsely representing employees as
In a 1997 press release, the Wisconsin Department of Workforce
Development stated that workers' compensation fraud in the state was
less than six-tenths of one percent. As recently as November 1, 2000,
the same department reported on fraud from 1994 to 1999 concluding, "The
public perception of workers' compensation fraud is exaggerated," and
"The documented level of workers' compensation fraud in Wisconsin is
A few months after the Dateline show aired, the LA Times printed,
"Anti-Fraud Drive Proves Costly for Employees," and found, "Over the
last decade, employers and insurance carriers have saved billions of
dollars as legislatures in many states rolled back benefits, more
narrowly defined workplace injuries and introduced impediments to
collecting for them."
And the J. Paul Leigh team concluded, "The dollar amount of
fraudulent workers' compensation claims submitted by workers pales in
comparison to the amount for claims never filed and, more importantly,
the overall small amount of total costs paid by workers' compensation
systems. Moreover, fraud committed by insurance companies at workers'
expense is likely to be significant."
The Leigh team further estimated that workers' compensation covers
only 27 percent of all occupational illness and injury costs and that
taxpayers bear a financial burden of 28.5 billion dollars -- close to
six times the estimate of workers' compensation fraud -- through
Medicare, Medicaid, and Social Security. Further, they discovered that
costs were borne by injured workers and their families, by all workers
through lower wages, by employers with lower profits and by consumers
with higher prices. Specifically, they estimated that injured and ill
workers and their families absorbed about 44% of the costs. Now that is
an injustice worthy of outrage. ...
Workers' compensation is hardly the gold mine insurers portray it as.
Fat lawsuits and big settlements are usually completely out of the
"When I tell distraught families who just lost someone in a workplace
fatality that they cannot sue the employer, they are shocked. Sometimes
it takes attorneys to tell them the same thing until they believe it,"
says Ron Hayes, founder of Families in Grief Hold Together (The FIGHT
Project). "I've had families go to three or four attorneys until they
would accept it. It depends on how angry they are."
The National Academy of Social Insurance, a private non-profit,
non-partisan resource center explains the workers' compensation
arrangement this way:
Under the exclusive remedy concept, the worker accepts
workers' compensation as payment in full, without recourse
to an additional tort suit. Employers are responsible for
benefit payments as prescribed by workers' compensation
laws, thereby ending their liability.
In other words, exclusive remedy safeguards employers from large punitive awards but impedes justice in the many cases that might be better served in court. The bottom line is that in all but the most willfully negligent circumstances, injured and ill workers cannot sue their employer for making them injured or ill.
Discussing exclusive remedy in an online article, the law firm of Boxer & Gerson explained a California case this way:
The survivors of three workers killed by the Tosco refinery
explosion were awarded a total of $21 million in damages.
The workers were not employees of Tosco but of a
subcontractor at the site; thus they had the right to sue Tosco
for negligence. In contrast, Steve Duncan was a Tosco
employee. He survived by jumping off the tower while ablaze
from the blast. His sole remedy is workers' compensation.
As a result of falling some 60 feet, Duncan broke almost
every bone in his body. He has had 24 surgeries to date,
numerous skin grafts, and amputation of his fingers and
a thumb on one hand. He is confined to a wheelchair; and
has numerous metal pins sticking out from his knee and thigh.
He was earning more than $1,000 per week. Now, he gets
$490 a week in temporary disability benefits. Even if he is totally,
permanently disabled, this is the most he will ever get -- no cost of
living raise and no lump sum payment. If he is found to be less
than 100% permanently disabled -- even if marginally less, such
as 99.75% disabled -- he will receive just $230 per week in
permanent disability benefits -- and not for life, but for a finite
period of time.
Hayes explains, "In a handful of states, there are certain exceptions
that let people sue, such as when a person behaves criminally. But
usually, they cannot sue their direct employer. Instead, they have to
sue other employers that were involved (like on a multi-employer
construction site) or they can sue under product liability, like when
someone killed by a drill rig sues the manufacturer of the equipment
rather than the employer who did not maintain it or train workers on
"But," cautions Ron, "what people don't realize is that if they win
these lawsuits, they then have to return all money received under
workers' compensation because winning the suit will actually prove
someone else was at fault. So here are these families that fight to win
in court and then they discover that of any award they received, they
have to pay the lawyers 30-40% off the top, return any workers'
compensation they have received back to the insurance company (sometimes
a lump sum of $20,000 or more) and they won't receive any more payments
under workers' compensation. The employer's insurance company actually
ends up getting their money back." Ron describes the whole mess, saying
"It's like the lawyers need to hire economists to figure out if the
families will end up with anything." ...
The flip side of the exclusive remedy coin is that workers are paid
even if an injury was partially their fault. If a person missteps and
falls off a ladder, for instance, he or she is still compensated. The
exclusive remedy trade-off works for many short duration injuries and
illnesses where the system achieves the goal of prompt compensation
without lawsuits. For most seriously injured and ill workers, however,
the system does not work fairly.
After lengthy investigation, Executive Director Greg Tarpinian from
Labor Reseach Associates concludes, "The presumption of widespread
malingering and dishonesty undercuts any meaningful discussion of the
adequacy of benefits and provides a convenient response for those
opposed to the benefit increases that are so critically needed in many
states. Until the misplaced focus on claimant fraud is overcome,
district attorneys will continue to fry the small fish while the big
fish go free, and the voting public will remain distracted by anecdotes.
The emphasis on fraud and costs also distracts the public and lawmakers
from the workplace hazards and flagrant safety violations that are the
real cause of the problem of worker injuries and workers' compensation
1. Rohrlich, Ted and Evelyn Larrubia, "Anti-Fraud Drive Proves Costly for Employees." Los Angeles Times. Aug. 7, 2000.
2. Leigh, J. Paul et al. Costs of Occupational Injuries and Illnesses. Ann Arbor: University of Michigan Press, 2000. pg. 195-197.
3. National Broadcasting Company, Inc. Dateline, NBC, May 29, 2000. Burrelle's Information Services, Burrelle's Transcripts, No. 1124. pg. 1.
4. National Academy of Social Insurance. "Workers' Compensation: Benefits, Coverage and Costs, 1997-1998 New Estimates." May 2000. http://www.nasi.org/publications2763/publications_
show.htm?doc_id=53221&name=Workers%27%20Compensation. pg. 1
5. National Broadcasting Company, Inc. Dateline, NBC, May 29, 2000. Burrelle's Information Services, Burrelle's Transcripts, No. 1124, pg. 3.
6. While the AFL-CIO is actually a federation of many different unions, it is referred to as a union to simplify the reference.
7. AFL-CIO. "Fraud, Fraud and More Fraud." Workers' Compensation Notes; Issue 2, 1998.
8. Leigh, J. Paul et al. Costs of Occupational Injuries and Illnesses. Ann Arbor: University of Michigan Press, 2000. pg. 195.
9. Workers' Compensation Notes, AFL-CIO Department of Occupational Safety and Health, Issue 3-00, May/June 2000. pg. 1.
10. Stern, Robert. Personal communication, reprint permission given.
11. Harris, Marlys. "Workers Comp: Falling Down on the Job." Consumer Reports. February 2000. pg. 29. (Since workers' compensation is not taxed, theoretically, workers don't need their full wages; hence the Commission's two-thirds pay recommendation.)
12. Supreme Court of the State of Florida. Case Number 90,703: Report of the Fourteenth Statewide Grand Jury. Report of Workers' Compensation Fraud, Findings Section (IV)(A)(1). July Term, 1997.
13. Supreme Court of the State of Florida. Case Number 90,703: Report of the Fourteenth Statewide Grand Jury. Report of Workers' Compensation Fraud, Findings Section (IV)(A)(4). July Term, 1997.
14. State of Wisconsin, Department of Workforce Development. "Workers' Compensation Fraud is Low." Press Release, November 26, 1997.
15. State of Wisconsin, Department of Workforce Development. "Allegation of Workers' Compensation Fraud." November 1, 2000.
16. Rohrlich, Ted and Evelyn Larrubia, "Anti-Fraud Drive Proves Costly for Employees." Los Angeles Times. Aug. 7, 2000.
17. Leigh, J. Paul et al. Costs of Occupational Injuries and Illnesses. Ann Arbor: University of Michigan Press, 2000. pg. 12-13.
18. Leigh, J. Paul et al. Costs of Occupational Injuries and Illnesses. Ann Arbor: University of Michigan Press, 2000. pg. 2 and 11.
32. National Academy of Social Insurance. "Workers' Compensation: Benefits, Coverage, and Costs, 1997-1998 New Estimates." May 2000. http://www.nasi.org/publications2763/publications_
33. Young, Julius. "Workers' Compensation Reform: Why Is It Needed?" Boxer & Gerson, 171-12th Street, Suite 100, Oakland, CA 94612. (510) 835-8870. (Article text taken from a white paper prepared by Doug Kim for the California Applicant's Attorney Association. Mr. Duncan testified before the SB 996 Conference Committee hearing on Temporary and Permanent Disability Benefits, on May 8, 2000 at the State Capitol, Sacrament, CA.) http://www.boxerlaw.com/bg04024b.htm
35. Tarpinian, Greg. Labor Research Council, "Workers' Compensation Fraud: The Real Story," June 1998. http://www.laborresearch.org/ind_temps/work_comp_fraud._rpt.html