Future Medical Costs Research Articles

Lump-Sum Awards in Workers' Compensation: Comment

In a recent article in this Journal [12], Joan T. Schmit considered some potential consequences of increased state leniency in allowing lump-sum awards in workers' compensation. In her conclusion she states: One wonders why lump-sum payments are employed as frequently as they are and at such low interest Schmit considers lump-summing as a discounting problem, e.g. estimating the present value of future medical and compensation costs of an injured worker. We believe her treatment of the problem is overly simplistic and leads her to place undue emphasis on the level of state mandated discount rates. She has ignored a key dimension of the phenomenon of lump-summing, namely, the litigious character of workers' compensation. Consideration of the basic interests of the principal parties to workers' compensation cases (employers, insurers and employees) and especially the role of attorneys and the courts in resolving conflicts will provide a substantial part of the answer to her question. Moreover, one important consequence of leniency, increased costs of private attorney involvement, has been overlooked. Recent experience in Florida is utilized to help establish our argument.

Workers' Compensation: Subsidies for Occupational Disease

ta C FFTER twenty-one years of work in a cotton textile mill, b Evelyn Clark is left with less than 47% of her breathing capacity. She is totally disabled from what researchers at Yale University say isbyssinosis. Her own doctor agrees that cotton dust was the cause of her problem. She now L 9tX spends about twenty days per year in a hospital. In the years leading up to disability, her earnings record showed a pattern of decreasing income and more lost time. She gets $300 per month from a Social Security retirement plan that allows persons between ages sixty-two and sixty-five to take early, but permanently reduced, retirement benefits. She has no other income and must dip into savings to live. Twenty-one years around the weaving room has left her with another legacy-poor hearing. But, comparatively speaking, Evelyn Clark is a workers' compensation winner. In June 1978, after three years of fighting a contested workers' compensation claim for byssinosis, she won a settlement from the textile manufacturer's insurance company. As part of the lump sum settlement, Mrs. Clark waived her rights to future medical cost reimbursement and to workers' compensation weekly benefits. After she paid one-third of the settlement to her lawyer, Mrs. Clark was left with a grand total of $i,ooo. That Evelyn Clark can be considered a winner is a mockery of the workers' compensation laws. The principles that guide workers' compensation practice call for adequate income protection, safety and health incentives for employers, and full medical and rehabilitative care. Evelyn Clark got more than most. While researchers estimate that as many as 23,000 totally disabled textile workers with byssinosis are living in the Carolinas, fewer than 5oo have received any compensation (1). Most of them got payment in a lump sum with forfeiture of future benefit rights. Textile