The cost of compensating asbestos victims under the Occupational Disease Compensation Act of 1983.

Abstract

The potentially huge financial liability due to asbestos product suits and the resulting filings for reorganization in bankruptcy by Manville, UNR Industries, Inc., and Amatex, has become a major public policy concern. In response to the problem several bills have been introduced in the Congress to provide compensation for asbestos (and other occupational disease) victims. This paper estimates the cost of compensating asbestos victims under the provisions of the "Occupational Disease Compensation Act of 1983," introduced by Congressman George Miller. Utilizing fatality projections from studies by Enterline, Selikoff, and Walker, and assumptions regarding likely claims filing and success rates, duration and degree of disability, and medical expenses, first year costs for this legislation are estimated to range from a low of $131 million to a high of $ billion. Present value cost estimates at a 2% real discount rate range from $3 billion to $56 billion. The paper also estimates the impact of possible modifications to the compensation provisions of the legislation. Reducing medical payments by the amount received from medicare would lower costs by 3-4%. Providing survivors with a 3-year lump sum benefit rather than a 5-year lump sum payment would save 20-25% as would offsetting the 5-year lump sum by expected social security old age and disability benefits. Combining all of these changes would reduce costs by almost 50%.