    [House Hearing, 107 Congress]
    [From the U.S. Government Publishing Office]

      OVERSIGHT OF THE MANAGEMENT OF THE OFFICE OF WORKERS' COMPENSATION
                    PROGRAMS: ARE THE COMPLAINTS JUSTIFIED?

    =======================================================================

                                    HEARING

                                   before the

                     SUBCOMMITTEE ON GOVERNMENT EFFICIENCY,
                            FINANCIAL MANAGEMENT AND
                          INTERGOVERNMENTAL RELATIONS

                                     of the

                                  COMMITTEE ON
                               GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED SEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 9, 2002

                                   __________

                               Serial No. 107-191

                                   __________

           Printed for the use of the Committee on Government Reform

      Available via the World Wide Web: http://www.gpo.gov/congress/house
                          http://www.house.gov/reform

                                     ______

    86-344              U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2003
    ____________________________________________________________________________
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                         COMMITTEE ON GOVERNMENT REFORM

                         DAN BURTON, Indiana, Chairman
    BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
    CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
    CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
    ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
    JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
    STEPHEN HORN, California             PATSY T. MINK, Hawaii
    JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
    THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington,
    MARK E. SOUDER, Indiana                  DC
    STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
    BOB BARR, Georgia                    DENNIS J. KUCINICH, Ohio
    DAN MILLER, Florida                  ROD R. BLAGOJEVICH, Illinois
    DOUG OSE, California                 DANNY K. DAVIS, Illinois
    RON LEWIS, Kentucky                  JOHN F. TIERNEY, Massachusetts
    JO ANN DAVIS, Virginia               JIM TURNER, Texas
    TODD RUSSELL PLATTS, Pennsylvania    THOMAS H. ALLEN, Maine
    DAVE WELDON, Florida                 JANICE D. SCHAKOWSKY, Illinois
    CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
    ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
    C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
    EDWARD L. SCHROCK, Virginia                      ------
    JOHN J. DUNCAN, Jr., Tennessee       BERNARD SANDERS, Vermont
    ------ ------                            (Independent)

                          Kevin Binger, Staff Director
                     Daniel R. Moll, Deputy Staff Director
                         James C. Wilson, Chief Counsel
                         Robert A. Briggs, Chief Clerk
                     Phil Schiliro, Minority Staff Director

        Subcommittee on Government Efficiency, Financial Management and
                          Intergovernmental Relations

                       STEPHEN HORN, California, Chairman
    RON LEWIS, Kentucky                  JANICE D. SCHAKOWSKY, Illinois
    DAN MILLER, Florida                  MAJOR R. OWENS, New York
    DOUG OSE, California                 PAUL E. KANJORSKI, Pennsylvania
    ADAM H. PUTNAM, Florida              CAROLYN B. MALONEY, New York

                                   Ex Officio

    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
              J. Russell George, Staff Director and Chief Counsel
                     Earl Pierce, Professional Staff Member
                            Justin Paulhamus, Clerk
               David McMillen, Minority Professional Staff Member

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on May 9, 2002......................................     1
    Statement of:
        Hallmark, Shelby, Director, Workers' Compensation Program,
          Department of Labor........................................    39
        Heddell, Gordon S., Inspector General, U.S. Department of
          Labor......................................................    55
        Henderson, Ronald E., Manager, Health and Resource
          Management, U.S. Postal Service............................    65
        Stalcup, George H., Director, Strategic Issues, U.S. General
          Accounting Office..........................................     2
        Ungar, Bernard L., Director, Physical Infrastructure, U.S.
          General Accounting Office..................................    18
        West, Richard, General Counsel and Assistant Inspector
          General for Congressional, Oversight and Legal Services,
          U.S. Postal Service........................................    78
    Letters, statements, etc., submitted for the record by:
        Hallmark, Shelby, Director, Workers' Compensation Program,
          Department of Labor, prepared statement of.................    42
        Heddell, Gordon S., Inspector General, U.S. Department of
          Labor, prepared statement of...............................    57
        Henderson, Ronald E., Manager, Health and Resource
          Management, U.S. Postal Service, prepared statement of.....    68
        Stalcup, George H., Director, Strategic Issues, U.S. General
          Accounting Office, prepared statement of...................     5
        Ungar, Bernard L., Director, Physical Infrastructure, U.S.
          General Accounting Office, prepared statement of...........    20
        West, Richard, General Counsel and Assistant Inspector
          General for Congressional, Oversight and Legal Services,
          U.S. Postal Service, prepared statement of.................    80

      OVERSIGHT OF THE MANAGEMENT OF THE OFFICE OF WORKERS' COMPENSATION
                    PROGRAMS: ARE THE COMPLAINTS JUSTIFIED?

                                  ----------

                             THURSDAY, MAY 9, 2002

                      House of Representatives,
      Subcommittee on Government Efficiency, Financial
            Management and Intergovernmental Relations,
                                Committee on Government Reform,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10:03 a.m., in
    room 2154, Rayburn House Office Building, Hon. Stephen Horn
    (chairman of the subcommittee) presiding.
        Present: Representative Horn.
        Staff present: J. Russell George, staff director and chief
    counsel; Bonnie Heald, deputy staff director; Earl Pierce,
    professional staff member; Justin Paulhamus, clerk; Conn
    Carroll, clerk of the Subcommittee on Criminal Justice, Drug
    Policy and Human Resources; David McMillen, minority
    professional staff member; and Jean Gosa, minority clerk.
        Mr. Horn. A quorum being present, this hearing of the
    Subcommittee on Government Efficiency, Financial Management and
    Intergovernmental Relations will come to order.
        Today the subcommittee is continuing its continuing
    examination of the Office of Workers' Compensation Programs,
    administered by the U.S. Department of Labor. This program was
    established in 1916 under the Federal Employees Compensation
    Act to handle compensation claims for injured Federal workers
    and employees in a non-adversarial manner.
        In fiscal year 2000, the program received approximately
    174,000 new injury claims and paid out approximately $2.1
    billion in medical and death benefits to nearly 273,000 Federal
    employees who suffered work-related injuries. Despite the
    laudable efforts of this office, the subcommittee has heard
    countless complaints about the program, from lost case files
    and long delays in the appeals process to unresponsive claims
    examiners. This is the subcommittee's fourth hearing on this
    subject.
        Despite these hearings and numerous telephone calls and
    letters from this subcommittee, injured workers and their
    representatives say the problems continue. They say that case
    files are still being lost, which has no excuse for that.
    Telephone calls are still not being returned, and they're just
    impossible. And cases are still unresolved. Meanwhile, these
    Federal employees are without compensation and their medical
    bills continue to mount.
        In response to these complaints, the subcommittee requested
    the General Accounting Office to conduct an examination of the
    management practices and customer service at the Office of
    Workers' Compensation Programs. Today we will discuss the
    findings of that study and what changes may be needed to
    improve this vital program. It is imperative that Federal
    employees know that if they are injured on the job, they will
    receive appropriate assistance from their employer, the Federal
    Government, in a timely way.
        I welcome each of our witnesses today and I look forward to
    your testimony. As you know, these are investigating committees
    and we do swear in all of the witnesses and any of your
    assistants that will be whispering in your ear, please include
    them. The clerk will note the names, for those at the table and
    those behind the table. So if you will stand and raise your
    right hands, and have your aides back there also, and the clerk
    will get the names.
        [Witnesses sworn.]
        Mr. Horn. The clerk will note that the affirmation of the
    oath has occurred.
        We will now move with the U.S. General Accounting Office.
    We have with us George S. Stalcup, Director, Strategic Issues;
    and Bernard L. Ungar, Director, Physical Infrastructure, U.S.
    General Accounting Office. We look forward to your summary, and
    we will get into questions after all the witnesses have made
    their presentation.
        So Mr. Stalcup, go to it.

      STATEMENT OF GEORGE H. STALCUP, DIRECTOR, STRATEGIC ISSUES,
                     U.S. GENERAL ACCOUNTING OFFICE

        Mr. Stalcup. Thank you, Mr. Chairman. We appreciate the
    opportunity to testify today on selected aspects of the Office
    of Workers' Compensation Programs, which has been for a number
    of years a particular focus of this subcommittee.
        We're here today in response to your request that we
    conduct two separate reviews; one to examine issues associated
    with the claims adjudication process; and second, to assess
    certain aspects of compensation claims submitted by Postal
    Service employees. We have provided the committee with full
    statements. Mr. Ungar and I would now like to briefly summarize
    those statements, starting with my discussion of the
    adjudication process, then Mr. Ungar will talk about the review
    of Postal Service claims.
        As requested, we focused on four primary dimensions of the
    OWCP claims adjudication process. First, we looked at the rates
    of initial claim decisions that, once appealed by the claimant,
    are reversed or remanded back to the district office and
    reasons why. Second, we looked at timeframes for notifying
    claimants about the outcomes of hearings on their appeals.
    Third, we looked at whether physicians used by OWCP are board
    certified, State licensed and hold appropriate medical
    specialties. Last, we looked at how OWCP monitors customer
    satisfaction and potential claimant fraud.
        When a claim is denied, the claimant has three avenues of
    recourse. They may request an oral hearing or review of the
    written record by the Branch of Hearings and Review. They also
    may request reconsideration by a different claims examiner
    within the district office. Finally, they may ask for a review
    by the Employees Compensation Appeals Board [ECAB].
        We found that approximately 31 percent of the claims
    decisions appealed by the claimants were either reversed or
    remanded. Some reversals and remands were due to additional
    evidence being submitted by the claimant. However most, 25
    percent of all claims appealed, were a result of other reasons,
    such as a question about or problem with the initial evaluation
    of information or a problem with the management of the case
    file. When a claim is initially denied but later upon appeal
    determined to have been valid, the effect is a delay in the
    benefits to the claimant. Further, the claimant may have to
    incur additional expenses during the appeals process. It is
    therefore important that improper denials be minimized.
        OWCP takes a number of steps to monitor remands and
    reversals. Among other things, they review ECAB decisions and
    prepare periodic circulars and bulletins to claims examiners
    with examples of problems and suggested corrective actions.
    While such information is important, we believe there may be an
    opportunity for OWCP to more systematically track reasons for
    remands and reversals and their underlying causes. Such
    information, coupled with the steps OWCP is already taking,
    could help it identify actions that might reduce the frequency
    of remands and reversals.
        Regarding our second objective, the Federal Employee
    Compensation Act [FECA] specifies that claimants will be
    notified of hearing outcomes ``within 30 days of the hearing.''
    In setting target timeframes for such notification, OWCP has
    factored in time for producing hearing transcripts, for both
    the claimant and the employing agency to comment, and for the
    claimants to submit additional evidence. OWCP can also grant
    extensions if necessary.
        Considering these factors, OWCP has set a target of
    notifying 96 percent of the claimants of hearing outcomes
    within 110 days of the original hearing dates. We found they
    notified 92 percent within this 110 day period.
        For our third objective, we found that at least 94 percent
    of second opinion physicians and 99 percent of referee
    physicians were board certified. Similarly, we found that at
    least 96 percent of second opinion physicians and 99 percent of
    referee physicians were State licensed. We also estimate, that
    98 percent of all physicians held appropriate specialties for
    the injuries and illnesses they were evaluating.
        To monitor customer satisfaction, OWCP has about annually
    surveyed claimants by mail. More recently, they have also
    conducted focus groups of employing agencies and, in 2001,
    hired a contractor to perform a telephone survey of claimants.
    OWCP has received mixed results on these written surveys,
    higher in some areas, lower in others. The most recent written
    survey results available to us, those for year 2000, showed a
    52 percent customer satisfaction rate with the workers'
    compensation program as a whole.
        In monitoring potential fraud, the Labor Inspector General
    relies on a number of sources. One source involves OWCP claims
    examiners who look for certain indicators or red flags. The IG
    will look at questionable cases and carry out the appropriate
    investigation activity. From 1998 to 2001, the IG investigated
    approximately 500 claims resulting in 212 indictments and 182
    convictions of claimants and/or physicians.
        This concludes my portion of the testimony.
        [Note.--The report entitled, ``Office of Workers'
    Compensation Programs, Further Actions Are Needed to Improve
    Claims Review,'' may be found in subcommittee files.]
        [The prepared statement of Mr. Stalcup follows:]

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        Mr. Horn. Thank you very much for that.
        Now Mr. Bernard Ungar is going to testify on a different
    way. Mr. Ungar.

           STATEMENT OF BERNARD L. UNGAR, DIRECTOR, PHYSICAL
             INFRASTRUCTURE, U.S. GENERAL ACCOUNTING OFFICE

        Mr. Ungar. Mr. Chairman, I'm pleased to be here today to
    discuss Workers' Compensation Program benefits for Postal
    Service Employees. I'm accompanied today by our team that
    worked on this assignment and is continuing to do so: Sherrill
    Johnson, Michael Rives, Fred Lyles, Melvin Horne, who's not
    here, and John Vocino. They're going to help bail me out when
    you give me the tough questions to answer, hopefully.
        When we met with you last year, you expressed a great deal
    of concern about the level of service that constituents were
    receiving from the workers' compensation program. Since the
    Postal Service constitutes such a large part of this program,
    you asked us to focus on the Postal Service and determine to
    what extent Postal Service employees were getting the service
    to which they were entitled to. In response to that, we focused
    on two questions during our review. One, whether USPS employees
    are submitting the evidence required for an eligibility
    determination, and second, the time required by the Postal
    Service and the Department of Labor to make entitlement
    decisions as well as decisions for compensation and schedule
    awards.
        Our work is still in progress. The results that we are
    presenting today are preliminary. They are not yet complete, we
    still have a great deal of analytical work to do, as well as
    discussions with the Department of Labor and the Postal Service
    officials.
        In brief, we randomly sampled about 500 cases from all OWCP
    districts for chargeback year 1998. We found that essentially
    all the employees from the Postal Service did submit the
    required evidence eventually.
        Regarding the median processing times for establishing
    entitlement and approving wage loss compensation payments,
    there are two separate processes: one for entitlement and one
    for compensation. The Postal Service supervisors in this case
    met all the requirements in terms of the time requirements for
    getting the claim information to OWCP.
        For traumatic injuries, our preliminary data--and I want to
    emphasize that this data is preliminary--indicates that the
    median processing times for OWCP would appear to exceed the
    performance standards for entitlement decisions and for
    compensation decisions laid out in Labor's guide. We did not
    determine, however, the extent to which our cases that we're
    reporting on include those types of cases which aren't subject
    to the performance standard. There are two types of cases--
    administratively closed cases and schedule awards--that would
    not be counted in the time processing period. Again, because of
    the short time we had for the hearing, we did not have enough
    timeframe to go back and determine the extent to which our
    cases had those types of situations.
        With respect to median processing times for entitlement and
    compensation for wage loss decisions for occupational diseases,
    our preliminary data indicate that OWCP met its standards for
    entitlement decisions. However, it does not have a standard for
    occupational disease claims for compensation.
        It's important to point out, and I want to emphasize this,
    that we are reporting the median times because of the shortness
    of time that we had to analyze the results. That means that
    half the cases would have exceeded the median time. Some of
    these cases could have been beyond program requirements or
    performance standards.
        Finally, I'd like to mention that we have not yet had an
    opportunity to determine the extent to which USPS employees may
    have gone without income while they were waiting for payment.
    We plan to do so, however, as we complete our review. From the
    case files that we reviewed, it does appear that many have
    continued working, received continuation of pay for up to 45
    days, or gone on paid leave. Therefore, it would appear as
    though many did not go without pay for the period of time they
    were waiting. But this we hope to get to in greater detail as
    we complete our review.
        Mr. Chairman, that completes my summary.
        [The prepared statement of Mr. Ungar follows:]

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        Mr. Horn. Well, thank you very much for that. Did you find
    any aspect of the Post Office not helping the people with the
    forms or anything else? It seemed to look like, hey, if you
    want to be in this organization, which is a corporation now,
    you ought to not be seen as having too liberal? Was there any
    truth to that?
        Mr. Ungar. Mr. Chairman, we didn't quite look at that
    issue. I think from the median timeframes, the Postal Service
    supervisors, at least from the cases that we sampled, seemed to
    process these fairly quickly. But we really didn't look at the
    issue of to what extent the employees would be receiving help
    or not receiving help from the Postal Service itself.
        Mr. Horn. OK. We'll have a little more with that later.
        And we will now go with Shelby Hallmark, the Director of
    Workers' Compensation Programs for the Department of Labor. Mr.
    Hallmark.

     STATEMENT OF SHELBY HALLMARK, DIRECTOR, WORKERS' COMPENSATION
                      PROGRAM, DEPARTMENT OF LABOR

        Mr. Hallmark. Thank you, Chairman Horn, for inviting us to
    speak about the FECA program this morning. I'd ask that my
    written testimony be made part of the record, I'll try to
    summarize briefly this morning.
        Mr. Horn. All of the written things automatically go in
    when you start talking and summarizing.
        Mr. Hallmark. Just as an overview, I believe we are making
    progress in the FECA program to address a range of issues.
    We've been pursuing a long-term strategic plan aimed at
    transforming the program into a responsive customer focused
    service delivery system. That transformation is not yet
    complete, but many steps have been taken in the right
    direction. We're moving to a paperless environment that will
    reduce lost case files. We are implementing a comprehensive
    communications redesign effort, which includes new phones, call
    centers, improved surveying, etc. We are completely renovating
    our computer support system, that should come online next year.
    We are outsourcing our medical bill processing system, also
    expect to do that next year. And we've raised the bar on our
    quality index measure that is used to ensure that adjudications
    are done right the first time.
        While we are still in the midst of all these construction
    projects, we hold ourselves accountable on a wide range of
    performance measures for timeliness, quality and effectiveness
    at the program and employee level. And we do that on a
    continual basis, as well as carrying out challenging GPRA and
    government-wide goals.
        We've been able to maintain these performance levels during
    the past year, despite the loss of staff to our new Energy
    Employees Compensation Division, despite the impact of
    September 11th and the anthrax attacks. The latter caused 2,000
    claims to be filed by Federal employees, and renewed our focus
    on the importance of this program.
        We welcome the two GAO studies that have just been reported
    on that followed from previous discussions of this
    subcommittee. In general, these reports find confirmation of
    our view of the areas that are reviewed. We're particularly
    pleased with the finding regarding high quality medical
    evaluations, that system is working and improving.
        With regard to the study on timeliness in the postal area,
    we are certainly very keen on further analysis of that type of
    timeframe. One or two points I'd like to make that I've got
    charts for this morning, and we may be able to discuss those
    later on in the comment period. With respect to the
    adjudication of new traumatic injuries, Mr. Stalcup mentioned
    the question of our administrative closure. This chart shows
    that 50th percent of the cases in the GAO study were completed
    in 84 days. When the short form or limited approval status is
    taken into consideration, that 50 percentile changes to 17
    days. That's the way the system actually works. Bills are being
    paid. We believe that is the true measure of timeliness in this
    area.
        Likewise on occupational disease cases, the 50 percentile
    data that GAO arrived at was 136 days. That is influenced very
    strongly by the day that the injured worker chooses as the
    point at which the occupational exposure occurred. If you take
    the date that we received the claim from Postal Service, the
    50th percentile is now 59 days.
        Perhaps most importantly, on the last chart here, when you
    talk about timeliness of wage loss claims, the 50th percentile
    GAO found was 49 days, clearly too long. But if you take out
    the complicated schedule award cases, which often take quite a
    long time to develop, the median time is 33 days for wage-loss
    cases, and OWCP's portion of that time, once we get the claim,
    is only 15 days, which is within our standard.
        We believe that these things need to be studied further.
    But one area that we'd like to comment on importantly is that
    the Postal Service portion of this time is important to avoid
    wage loss between continuation of pay and the beginning of OWCP
    compensation.
        The last report, which I'll try to summarize very quickly,
    talks about the remand and reversal rate. We have concerns
    about the findings of that report, which we've responded to
    GAO. We believe it underestimates the percentage of cases that
    result from new evidence having been produced, and therefore
    over-estimates the number of remands that result from OWCP
    errors. We also believe that the report under-estimates the
    level of OWCP's monitoring of these issues at present.
        We believe we have an effective appellate process, both at
    the hearings and review level and the Employee Compensation
    Appeals Board. We do not believe that the remand/reversal rate
    of either of those bodies is excessive in light of the complex
    nature of the matters being reviewed, and especially at the
    hearings and review level in terms of the introduction of new
    evidence and argument, which is the primary reason for that
    entire process. We go into great detail in my written testimony
    about our concerns about that issue and I would be glad to
    answer further questions about it. But suffice it to say that,
    in our view, the overwhelming reason for remands and reversals
    is often the introduction of new evidence, as opposed to error
    in the original decisions.
        Nevertheless, we will continue to review and monitor the
    cases that come out of our appellate process and to improve
    that process as GAO has recommended, and to focus on our
    quality index, which as I indicated before is intended to reach
    a correct decision in the first place, whether or not the
    claimant in fact appeals that decision. I would be glad to
    answer questions later on.
        [The prepared statement of Mr. Hallmark follows:]

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        Mr. Horn. Thank you.
        We will now move ahead to the Inspector General. That's the
    Honorable Gordon S. Heddell, Inspector General, Department of
    Labor. Please proceed.

        STATEMENT OF GORDON S. HEDDELL, INSPECTOR GENERAL, U.S.
                          DEPARTMENT OF LABOR

        Mr. Heddell. Good morning, Mr. Chairman. Thank you for
    inviting me to testify in my capacity as the Inspector General
    of the U.S. Department of Labor.
        I am pleased to address some of the management and
    operational concerns that my office has noted during the course
    of our audit, investigation and evaluation activities involving
    the Federal Employees Compensation Act program. I will
    summarize my full statement and ask that it be entered into the
    record.
        Mr. Horn. They're automatically in once you are presented.
        Mr. Heddell. Thank you.
        Mr. Chairman, as you know, FECA is a large worker
    disability compensation program that serves over 200,000
    claimants each year. Not surprisingly, my office receives
    complaints about this program from claimants, from other
    agencies, and from Members of Congress regarding the
    administration of this program. Typically, these concerns
    include dissatisfaction with assigned physicians, disagreement
    with appeals decisions, calls not being returned, and medical
    bills not being paid promptly. We also receive information
    about claimants and providers who abuse the system.
        Over the years, the OIG has provided oversight of this
    program and has identified a number of inefficiencies,
    vulnerabilities, and customer service problems. It's important
    to note, however, that OWCP management has been responsive to
    our findings and that most of our recommendations to improve
    the program have in fact been implemented.
        Because of the size of the FECA program and its potential
    for abuse by claimants and medical service providers, the OIG
    has focused its attention on identifying and investigating
    fraudulent claims. Over the last 4 fiscal years, for example,
    we have opened 513 FECA investigations. Our investigations
    during this same period resulted in 212 indictments, 183
    convictions, and over $79 million in criminal, civil, and
    administrative penalties. We currently have 401 open FECA
    investigations.
        Our audits and evaluations, on the other hand, have
    generally been directed toward the program's internal controls,
    customer service, and performance measures. For example, in
    September 2000, my office issued an audit report on OWCP's
    internal controls. As part of this audit, we conducted a cross-
    match of FECA roles with Social Security Administration
    earnings records and with State wage records to determine
    whether FECA claimants earned wages while receiving benefits.
    Among our findings was that 905 of the 27,050 claimants in our
    sample had total earnings of $2.9 million and that almost 5
    percent of the Social Security numbers were incorrect.
    Unfortunately, because we did not have access to individual
    earnings information on the claimants who showed income, it was
    not possible to review their claims to determine whether the
    earnings were reported or whether there was potential fraud or
    over-payment.
        Three years ago, the OIG conducted a review of the surveys
    that OWCP uses to measure customer satisfaction. We concluded
    that OWCP's survey procedures were flawed and did not provide
    accurate and useful information. Our report made several
    recommendations in the areas of survey design, customer service
    measurement, sampling, response rate, and survey operations.
    OWCP reported that our recommendations have been incorporated
    into its customer satisfaction survey development process.
        In another evaluation relative to customer service, the OIG
    reviewed some specific allegations of anti-claimant bias
    regarding the acceptance of initial claims for benefits,
    determination of benefits, and the appeals process. Our review
    did not confirm evidence of these allegations. Instead, we
    found that the agency was committed to improving service to
    claimants and ensuring the cost-effective administration of the
    program. Our recent audit of the FECA program's performance
    measures did in fact disclose needed improvements.
        While we found that the Employment and Standards
    Administration had developed and implemented a strategic annual
    performance plan reflecting its mission, and that it had
    outcome-based goals, we also found that ESA needed to develop a
    system to identify the full cost of achieving reported
    performance to provide a more comprehensive picture of program
    accomplishments.
        In my full statement, I also discuss our investigative work
    and a number of legislative recommendations that we believe
    would improve the administration of this program. In
    conclusion, Mr. Chairman, we consider FECA to be an important
    program that needs to operate as effectively and efficiently as
    possible. We will continue to work with the Department and the
    Congress to this end.
        This concludes my testimony. I would be glad to answer any
    questions that you may have. Thank you.
        [The prepared statement of Mr. Heddell follows:]

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        Mr. Horn. Thank you.
        Just let me go with one question right now. Do you have
    easy access to the Social Security numbers as an Inspector
    General? Or is there some concern where Social Security doesn't
    want its records made available? How does that process work for
    you?
        Mr. Heddell. Mr. Chairman, the Department in fact does not
    currently have legislative authority to conduct what we call
    routine cross-matches between wage data and FECA benefits.
    Automated cross-matches with Federal and State wage records
    could greatly assist OWCP in identifying potential claimant
    fraud. The system as it exists right now, OWCP can only access
    Social Security earnings information if granted permission by
    the claimant themselves. Claimants who are defrauding the FECA
    program by not reporting their outside employment income are
    unlikely to willingly provide this authorization to OWCP,
    because it could adversely affect them if they are doing
    something that's illegal.
        On the other hand, the policy is that denying this Social
    Security information by the claimant doesn't jeopardize their
    claim in any way at all. So yes, sir, it would be extremely
    helpful to have legislation in this area that would allow the
    Department access to Social Security Administration wage data.
        Mr. Horn. Mr. Stalcup, does the General Accounting Office
    think that's a good recommendation?
        Mr. Stalcup. Our work was not focused on that specific
    issue. I know that our office does have a position on that
    which I can definitely provide.
        Mr. Horn. It makes sense to me, and we ought to give the
    Inspector General just that authority.
        So we will now go on to our last two, and we thank you for
    coming, because I know it was the last minute and we appreciate
    your coming here. Ronald E. Henderson is Manager of the Health
    and Resource Management of the U.S. Postal Service. With him is
    Richard K. West, the General Counsel and Assistant Inspector
    General for congressional oversight and legal service for the
    U.S. Postal Service. Go ahead.

    STATEMENT OF RONALD E. HENDERSON, MANAGER, HEALTH AND RESOURCE
                    MANAGEMENT, U.S. POSTAL SERVICE

        Mr. Henderson. Good morning, Mr. Chairman and subcommittee
    members. I appreciate this opportunity to share information
    with you about the workers' compensation program as it affects
    the U.S. Postal Service.
        With one of the largest workforces in the United States,
    comprising hundreds of thousands of employees working in a wide
    variety of positions in post offices, mail processing
    facilities, administrative offices and on virtually every
    street in every neighborhood in the Nation, the Postal Service
    well recognizes the value of the Federal Employees Compensation
    Program managed by the Office of Workers' Compensation
    Programs.
        The men and women of the Postal Service have historically
    worked through extreme weather conditions, including floods,
    blizzards, earthquakes and other natural calamities to deliver
    on the fundamental right of all Americans, no matter who, no
    matter where, to affordable, universal mail service. As you
    know, over the last 8 months, our people have been challenged
    as never before. They have bravely faced the threat of
    bioterrorism through the mail, and in the last week, the
    extreme danger of pipe bombs placed in customer mail boxes
    across several Midwestern States.
        In administering the provisions of the act within the
    Postal Service, it is our policy to ensure the prompt and
    accurate processing of all workers' compensation claims for all
    eligible employees. We maintain an active and far-reaching
    program to accomplish this. Similarly, it is our goal to
    provide meaningful and productive work within any medical
    limitation to injured workers who are able to return to work.
    We also work closely with the Office of Workers' Compensation
    Programs to find suitable work outside the Postal Service, to
    the extent possible, for injured employees who may not be able
    to return to postal duties, but who are capable of returning to
    the workforce in an active capacity.
        While the cost of pain and suffering cannot be calculated
    on a monetary scale, the benefits provided to employees who
    become ill or injured as a result of their Postal Service
    employment do come with specific costs. This fiscal year, we
    project the compensation medical costs will reach approximately
    $800 million. This figure represents an approximately 11
    percent increase over last year. It is a figure that has been
    steadily rising over the last 5 years.
        It is important to place this figure in its proper
    framework. Our rise in compensation costs does not track
    similar to a rise in accidents. This fiscal year we expect that
    our OSHA injury illness rate will decline by at least 10
    percent below last year's figures. For the same period,
    attrition will reduce our complement of career employees by
    some 20,000. This comes on the heels of a reduction of almost
    12,000 career employees in 2001 and 10,000 in fiscal year 2000.
    A reduced accident rate involving fewer employees should reduce
    workers' compensation costs.
        The Postal Service is very clear in its understanding of
    the relationship between a strong safety program and a healthy
    workforce. Beyond our own efforts to reduce costs through
    effective case management, we are grateful for the help of
    others. We appreciate the significant and successful efforts by
    the Postal Service Office of Inspector General to identify and
    eliminate fraudulent practices and practices by healthcare
    providers in connection with the workers' compensation program.
    Similarly, the effects of the Postal Inspection Service in
    pursuing fraud by claimants continues to protect the Postal
    Service assets.
        The work of both organizations is important to maintain the
    integrity of a program that is so important to our employees,
    their families and communities. Throughout their financial
    recovery efforts, the Office of Inspector General and the
    Postal Inspection Service are minimizing the costs of this
    program to the households and businesses of America. After all,
    it is the users of the mail who ultimately pay for the program
    through their purchase of postal products and services.
        As we have seen, our accident rate is decreasing at the
    same time that we are seeing a double digit increase in
    workers' compensation costs. Considered within the context of
    the overall financial condition of the Postal Service, this
    trend is disturbing. This year, the Postal Service is
    projecting net loss in the range of $1.5 billion, and this year
    we project a mail volume decline of 6 billion pieces, the
    largest in our history.
        Congress and the Comptroller General of the United States,
    recognizing the extremely difficult financial position of the
    Postal Service, asked us to develop a comprehensive
    transformation plan. This plan addresses the actions we can
    take within the constraints of current legislation to protect
    our ability to provide universal mail service to the Nation.
    The plan also identified the short and long-term legislative
    changes needed for the continuation of a successful national
    postal system.
        Ultimately, we believe that the American public will
    benefit most from a postal service that is operated as a
    commercial-government enterprise. While we've examined other
    structural models, including privatization and a return to the
    1960's model of a heavily subsidized government agency, we do
    not believe these models best serve the interests of the Nation
    or provide service at a cost they will be willing to pay.
        Because our transformation plan is comprehensive, it does
    not address in detail changes to our own internal practices and
    potential changes to the administration of the Federal
    Employees Compensation Act, though protecting interests and
    rights of postal employees who suffer from job related injuries
    and illnesses. At the same time, these changes can bring
    considerable relief to the dramatic upward pressure we have
    been experiencing in connection with program costs.
        Our plan identifies the following strategies we believe can
    reduce injury compensation costs. No. 1, expand the preferred
    provider organizational program. Two, moving Federal Employees
    Compensation Act recipients to a FECA annuity at age 65. Three,
    encourage OWCP to revise regulations to permit the employer to
    have direct contact with the treating physician.
        Four, private sector out-placement of injured Postal
    Service employees and the creation of new internal positions to
    accommodate injured workers, such as the baggage checkers
    positions with the Department of Transportation. Five, greater
    interagency cooperation to attain organizational objectives.
        In summary, the Postal Service supports the objectives of
    the Federal Employees Compensation Act, yet we believe the
    elements of the act as now administered result in unnecessary
    costs that substantially contribute to the Postal Service's
    deteriorating financial condition. We also believe that many of
    these costs could be reduced with no harm to injured employees.
        Mr. Chairman, I appreciate the opportunity to share these
    proposals with you today. It is my hope that my comments
    provide you and the members of the subcommittee with
    understanding of the challenges faced by the Postal Service in
    connection with workers' compensation costs. I'll be pleased to
    answer any questions you might have.
        [The prepared statement of Mr. Henderson follows:]

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        Mr. Horn. Mr. West.

       STATEMENT OF RICHARD WEST, GENERAL COUNSEL AND ASSISTANT
       INSPECTOR GENERAL FOR CONGRESSIONAL, OVERSIGHT AND LEGAL
                     SERVICES, U.S. POSTAL SERVICE

        Mr. West. Good morning, Chairman Horn. I appreciate the
    opportunity to discuss the work of the Office of Inspector
    General regarding the administration of the Postal Service's
    Workers' Compensation Program.
        In my statement, I will highlight our efforts to help the
    Postal Service identify better ways to administer its program.
    Our office is particularly interested in giving postal
    employees the assistance they need and helping postal
    management control costs. As you know, the Postal Service's
    financial condition is getting worse. Since 1998, their
    workers' compensation costs have increased by 29 percent.
        Controlling these costs is a major concern, but so is the
    health and safety of postal employees, particularly in light of
    the recent anthrax attacks, where two postal employees died,
    others were infected and thousands exposed. Concerns about this
    threat continue, but as shown by the recent discovery of pipe
    bombs in mail boxes, postal employees risk their health and
    safety on a daily basis. Sadly, these injuries can result in
    significant costs to both employees and the Postal Service.
        Turning to the work we have performed since our inception
    in 1997, we have already initiated over 100 investigations
    involving healthcare fraud, as well as a number of audits of
    Postal's efforts in the workers' compensation area. We also
    have a hotline through which employees can report concerns
    about the program.
        Perhaps our biggest challenge in performing audits and
    investigations in this area is the outdated, manually driven
    processes used to track and manage the program. Until these
    processes are automated and streamlined, it will be difficult
    for us to perform effective oversight.
        Generally, our work falls into two categories. The first is
    program administration. As you would expect, with so many
    employees in so many places, some managers and supervisor do
    not handle workers' compensation claims appropriately,
    regardless of senior management's best efforts.
        For example, in response to a congressional request, we
    found that an employee who was struck by a postal vehicle on
    postal property and dragged outside that property was denied
    the opportunity to file an injury compensation form until
    approximately 1 year after her injury. Local postal management
    originally refused to provide her with the form, stating that
    they did not consider the accident to have occurred on postal
    property. Fortunately, in the course of our work, postal
    management provided her the necessary form and processed her
    claim.
        The second category of our work is in controlling costs.
    One way to do so is to prevent and detect fraud by medical
    providers. For example, we participated in a multi-agency
    undercover investigation that resulted in the debarment of six
    physicians from providing services to the Office of Workers'
    Compensation Programs. Specifically we identified fraudulent
    billing and payments for postal employees who were treated at
    medical clinics operated by these physicians. This fraud also
    involved billings for non-existent or ghost patients.
        One of the most effective ways to reduce workers'
    compensation claims is to ensure the health and safety of
    postal employees. For example, one audit disclosed unsafe
    conditions in a post office, including fire hazards and falling
    debris. After viewing our video report, I could not imagine
    anyone would ask an employee to work under these conditions.
    When we showed this video report to senior management, they
    took immediate corrective action.
        To improve program administration, employees must feel free
    to contact us to report fraud, waste, abuse or mismanagement
    without fear of retaliation. Since our inception, we have
    worked to improve protections because postal employees are not
    covered by the Federal Whistleblower Act.
        Finally, we are excited about our partnership with the
    Department of Labor Office of Inspector General to look at ways
    we can work together to address the crucial issues facing the
    workers' compensation program. We believe our combined efforts
    will result in program improvements at the Postal Service and
    throughout the Federal Government.
        Thank you for the opportunity to testify before the
    subcommittee. And I welcome any questions.
        [The prepared statement of Mr. West follows:]

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        Mr. Horn. Well, thank you. I did see that 1 year bit in No.
    7, I think, on your page. When that was discovered, did you
    feel that the people in the regions that have responsibilities
    for this, as well as the central aspect of administration, have
    a lot of faith in the Postmaster General? I just couldn't
    believe that somebody would get away with that. Don't give them
    any forms. I mean, that's just crazy.
        Do you feel that's now going through the administrative
    hierarchy of the Postal Service? Did they get the message?
        Mr. West. We found this to be an isolated example. We have
    no indication that there's any kind of systemic problem. Like I
    said in my testimony, whenever we bring issues to senior postal
    management, we found them very responsive to take corrective
    action.
        Mr. Horn. Does the General Accounting Office, now that
    they've heard all this, have any thoughts on it?
        Mr. Stalcup. I would like to take a moment, Chairman Horn,
    to talk about OWCP's disagreement with our report and
    testimony. Again, in the aspect of the report with which they
    disagree, one of their primary assertions was that we
    overstated the number of cases that were remanded for reasons
    other than new evidence, and therefore understated the amount
    of remands and reversals related to new evidence being
    introduced.
        OWCP adds in its response to our report that the BHR
    summary decisions that we looked at, as well as other
    information, were not adequate for us to make that conclusion.
    We disagree with that. To determine the specific reasons, as we
    were asked to do by you, for remands and reversals, we
    carefully reviewed decision summaries for BHR appeal decisions
    and published decisions by the ECAB. These documents are those
    that are used to notify the claimants of the reasons for the
    remands and reversals. Those reasons were very clear to us upon
    our examination.
        For example, when an item was reversed or remanded because
    of new evidence being introduced, the common phrase used was
    ``because claimant submitted relevant and pertinent evidence
    not previously considered by this office.'' This occurred in 6
    percent of the cases that we reviewed. The reasons for other
    reversals and remands were equally clear, and it was for other
    than new evidence being introduced.
        OWCP also believes that we inappropriately completed our
    analysis of remands and reversals. Again, we disagree. Our
    report distinguishes clearly between a remand, which may or may
    not result in a reversal, and a reversal, which is actually a
    changed decision. In categorizing reasons for all remands and
    reversals, as we were requested to do, using such a combined
    indicator is entirely appropriate.
        A couple other quick points. OWCP states that we have
    concluded that their process is inadequate. That's not the
    case. OWCP is doing a number of things well. We offer some
    ideas that we believe they might consider in determining
    whether additional information can be identified that would
    better enable them to address the current remand and reversal
    rate and get at some of those underlying causes.
        Finally, OWCP points out that the BHR process is an
    effective protection of claimant rights. We couldn't agree
    more. Our concern is the appeals process becoming a point of
    reliance on their part to ultimately arrive at a correct
    decision.
        Mr. Horn. Mr. Ungar.
        Mr. Ungar. Mr. Chairman, I'd just like to point out that
    from the Postal Service's perspective, and this certainly
    probably applies to other agencies, although maybe not to the
    same extent as was indicated by the Postal Service witnesses,
    the Postal Service is in a very difficult financial situation,
    with increasing losses over the last couple of years. And it
    faces very significant liabilities.
        With respect to the Workers' Compensation Programs, we were
    surprised the other day to hear that while the total program
    costs for the Postal Service was about $1 billion last year,
    this year they're estimating it could go as high as $1\1/2\
    billion, which is a huge increase.
        So the Postal Service, as well as other agencies, has this
    balancing act to, on the one hand, assure that the employees
    get the services to which they are entitled, and on the other
    hand, to make sure that the program costs are controlled. So to
    the extent that issues are raised in terms of the framework for
    the program and the ability of agency officials like Inspector
    Generals to have access to the necessary information to do
    thorough reviews, I think we would certainly support those
    kinds of assessments and action where appropriate on those
    kinds of issues.
        Mr. Horn. Well, I would think that the whole purpose for
    the workers' compensation in labor is to get it in one place
    for the whole executive branch and should we change it? In
    other words, if you have so many problems in the Postal Service
    or Defense or wherever, which is where I think most of them
    are, where should they be?
        And that would probably have much more attention if some of
    the larger departments had to put their own budget and get a
    nick out of it to pay these claims. Have you taken a look at
    that thought?
        Mr. Ungar. Well, they do pay the claims, Mr. Chairman. The
    agencies reimburse the Department of Labor for the cost of the
    program as well as for the administrative costs. So it's not a
    question of the agencies not paying. Because they do do that.
    It's a question, I think, of making sure that only those people
    who are entitled, are actually receiving the benefits and maybe
    even taking a look at the benefit structure to determine
    whether, given what the situation is today, it's still
    appropriate in all cases.
        Mr. Horn. Well, how about it, Mr. West, Mr. Henderson?
    Would you like to have the whole program in the Postal Service?
        Mr. Henderson. That appears to be my question, I suspect.
    Would we like to run our own program, Mr. Horn?
        Mr. Horn. Right. You were made as independent as we could.
        Mr. Henderson. I think we would welcome the challenge and
    the opportunity if it was presented to us. However, that
    shouldn't be construed as an indictment against the present
    administration at OWCP. Because I believe that they are running
    the program at a highly professional level, given the structure
    and the laws that they're running within.
        Mr. Horn. OK. Any other thoughts, Mr. West?
        Mr. West. It probably would give us some more work, but
    other than that, we have not looked at the issue. So we really
    don't have any comment on it.
        Mr. Horn. Well, take a look at it, and we'll have a little
    space in the hearing record to see what you think about it.
        Mr. West. We will do that.
        Mr. Horn. OK. Now, Mr. Hallmark, you've heard all the
    testimony. Would you like to add something to the record as to
    whether you don't like what you heard or did like what you
    heard. [Laughter.]
        Mr. Hallmark. As I said earlier, we are appreciative of
    GAO's investigating these issues, because they are complex and
    deserving of study. I think in both cases the reports were
    undertaken and completed in a very short timeframe. There are
    reasons why that becomes a difficulty that leads to some of, I
    think, the disagreement issues.
        If I could just respond very briefly to Mr. Stalcup's
    comment. I think we do have an underlying disagreement with
    regard to the methodology they used in evaluating especially
    our hearing and review cases. They looked at the decisions, as
    he's indicated, they read the decision with respect to the
    reasoning presented in the decision for an overturn, for a
    remand or reversal.
        But the writer of those decisions is not focused on making
    a determination as to what the cause necessarily was in terms
    of whether it was OWCP's original error or a reinterpretation
    of the evidence or new evidence. They may specify, as in some
    cases, apparently 6 percent of the sample, that there was new
    evidence presented.
        But in every hearing case, there is always a fuller record,
    because the individual claimant has a right to go and persuade
    the hearing representative about the evidence that's already
    before him or her. That interpretation of what the claimant
    presents in terms of, for example, credibility, is something
    that goes into the hearing representative's decisionmaking.
    While there may or may not have been new evidence adduced in
    that particular case, the hearing representative is in fact
    influenced by what has been presented by the claimant directly.
    That's why we have the process.
        So we would argue that even though the decision itself
    might not say the reason why this case is being remanded is
    because I believe, on hearing what the claimant's argument is,
    that the district office didn't fully interpret the claimant's
    position properly, in fact, that is what's going on in many of
    these decisions. So the 25 percent number that Mr. Stalcup has
    presented we believe is just not accurate.
        But in general, I would say that especially with regard to
    the timeliness measures that Mr. Ungar reported on, we think
    it's very important that those issues be addressed and that the
    full timeframe from when the individual is injured to when the
    process is completed be looked at and analyzed in all its
    different parts. We look at our data, including the data I
    presented in my chart, we look at that data very, very closely.
        If I could point out, the data that GAO is reporting on is
    a 500 case sample. The data I have presented is every single
    case presented by the Postal Service during the year that was
    being studied. So in the case of traumatic injuries, that was
    64,688 cases. We capture every single event. That's the level
    of detail we go to, because we are very, very focused on making
    this thing happen quickly.
        Mr. Horn. Could you explain that in the title up there, the
    CA-7, is that California something?
        Mr. Henderson. I know that is your home State, sir. That is
    a claim form number which dates probably from around 1960. I'm
    not sure exactly what the CA stands for. But the CA-7 is the
    form that's filed by the individual once they have a need for
    wage loss compensation, after, typically they have been
    receiving continuation of pay from the Postal Service. This is
    the point at which interruption of income can occur.
        If the Postal Service is paying continuation of pay, we are
    meanwhile paying medical benefits. If the person's disability
    lasts longer than 45 days, then they need to submit that CA-7,
    the Postal Service needs to process it and get it to us. If
    there's a delay in that process, then the individual doesn't
    have a check coming in from Postal Service nor do they have one
    coming from the OWCP. And when that period is elongated,
    clearly these individuals are not being well served, and those
    cases become very difficult and very problematic for the reason
    that we can all understand.
        We think that it needs to be worked very, very closely from
    both sides. We think our side of the process is working pretty
    well. Oftentimes we don't have enough push from the agency, and
    this is not a Postal Service problem particularly, they are in
    the middle of all the pack of agencies, but there's not enough
    push on the agency to say, OK, COP is getting close to end,
    let's get that CA-7 in hand so there won't be an interruption
    of income.
        That's something I think that the Postal Service is aware
    of and is working on. But it's a complex issue. And it's one
    that we have to continue to struggle with.
        Mr. Horn. Let me ask the Inspector General of Labor, Mr.
    Heddell. You mentioned this fraud case in Texas that involved
    millions of dollars. How unusual is this type of fraud? Do you
    have much fraud like that, or was this the biggest case you've
    ever had?
        Mr. Heddell. Mr. Chairman, we in fact receive allegations
    of fraud and misconduct regarding the FECA program on a fairly
    regular basis. As I indicated, we currently have 401 cases
    under active investigation. I can tell you that our hot line
    receives several calls per week. Many of those calls involve
    allegations of fraud and/or misconduct.
        Many of those calls, of course, are from claimants who
    simply have received an adverse decision. They provide us with
    information either because they don't feel that their claim has
    been handled as they would have liked it to have been handled,
    or in some cases, it's information directly alleging some kind
    of fraud, whether it's against the individuals at OWCP making
    the decision or, in the case of the true criminal
    investigation, such as the one you've referred to, we may
    receive documented evidence.
        Where we receive documented evidence of possible criminal
    activity, we refer that to my Office of Investigations. And
    we're very active in that area, and do a considerable amount of
    work.
        Mr. Horn. Was that because doctors were committing fraud or
    the consumer?
        Mr. Heddell. There's actually three general categories that
    fraud normally would fall into. One would be the area of
    claimant fraud, where an employee claims to be injured when in
    reality he or she is not. There are instances where a claimant
    has in fact been injured and has received medical treatment and
    is no longer injured, but continues to claim an injury. There
    are claimants who in fact claim injury and are working,
    receiving compensation for work but not advising OWCP, so that
    an adjustment can be made.
        And then there are medical service providers such as
    doctors, pharmacists, or clinics, who provide medical
    equipment, for instance, and other medical services, and who
    defraud the system by code violations. For instance, they may
    change the code on a medical form to reflect a treatment for a
    particular patient that would bring in a greater revenue to
    that physician or they may have a patient for whom they
    prescribe aggregate diagnoses or treatment, versus let's say
    one particular code.
        So they will design or modify the medical coding system in
    such a way as to reap the greatest amount of financial benefit
    to themselves in an illegal manner.
        Mr. Horn. Mr. Heddell, and to the presenters, you've made
    some interesting proposals in terms of legislative
    recommendations. One was return the 3-day waiting period before
    FECA benefits can start to the beginning of the 45-day
    continuation of pay process. This would require employees to
    use any accrued sick leave, annual leave, or leave without pay
    for that 3-day waiting period before the FECA benefits could
    begin. Should the claim be approved by the OWCP, any leave used
    during this 3-day waiting period would be restored.
        Then there's an earlier, pre-1974 procedure, that would
    help to discourage the filing of so many minor claims. Under
    the current process, the waiting period is at the end of the
    claims process, which provides no disincentive to file a claim.
    Then the second to last, current FECA beneficiaries are not
    required to retire at any age. Instead, beneficiaries may
    remain on the disability rolls until they die. Indeed, there is
    a strong incentive to remain on the rolls, since FECA's tax-
    free benefits may be greater than either their taxed earnings
    from work or their Federal retirement benefits would be.
        And thus, you note we recommend a statutory change that
    would move long-term disability claimants into a form of
    retirement such as through an OWCP-administered annuity program
    after claimants reach a predetermined age. Anything you want to
    add to that? Because then I want everybody to tell me whether
    they like the idea or don't like the idea. So do you want to
    add any to this?
        Mr. Heddell. I certainly would like to, Mr. Chairman. The
    OIG strongly supports the concept of Congress reinstating a 3-
    day waiting period before the continuation of pay period
    begins. Clearly, in our opinion, this would discourage
    frivolous claims.
        In terms of beneficiaries remaining on the OWCP rolls for
    long periods of time, we would also recommend that the Congress
    establish a retirement age for beneficiaries, whereby at a
    particular age benefits would be adjusted, and some form of
    annuity, probably administered by the OWCP, would kick in.
        Mr. Horn. OK. Any thoughts on this, Mr. Henderson, Mr.
    West?
        Mr. Henderson. The Postal Service also agrees that a 3-day
    waiting period would be beneficial financially. And also to
    reduce the number of claims that probably wouldn't be filed
    otherwise. It would also put us much on par with many State
    programs.
        In terms of an annuity, that would be beneficial, because
    at this time, for some people it's actually much more
    beneficial to be on compensation than to take a retirement. And
    we don't think that being on compensation should be an
    advantage, it should be equal to an employee who works 30 years
    but was fortunate enough not to be injured. We'd like those to
    be leveled out at the retirement age.
        Mr. Horn. Mr. West, anything else?
        Mr. West. No.
        Mr. Horn. You mean a lawyer that says no? [Laughter.]
        Mr. West. It's hard to get that short answer out of a
    lawyer.
        Mr. Horn. That's right.
        Mr. West. We just feel that our mission is to monitor the
    Postal Service. This is really a Department of Labor program,
    so it would not be appropriate for us weigh in on this issue.
        Mr. Horn. You are independent. You don't have to worry
    about anybody.
        OK, let's ask GAO. Do you see any light in some of Mr.
    Heddell's proposals?
        Mr. Ungar. Yes, Mr. Chairman. We think they should be
    considered. And particularly as they affect the cost of the
    program.
        One other issue that I don't think was specifically
    mentioned, although it may be in a written statement, is that
    we have reported over the years on workers' compensation
    programs. Some of the reports deal with the retirement issue
    and whether eligibility should continue afterward. Another
    issue is the percent of pay that's reimbursed, either two-
    thirds or 75 percent.
        So another issue that might be worthwhile looking at is the
    additional percent of reimbursed pay due to whether an
    individual has dependents or not. I'm not suggesting that they
    definitely be changed, but at least they ought to be looked at
    in the context of possible legislative changes to the program.
        Mr. Horn. Now, Mr. Hallmark, you've had people on one side
    and the other. What do you think on this?
        Mr. Hallmark. As it happens, the administration is on
    record as being prepared to present a FECA legislation proposal
    that would address both of the issues that Mr. Heddell has
    recommended, as well as possibly other features. It's being
    considered now, that package is under review in the
    administration.
        So those are, I believe there will be legislative proposals
    shortly in those areas.
        Mr. Horn. Great. Glad to hear it. So it's over in OMB being
    circulated around the executive branch.
        Mr. Hallmark. That's right, sir.
        Mr. Horn. To see if it conforms with the program of the
    President. Good. That will be progress.
        Now, let me just go through a few of these things to get a
    decent record here one way or the other. To all of the
    participants, let's see, Mr. Ungar, in your report, you
    mentioned numerous times that you were not given enough time to
    complete your report. How long has the General Accounting
    Office been working on this project, and when do you expected
    to complete your work and issue a report?
        Mr. Ungar. We started in January, sir. As I indicated, this
    was a random sample that involved all district offices in OWCP.
    So I think we would like to propose to have our work completed
    in September. What I'd like to do though is emphasize that our
    results are preliminary now, as we indicated. I think Mr.
    Hallmark has raised some very good issues. We did not have an
    opportunity, because of the speed of getting our data collected
    and analyzed, to exclude the types of cases that he's
    mentioning.
        One in particular, on the administratively closed cases,
    I'd just like to make a few points there very briefly. One,
    when we went to the hard file cases, it was not clear which of
    those cases, from the information we saw, were administratively
    closed. So we're going to have to work with his people to
    really identify those in the next several weeks.
        Second, I'm not sure that the statistical population
    information that's there is comparable to the sample that we're
    taking in terms of what it represents. So we'll have to work
    with his folks on that. Third, I presume that he's dealing with
    the automated data when he's using the entire population. We
    did find during our review that there were a number of errors
    in the automated system compared to the hard file records that
    we reviewed. So we didn't want to rely too heavily on the
    automated files.
        So we would like to have enough time to make sure that we
    square away with the OWCP folks on making sure we have accurate
    data and understanding of what these timeframes are. So I would
    think in September we'd be able to get you a final report, if
    that's reasonable in your view.
        Mr. Horn. Do you have enough data today to accurately
    comment on the Postal Service's role in the Office of Workers'
    Compensation Programs?
        Mr. Ungar. Mr. Chairman, I believe that when we have enough
    time to analyze the data we have, we will be able to be more
    precise as to what particular steps are taking the most time
    and whether it's in the Department of Labor or whether it's at
    the Postal Service.
        Mr. Horn. In your testimony you mention that there is in
    some cases a dramatic variance in the time it takes for the
    OWCP to process claims. What do you attribute this to?
        Mr. Ungar. Well, that's what we'll try to find out. Of
    course, a lot of these cases----
        Mr. Horn. So you're saying it's a matter of time?
        Mr. Ungar. Yes, we need time to analyze it. All of these
    cases are of varying complexity, from very simple to very
    complex. But in terms of what stages of the process may be
    bottlenecks, that's what we hope to identify as we further
    analyze the data, and then get with both Postal Service and
    OWCP folks to iron that out and try to develop definitive
    information on that.
        Mr. Hallmark. If I could interject, Chairman Horn.
        Mr. Horn. Sure.
        Mr. Hallmark. In the area, for example, of wage-loss
    claims, the CA-7, if a case involves a schedule award, that
    schedule award would be for permanent impairment and we would
    need to get an assessment of exactly what the degree of
    impairment is. That usually requires that the employee get a
    new medical evaluation that says, OK, the shoulder impairment
    is 12 percent or 20 percent or 50 percent. That has to occur
    after the individual has reached what we call maximum medical
    improvement. And that in fact could be a matter of months or
    even years after the individual files that claim.
        So the claim could run from a matter of being doable within
    a week or a few days to a matter of months or years, depending
    on the complexity of the issues at hand. That is unfortunately
    the nature of this kind of program.
        Mr. Horn. OK. Any other thoughts anybody's like to--I'm
    going to try one more here with the preferred provider
    organization program. The Postal Service believes that
    significant cost reductions can be achieved by expanding the
    preferred provider organization program with the First Health
    throughout the organization. First Health, through its hospital
    and physician network, is able to reduce medical fees below
    those of OWCP's schedule fees.
        This effective relationship is now operating in areas
    served by four of the OWCP's 12 district offices. It presently
    reaches 50 percent of our injured employees. The program will
    be expanded nationwide on July 1, 2002. This is a powerful
    example of the results that can be achieved through joint
    cooperation with OWCP.
        How do you feel about that? Do you agree with them?
        Mr. Hallmark. Are you asking me, sir?
        Mr. Horn. Yes.
        Mr. Hallmark. Yes, we have been working with the Postal
    Service for about a year on the particular project that is
    being referred to there with the PPO. We are, I think, very
    close in our conversations with the Postal Service to further
    expanding that program. I believe our next step will be to
    expand to all the rest of the eight sites that are not
    currently operating in this fashion. Ione of several
    cooperative projects OWCP runs, works with Postal Service on.
        I would say, in response to a comment that Mr. Ungar made
    earlier, Postal Service more than any other agency is keenly
    aware of the costs of these kinds of cases. They work harder, I
    think, than all the other agencies because of that economic
    concern. And in that respect, they are often our most
    cooperative partner in a whole range of activities associated
    with FECA cases.
        Mr. Horn. Moving Federal Employees Compensation Act
    recipients to FECA annuity at age 65, just on a yes or no, you
    like the idea, right?
        Mr. Henderson. Yes.
        Mr. Horn. OK. Anybody not want that? OK, we'll assume
    they're all yeses.
        We have a vote on the Floor, so we're going to have to
    break this up. But we would, when you get back in your taxi or
    whatever to get back to the executive branch, if you have some
    good ideas, just send them to us. We'll put it at this point in
    the record.
        I want to thank our witnesses. This subcommittee has been
    examining this problem for more than 5 years. And I'm uncertain
    that much progress has been made to improve the situation for
    hundreds of Federal workers who deserve better. When workers
    who have been injured on the job seek the assistance they are
    entitled to, they should be given the best service possible.
    The Federal Government should be setting the highest standard.
        Undoubtedly, new computers and new telephone systems will
    help resolve some of these problems. But all the technology in
    the world doesn't force OWCP employees to treat injured
    employees, regardless of the merit of their claims,
    courteously, respectfully and in a timely manner. This is
    clearly a management problem that has been allowed to fester.
        I think that sort of sums it up, and I'll wait for the rest
    of the GAO on the case studies.
        I want to thank the people that helped put this hearing
    together. The gentleman on my left will not be on our staff,
    and we wish he could, but this will be his last hearing as a
    member of the professional staff of our subcommittee. He's
    leaving to join the staff of the American University School of
    Law, as well as becoming a student there. More lawyers.
    [Laughter.]
        Earl, good luck. You're a great guy.
        And J. Russell George, the Staff Director and Chief
    Counsel, is right behind there. President Bush has nominated
    him and he's just waiting for the Senate to call.
        Bonnie Heald, the Deputy Staff Director, is right next to
    him. And next to her is my chief of staff, Mr. Bartell. And the
    majority clerk, he has, I hope, the NCAA basket height, and
    that's our hard working majority clerk, Justin Paulhamus. Conn
    Carroll, majority clerk, Subcommittee on Criminal Justice, Drug
    Policy and Human Resources also helped in this. And Clair
    Buckels, our fellow on our staff from the American Political
    Science Association.
        Minority staff, right back here, is Jean Gosa, the clerk,
    and David McMillen, minority professional staff. And if you
    want to file a statement, we'll clean that one up.
        Court Reporter, Mary Ross. Thank you, Mary. We appreciate
    it.
        With that, I wish you well.
        [Whereupon, at 11:57 a.m., the subcommittee was adjourned,
    to reconvene at the call of the Chair.]
        [Additional information submitted for the hearing record
    follows:]

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