[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 
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