[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
   EXAMINING THE FEDERAL EMPLOYEES' COMPENSATION ACT AND ITS BENEFITS 
                              FOR WORKERS

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


                                HEARING

                               before the

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                                 of the

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              May 13, 2004

                               __________

                           Serial No. 108-59

                               __________

  Printed for the use of the Committee on Education and the Workforce



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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN A. BOEHNER, Ohio, Chairman

Thomas E. Petri, Wisconsin, Vice     George Miller, California
    Chairman                         Dale E. Kildee, Michigan
Cass Ballenger, North Carolina       Major R. Owens, New York
Peter Hoekstra, Michigan             Donald M. Payne, New Jersey
Howard P. ``Buck'' McKeon,           Robert E. Andrews, New Jersey
    California                       Lynn C. Woolsey, California
Michael N. Castle, Delaware          Ruben Hinojosa, Texas
Sam Johnson, Texas                   Carolyn McCarthy, New York
James C. Greenwood, Pennsylvania     John F. Tierney, Massachusetts
Charlie Norwood, Georgia             Ron Kind, Wisconsin
Fred Upton, Michigan                 Dennis J. Kucinich, Ohio
Vernon J. Ehlers, Michigan           David Wu, Oregon
Jim DeMint, South Carolina           Rush D. Holt, New Jersey
Johnny Isakson, Georgia              Susan A. Davis, California
Judy Biggert, Illinois               Betty McCollum, Minnesota
Todd Russell Platts, Pennsylvania    Danny K. Davis, Illinois
Patrick J. Tiberi, Ohio              Ed Case, Hawaii
Ric Keller, Florida                  Raul M. Grijalva, Arizona
Tom Osborne, Nebraska                Denise L. Majette, Georgia
Joe Wilson, South Carolina           Chris Van Hollen, Maryland
Tom Cole, Oklahoma                   Tim Ryan, Ohio
Jon C. Porter, Nevada                Timothy H. Bishop, New York
John Kline, Minnesota
John R. Carter, Texas
Marilyn N. Musgrave, Colorado
Marsha Blackburn, Tennessee
Phil Gingrey, Georgia
Max Burns, Georgia

                    Paula Nowakowski, Staff Director
                 John Lawrence, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                   CHARLIE NORWOOD, Georgia, Chairman

Judy Biggert, Illinois, Vice         Major R. Owens, New York
    Chairman                         Dennis J. Kucinich, Ohio
Cass Ballenger, North Carolina       Lynn C. Woolsey, California
Peter Hoekstra, Michigan             Denise L. Majette, Georgia
Johnny Isakson, Georgia              Donald M. Payne, New Jersey
Ric Keller, Florida                  Timothy H. Bishop, New York
John Kline, Minnesota                George Miller, California, ex 
Marsha Blackburn, Tennessee              officio
John A. Boehner, Ohio, ex officio
                                 ------                                


















                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on May 13, 2004.....................................     1

Statement of Members:
    Greenwood, Hon. James C., a Representative in Congress from 
      the State of Pennsylvania..................................     4
    Norwood, Hon. Charlie, Chairman, Subcommittee on Workforce 
      Protections, Committee on Education and the Workforce......     2
        Prepared statement of....................................     3
    Owens, Hon. Major R., Ranking Member, Subcommittee on 
      Workforce Protections, Committee on Education and the 
      Workforce..................................................     4

Statement of Witnesses:
    Carney, Susan M., Human Relations Director, American Postal 
      Workers Union, Washington, DC..............................    17
        Prepared statement of....................................    19
    Hallmark, Shelby, Director, Office of Workers' Compensation 
      Programs, Employment Standards Administration, U.S. 
      Department of Labor, Washington, DC........................     5
        Prepared statement of....................................     7
    Hunt, Dr. H. Allan, Kalamazoo, MI............................    11
        Prepared statement of....................................    13
    Lewis, Elliot P., Assistant Inspector General for Audit, 
      Office of the Inspector General, U.S. Department of Labor, 
      Washington, DC.............................................    22
        Prepared statement of....................................    24












EXAMINING THE FEDERAL EMPLOYEES' COMPENSATION ACT AND ITS BENEFITS FOR 
                                WORKERS

                              ----------                              


                         Thursday, May 13, 2004

                     U.S. House of Representatives

                  Subcommittee on Workforce Protections

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to call, at 1:43 p.m., in 
room 2175, Rayburn House Office Building, Hon. Charlie Norwood 
[Chairman of the Subcommittee] Presiding.
    Present: Representatives Norwood, Biggert, Owens, and 
Payne.
    Also Present: Representative Greenwood.
    Staff Present: Molly McLaughlin Salmi, Deputy Director of 
Workforce Policy; Donald McIntosh, Staff Assistant; Stacey 
Dion, Professional Staff Member; Kevin Frank, Professional 
Staff Member; Jim Paretti, Workforce Policy Counsel; Deborah L. 
Samantar, Committee Clerk; Todd Shriber, Communications 
Assistant; Kevin Smith, Communications Counselor; Ann Owens, 
Minority Clerk; Marsha Renwanz, Minority Legislative Associate 
for Labor; Peter Rutledge, Minority Senior Legislative 
Associate for Labor.
    Chairman Norwood. A quorum being present, the Subcommittee 
on Workforce Protections of the Committee of Education and the 
Workforce will come to order.
    We are meeting today--I apologize to you now, I have a 
little allergy. I am just going to say it once, I apologize.
    We are meeting today to hear testimony on examining the 
Federal Employees' Compensation Act and its benefit for 
workers. Under the Committee Rule 12(b), opening statements are 
limited to the Chairman and the Ranking Minority Member of the 
Subcommittee. Therefore, if other Members have statements, they 
may be included in the hearing record.
    With that, I ask unanimous consent for the hearing record 
to remain open 14 days to allow Members' statements and other 
extraneous material referenced during the hearing to be 
submitted in the official hearing record.
    Without objection, so ordered.

 STATEMENT OF HON. CHARLIE NORWOOD, CHAIRMAN, SUBCOMMITTEE ON 
WORKFORCE PROTECTIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE

    Chairman Norwood. The Subcommittee is meeting today to 
examine the Federal Employees' Compensation Act, otherwise 
known as FECA, which is the comprehensive workers' compensation 
Law for Federal Employees.
    I want to say up front, I view these types of hearings as a 
great opportunity for Members of Congress to learn. And that 
really is what this hearing is all about, for us to increase 
our knowledge.
    The law is designed to provide important benefits and 
services to Federal workers who have suffered economic hardship 
because of a work-related injury or death.
    Today's hearing will allow us to examine the overall 
effectiveness of the FECA program and to look at whether the 
claims processing, communication, and payment procedures are 
effective in meeting the needs of injured workers and 
furthering the goals of this entire program.
    I would like to note that we are not here to propose any 
particular changes to the program at this point. I believe, and 
so does our Chairman believe, that that would be premature at 
this point. We need to learn more about how the program 
operates and its overall effectiveness on behalf of workers 
before considering any changes.
    We also need to discuss recent changes that have been made 
to the program, learn about the issues that have been 
identified by the Office of the Inspector General and see how 
the Office of Workers' Compensation Programs is today 
addressing these issues.
    OWCP plays a very important function in administering the 
FECA program, providing wage-loss benefits and medical services 
to injured Federal workers and helping them return to 
productive work when they are medically able to do so.
    During the last FECA oversight hearing held in October 
2000, this Subcommittee looked at how OWCP communicates with 
injured workers, employing agencies, and medical and other 
service providers who are involved in treating Federal workers.
    I know that the Office of the Inspector General previously 
made a number of recommendations on how OWCP could improve the 
program and enhance customer service. It is my understanding 
that OWCP has been receptive to many of these recommendations 
and has implemented changes that respond to the OIG's concerns. 
Nonetheless, there is always room for improvement.
    The Subcommittee continues to hear complaints from 
claimants, medical providers and other congressional offices 
about the difficulty in communicating with OWCP. One of my 
colleagues from Texas recently forwarded a letter to me from a 
constituent who is a physician with experience in treating 
injured Federal workers. The physician pointed out that he has 
now stopped seeing new patients with Federal workers' 
compensation claims, as have many of his colleagues, because of 
the repeated delays and denials for surgery requests. In his 
experience, the typical delays for surgery approvals run 
anywhere from 6 months to a full year.
    And if that is a fact and going on very much, that is just 
totally unacceptable. These kinds of delays can impact the 
entire system by significantly increasing the amount of time 
that workers remain off the job. While I know that the agency 
receives and processes a vast amount of mail, medical bills and 
phone calls each year, the program must continue to improve its 
performance in these areas to benefit workers who need these 
critical services.
    I would like to thank the witnesses for being available to 
share their expertise with us today. We look forward to your 
testimony.
    Finally, I would like to recognize my colleague from the 
Full Committee, Congressman Greenwood, who has had a long-
standing interest in this program and is joining us today.
    Mr. Greenwood, we appreciate that. And I am going to yield 
Congressman Greenwood the remainder of my time.
    [The prepared statement of Chairman Norwood follows:]

Statement of Hon. Charlie Norwood, Chairman, Subcommittee on Workforce 
         Protections, Committee on Education and the Workforce

    The Subcommittee is meeting today to examine the Federal Employees' 
Compensation Act, otherwise known as FECA, which is the comprehensive 
workers' compensation law for federal employees.
    The law is designed to provide important benefits and services to 
federal workers who have suffered economic hardship because of a work-
related injury or death.
    Today's hearing will allow us to examine the overall effectiveness 
of the FECA program and to look at whether the claims processing, 
communication, and payment procedures are effective in meeting the 
needs of injured workers and furthering the goals of the program.
    I would like to note that we are not here to propose any particular 
changes to the program. That would be premature.
    We need to learn more about how the program operates and its 
overall effectiveness on behalf of workers before considering any 
changes.
    We also need to discuss recent changes that have been made to the 
program, learn about the issues that have been identified by the Office 
of the Inspector General (OIG), and see how the Office of Workers' 
Compensation Programs (OWCP) is addressing these issues.
    OWCP plays a very important function in administering the FECA 
program--providing wage loss benefits and medical services to injured 
federal workers and helping them return to productive work when they 
are medically able to do so.
    During the last FECA oversight hearing held in October 2000, this 
Subcommittee looked at how OWCP communicates with injured workers, 
employing agencies, and medical and other service providers who are 
involved in treating federal workers.
    I know that the Office of the Inspector General previously made a 
number of recommendations on how OWCP could improve the program and 
enhance customer service.
    It is my understanding that OWCP has been receptive to many of 
those recommendations and has implemented changes that respond to the 
OIG's concerns. Nonetheless, there is still room for improvement.
    The Subcommittee continues to hear complaints from claimants, 
medical providers and other Congressional offices about the difficulty 
in communicating with OWCP. One of my colleagues from Texas recently 
forwarded a letter to me from a constituent who is a physician with 
experience in treating injured federal workers.
    The physician points out that he has now stopped seeing new 
patients with federal workers' compensation claims, as have many of his 
colleagues, because of the repeated delays and denials for surgery 
requests. In his experience, the typical delays for surgery approvals 
run anywhere from six months to a full year.
    These kinds of delays can impact the entire system by significantly 
increasing the amount of time that workers remain off the job. While I 
know that the agency receives and processes a vast amount of mail, 
medical bills and phone calls each year, the program must continue to 
improve its performance in these areas to benefit workers who need 
these critical services.
    I would like to thank the witnesses for being available to share 
their expertise with us today. We look forward to your testimony. 
Finally, I would like to recognize my colleague from the Full 
Committee, Congressman Greenwood, who has had a long-standing interest 
in this program and is joining us today.
                                 ______
                                 

   STATEMENT OF HON. JAMES C. GREENWOOD, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF PENNSYLVANIA

    Mr. Greenwood. Thank you, Mr. Chairman very much, both for 
the courtesy of allowing me to participate in this hearing and 
for the opportunity to make a brief statement. We were here 7 
years ago. I was reviewing the record of that hearing from 
1997, and I am very eager to see what has changed.
    This is a program that obviously can fail in one of two 
ways. One of those is to not adequately take care of Federal 
workers who have been injured and need help from the program to 
recover and to exist.
    And the other is to have Federal workers take advantage of 
the program and remain in the program where, in many instances, 
they can have more net take-home pay than they did when they 
were working and, without proper oversight and follow-through, 
can remain on the rolls for a lifetime and, in fact, can go out 
and get second employment. We all know that that happens. I 
don't know that anybody has ever been able to successfully 
quantify the extent to which that happens, but we know that, 
anecdotally, it is a horrendous situation.
    So I am eager to see how things have changed in the last 7 
years. Thank you, Mr. Chairman.
    Chairman Norwood. Thank you Mr. Greenwood.
    Now I yield to the distinguished Ranking Minority Member 
from New York, Mr. Owens, for whatever opening statement he 
wishes to make.

STATEMENT OF HON. MAJOR OWENS, RANKING MEMBER, SUBCOMMITTEE ON 
WORKFORCE PROTECTIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE

    Mr. Owens. Thank you, Mr. Chairman. I applaud the fact that 
you said this is an education process for Members of Congress 
as much as anything else.
    It is also an oversight hearing on the Federal Employees' 
Compensation Act. As we know from the Department of Labor's own 
Web site, FECA is an extremely vital program. It provides 
essential protections for Federal workers in the event of 
workplace injuries and illness.
    The devastating terrorist attack on Federal workers in 
Oklahoma City provided a case study of how pivotal this program 
is in assisting surviving relatives of workers killed on the 
job. Likewise, services provided under FECA to those Federal 
workers seriously injured in the Oklahoma City bomb attack made 
the difference between rapid recovery and dangerous setbacks.
    Under this program, nurses visited the injured workers in 
the hospital, arranged the prompt support for critical medical 
care and managed the coordination of other urgent services. 
Oklahoma City was a shining example of both the importance of 
this program and how seamlessly it can work.
    I am, by all means, open to hearing suggestions today about 
how to make improvements in what the Labor Department's Web 
site already describes as a highly cost-effective self-
insurance system. However, I would be strongly opposed to any 
effort to use this oversight hearing as a mechanism for putting 
FECA benefits on the chopping block. Oklahoma City taught us 
how the FECA program can at times literally mean the difference 
between life and death.
    Let us not forget that we have Federal civilian employees 
in harm's way in Iraq and Afghanistan now. If injured or killed 
on the job, FECA will be central to them and their dependents.
    I look forward to hearing the witnesses at this hearing, 
Mr. Chairman.
    Chairman Norwood. Thank you, Mr. Owens.
    I want to assure you, this is not about a chopping block 
for anything. It is a time for us to see if we can improve and 
make the program better and find out what is going on. I 
appreciate your statement.
    And now I would like to begin with our panel of witnesses. 
To my colleagues here, I would like to introduce you to our 
witnesses. The first one is Mr. Shelby Hallmark, the director 
of the Office of Workers' Compensation Programs at the Labor 
Department.
    Thank you folks being here.
    Dr. Alan Hunt, the assistant executive director of the 
Upjohn Institute for Employment Research.
    Dr. Hunt, thank you.
    Ms. Susan Carney, human resources director at the American 
Postal Workers Union.
    Ms. Carney, thank you for taking time.
    Mr. Elliot Lewis, the assistant inspector general for audit 
at the Labor Department's Office of the Inspector General.
    Mr. Lewis, we appreciate you giving us this time.
    Before our witnesses begin their testimony, I would like to 
remind our Members that we will ask questions after the entire 
panel has testified. In addition, Committee Rule Two imposes a 
5-minute limit on all questions.
    For the panel, I bring your attention to the light that is 
in front of you. When that thing lights up yellow, that means 
red is pretty close by. I would be grateful if you would sort 
of cut it off at that point. It always embarrasses me to cut 
our guests off, and I don't like to do that. So if you would 
help me with that, I would be very grateful.
    With that, Mr. Hallmark, I would like to recognize you now 
for 5 minutes for your testimony.

  STATEMENT OF SHELBY HALLMARK, DIRECTOR, OFFICE OF WORKERS' 
  COMPENSATION PROGRAMS, EMPLOYMENT STANDARDS ADMINISTRATION, 
            U.S. DEPARTMENT OF LABOR, WASHINGTON, DC

    Mr. Hallmark. Thank you, Mr. Chairman, and Members of the 
Subcommittee. I appreciate the opportunity to come here today 
to talk about the measurable progress that we have made in 
administering the FECA program and also some of the challenges 
that we see to making it reach its potential as a world-class 
workers' compensation system.
    FECA covers, as you have said, 3 million Federal workers. 
Last year, we paid $2.3 billion to about 280,000 individuals. 
We provided crucial and focused assistance for victims of the 
9/11 and anthrax attacks, Oklahoma City and other tragedies 
and, most recently, to civilian employees in Iraq and 
elsewhere.
    Our goal is to provide that same level of high service to 
all of the 170,000 Federal workers who are injured each year.
    In the past decade, we have worked hard to transform 
ourselves from a bureaucratic organization focused on process, 
to a proactive service delivery organization that is looking at 
outcomes for customers as well as improving the service quality 
and containing costs for the program as a whole through careful 
measurement and accountability, improved administrative 
budgets, for which we thank the Congress.
    In creative case management strategies and increased 
cooperation with Federal agencies, we have made real progress 
toward those goals that we set out about 10 years ago.
    My written testimony will provide more details about the 
progress that we have made. And I can only touch on them in the 
time that is given to me today. But I will do a few examples.
    First of all, in the area of communications that you 
mentioned, Mr. Chairman, we have dramatically improved the 
accessibility and responsiveness of our offices to our 
customers. That was a particular problem in the past. We have 
established a wide range of very specific and challenging goals 
to address it and to improve work there. We know there are 
continuing problems, and we continue to work really hard.
    We have increased the number of injured workers that we 
return to work each year with assistance almost fourfold over 
the 10-year period. Working case-by-case, we have reduced the 
average time that a serious injury takes a person away from the 
Federal workplace by over a month in the past 8 years. And we 
have made a whole series of major technological enhancements, 
including a brand-new electronic case-management system, 
outsourcing and centralizing our mail and managing work and our 
medical bill process and a totally new support IT system, which 
is coming this summer.
    We have also worked very hard with our Federal counterparts 
with the employing agencies and doubled the speed that they 
have in filing OWCP claims with us. We have been very pleased 
that the President announced a Safety and Health and Return-to-
Employment initiative this winter. That SHARE project will 
focus greatly the attention of the entire Federal establishment 
on these goals. All of that has allowed us to achieve almost 
all of our--achieving our different goals.
    As a result, OMB has evaluated the FECA program as 
moderately effective, the second best score that any Department 
of Labor agency has received. That, we think, is a fair rating 
for where we are right now. It shows some of our progress, and 
it also points us to the things that we need to further 
improve.
    We are proud of all these achievements, but despite them, 
the costs continue to go up in the FECA program, and return-to-
work improvements are increasingly difficult. Of the two goals, 
GPRA goals that we did not meet last year were our most 
important lost-production-day goals. We cannot make fundamental 
cuts in those goals without addressing the structural problems 
that are built into the statute.
    Return to work following injury, a very difficult task. It 
can require physical, mental and emotional accommodations. Some 
employees are so seriously impaired they cannot make that 
transition. But the overwhelming majority of FECA injuries can 
be overcome.
    When our system provides disincentives to return to work or 
encourages people to cling to a disability mindset, the 
difficult transition is slowed or it may not happen at all. And 
if that happens, if those delays occur, then everyone pays--
costs to the taxpayers, lost productivity to the employing 
agency and for the workers themselves, and disrupted family 
lives and diminished self-esteem. All too often this happens in 
our system. And we think we should address that.
    Some of the disincentives that exist to return to work now 
in the FECA system are the following: One, it was mentioned, 
the augmentation of benefits for dependents, creates a 75 
percent tax-free benefit that often exceeds take-home pay. No 
other State system provides this level. OPM retirement benefits 
are far less generous, and therefore, thousands of FECA 
beneficiaries are beyond their retirement age. Many believe 
they have retired on FECA.
    Return to work would mean giving up 75 percent FECA 
benefits, tax-free, at the risk or even the certainty, in some 
cases, of a lower OPM pension at eventual retirement. That 
gives a powerful disincentive to return to work and results in 
people staying on the rolls for the time that they do.
    The absence of an effective waiting period combined with 
our unique continuation-of-pay feature means that many minor 
injuries which would be excluded in State systems result in 
time lost from work in the FECA system.
    We have improved the administration of the FECA program, 
but we still have many major challenges, especially regarding 
return-to-work outcomes. We would like to put FECA on an even, 
more positive trajectory for the coming century so that it can 
provide the benefits that we all believe are important.
    The 2005 President's budget proposes legislation to update 
benefit structures, strengthen return-to-work incentives and 
adopt best practices of State workers' comp systems. Those 
changes combined with the administrative initiatives that I 
have mentioned will serve to reduce lost-production days and 
bring the program into the modern age while maintaining the 
world class benefit levels and employee-friendly processes and 
rules that we have now. With relatively modest changes to the 
system structure, FECA can become a model for other systems to 
emulate.
    I will be glad to answer questions.
    [The prepared statement of Mr. Hallmark follows:]

Statement of Shelby Hallmark, Director, Office of Workers' Compensation 
   Programs, Employment Standards Administration, U.S. Department of 
                         Labor, Washington, DC

    Chairman Norwood and Members of the Subcommittee:
    My name is Shelby Hallmark. I am the Director of the Office of 
Workers' Compensation Programs (OWCP), a component of the Employment 
Standards Administration, within the Department of Labor. OWCP 
administers four workers' compensation programs, of which the Federal 
Employees' Compensation Act (FECA) is by far the largest. I appreciate 
the opportunity to discuss the real and measurable progress we have 
made in improving administration of FECA, and the challenges that must 
be addressed if the program is to reach its potential as a world-class 
workers' compensation system.
    The FECA program covers nearly three million employees. It provides 
a variety of benefits for employees injured in the performance of duty, 
including payments for medical care, wage-loss compensation for total 
or partial disability, schedule awards for loss, or loss of use of 
certain body parts, and assistance in returning to work, including 
vocational rehabilitation. FECA also provides benefits to the survivors 
of Federal employees who die in performance of duty. In fiscal year 
2003, the FECA program paid over $2.3 billion in benefits to about 
280,000 individuals.
    In recent years, we have provided crucial and focused assistance to 
the victims of the September 11, 2001, and anthrax attacks, the 
bombings of our embassies in East Africa, the Oklahoma City tragedy, 
and most recently to civilian employees hurt or killed in Iraq. While 
most of the injuries we address are less dramatic, OWCP endeavors to 
provide the same high level of service to all injured Federal workers.
    Because this protection is critically important to Federal 
employees, OWCP strives to provide benefits to beneficiaries as quickly 
as possible. For the nearly 170,000 workers who file notices of new 
injuries each year, we have maintained a consistent record of timely 
adjudication and prompt processing of wage-loss claims and medical 
bills since the 1980's.
    The FECA program's solid record of accomplishment is based on a 
strategic planning process that started even before the advent of the 
Government Performance and Results Act (GPRA).
The Past 10 Years: Where We Are Now
    Since 1994, OWCP has focused on return to work, service to injured 
workers, fiscal integrity, and partnerships with stakeholders. OWCP set 
goals to move the FECA program beyond its traditional role of providing 
cash benefits, dedicating resources to improving the likelihood that 
injured workers will recover and return to duty as quickly as possible.
    When an employee covered by FECA becomes disabled due to a work-
related injury or illness, the program is pledged to restore that 
worker to gainful employment as quickly and completely as is medically 
appropriate. New disability management strategies and strengthened 
vocational rehabilitation assistance that have been implemented since 
1994 characterize this make-whole emphasis. We are especially proud of 
the high number of workers successfully returned to work with our 
assistance--over 9,200 of the 15,000 referred for intervention last 
year--nearly a four-fold increase over our results in 1994. We are also 
proud of the 18 percent reduction in time lost in serious new cases 
since 1996--in 2003, the average severe injury case resulted in 35 
fewer lost .
    We also recognize our fiduciary responsibility to Federal employers 
and taxpayers. Innovative disability case management strategies and 
effective cost containment measures have enabled the program to hold 
the cost of the FECA program--both benefit outlays and administrative 
costs--to an annual average increase of 4.2 percent over the past ten 
years.
    At the same time, greater resources have allowed the program to 
focus on several areas that needed attention. These initiatives have 
started at different times over the past decade, but are still in 
effect and subject to continuous reexamination and improvement. For 
example, careful case management, including the use of contract nurses, 
greatly expanded medical and vocational rehabilitation services, and 
contract medical scheduling brokers who arrange for second opinion 
medical examinations, have allowed the program to use its core staff 
more effectively.
    FECA also has improved its communication with its customers, 
including injured workers, medical providers, and Federal employers. 
The last time this subcommittee held a hearing on FECA there were a 
number of concerns about the quality of our communications with 
customers (U.S. General Accounting Office, ``Goals and Monitoring Are 
Needed to Further Improve Customer Communications ,'' GAO-REPORT 01-
72t, October 3, 2000). Since 2000, the program has undertaken a top-to-
bottom renovation of its processes for communicating with customers and 
stakeholders. Investments in personnel and equipment reflect concerted 
efforts to standardize both the information provided and the methods of 
delivery, so that callers to our 12 district offices will receive 
clear, consistent and prompt answers to their inquiries. OWCP has also 
made information more readily available through automated means via 
telephone and the Internet, and that access is continually being 
expanded and improved. Later this year the Internet access to FECA case 
status information will be made directly available to our claimants for 
the first time, using OPM's ``Employee Express'' portal. Customer 
satisfaction is routinely measured and tracked, to assess how well 
these communication and service improvements have worked. In 2004, we 
added a GPRA goal to measure our success in this area. These 
enhancements have resulted in real improvements in accessibility and 
responsiveness.
    Several major administrative initiatives launched during the past 
few years have provided better support services for injured workers. 
One of these has been the establishment of a centralized mail operation 
in 2001, whereby all routine mail and bills for the FECA program are 
directed to a private contractor where the mail is scanned, categorized 
at a high level, and transmitted electronically to the district 
offices. This process has dramatically improved OWCP's ability to 
control and manage incoming mail--previously a serious problem for the 
program.
    In 2003, the program consolidated its medical authorization and 
bill payment processes. Currently, a private contractor processes all 
medical bills and handles treatment authorizations for FECA medical 
providers and beneficiaries. Although there have been start-up problems 
in implementing this new bill payment system, it has already freed up 
resources in our district offices to better address injured workers' 
needs and focus on quality adjudication, case management, and 
communications. When new service standards, programming changes and 
telephone service improvements are fully in place, the new centralized 
system will provide more consistent, better controlled, and more 
efficient bill payment services.
    We have also worked closely with employing agencies to encourage 
faster transmission of notices of injury and claims for compensation 
from the agencies to OWCP. Progress in submitting these forms more 
quickly yields faster adjudication and payment, and fewer customer 
service problems. More than a quarter of new claims are now received 
via Electronic Data Interchange from the Departments of Labor, Defense, 
Treasury, Transportation, Veterans Affairs, and Homeland Security, and 
that percentage is expected to grow in the future.
    In January, President Bush announced the Safety, Health and Return-
to-Employment (SHARE) Initiative, which directs Federal agencies to set 
goals and track results in four areas: lowering workplace injury and 
illness case rates; lowering lost-time injury and illness case rates; 
reporting injuries and illnesses in timely fashion; and reducing days 
lost from work injuries and illnesses. In partnership with the 
Occupational Safety and Health Administration, OWCP is working with 
agencies to develop new strategies for improving safety and health at 
sites with high injury rates, increasing the timeliness of reporting 
claims through electronic and other means, and providing suitable 
work--all of which will help achieve OWCP's key goal: reducing lost 
production days.
    Finally, OWCP has made two improvements designed to make claims 
staff more efficient and effective in handling their caseloads. In 
discussing the central mail operation I mentioned that claims are now 
scanned and handled electronically. This has greatly improved our 
staff's ability to quickly access and review new materials, and enabled 
multiple parties to share information quickly and without risk of 
losing files.
    Later this year, a second IT improvement will arrive in the form of 
iFECS, the Integrated Federal Employees' Compensation System. This 
fully unified information support system will replace the disparate 
group of legacy programs that OWCP staff has used since the 1970's to 
process claims actions, make payments, and track results. These legacy 
systems have required redundant and time-consuming data entry by claims 
examiners, and blocked implementation of critical enhancements and 
modern decision support technology. Together, the electronic case 
processing, central bill payment system, and the new iFECS support 
system will go a long way toward providing a truly state of the art 
environment for case adjudication and management that will expedite the 
handling of claims and dramatically improve productivity and customer 
service.
    While these initiatives are being implemented, OWCP continues to 
achieve significant progress toward its challenging GPRA goals. In 
2003, the FECA program met four of its six GPRA goals, including: 
savings through management of long-term compensation payments (our 
``Periodic Roll Management'' program); rehabilitation of Postal Service 
employees into private sector jobs when they cannot return to work at 
the Postal Service; medical cost containment; and setting a baseline 
for communication quality. These successes continued a tradition of 
strong GPRA performance by the program, and a commitment to achieving 
challenging real-world results.
    However, two critical GPRA goals have not been met. While our 
Quality Case Management program continues to be effective, with the 
average days lost in serious new injuries down by 18 percent since 
1996, the program missed its two Lost Production Day targets (reducing 
overall lost production days for the Postal Service and for all other 
agencies). These goals were not met because the total number of new 
wage-loss claims, and days of ``continuation of pay,'' increased during 
fiscal year 2003. OWCP's disability management efforts, with the help 
of the employing agencies and the encouragement of the President's 
``SHARE'' initiative, should allow us to improve our performance 
against these critical lost days goals.
Challenges remain
    Despite our progress to date, there are structural features in the 
FECA which create, in themselves and in their interplay with civil 
service retirement law, incentives for workers to enter and remain on 
the long term disability rolls long after they could be expected to 
return to work. Returning to work following a significant injury can be 
a difficult and lengthy process, requiring physical, mental and 
emotional adjustments for the employee. When a workers' compensation 
system adds economic disincentives to the picture, that difficult 
transition occurs more slowly or not at all, creating higher costs to 
the taxpayers, lost productivity to the employing agency, and for 
workers themselves and their families, disrupted lives and diminished 
self-esteem.
    As currently structured, FECA creates direct disincentives to 
return-to-work in two significant ways. The first and most far-reaching 
is that while the basic rate of FECA compensation, 66 2/3%, is 
comparable to most state systems, the majority of Federal employees 
receive an augmented benefit, 75%, reflecting at least one dependent. 
Computed at 75% tax free, FECA benefits frequently exceed the 
employee's pre-injury take home pay. Few state systems provide any 
augmentation for dependents, and none approaches the Federal level.
    A second major disincentive to an employee's recovery and 
resumption of a Federal career is the disparity between retirement 
benefits provided by OPM and long-term FECA benefits. Under current 
law, the thousands of long-term FECA beneficiaries who are over normal 
retirement age have a choice between Federal retirement system benefits 
and FECA benefits, but they overwhelmingly elect the latter because 
FECA benefits are typically far more generous. Injured employees who do 
return to work risk the possibility that their retirement income will 
be less than it would have been had they stayed in the FECA system on 
total disability. Thus the FECA and retirement benefit structures 
intertwine to discourage employees from returning to work.
    Other features of FECA have an indirect effect on return to work 
and the monetary and personal costs of Federal workers' compensation. 
For example ,FECA, like all state systems, has a waiting day provision 
whose original intent is to discourage the filing of workers' 
compensation claims for minor injuries that resolve quickly. A waiting 
period before wage-loss compensation can be paid is virtually universal 
in state systems. In FECA, however, the waiting period is not applied 
until after the worker has received the full 45 days provided under 
FECA's unique ``continuation of pay'' provision, thus defeating its 
very purpose. The delayed waiting period unnecessarily burdens program 
administration with numerous minor injuries and makes the program 
vulnerable to over-utilization. The figure below shows the growth of 
incoming injury reports after the 1974 amendments inserted the 
continuation of pay provision and effectively cancelled the impact of 
waiting days.

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]



    In closing, Mr. Chairman, I believe the FECA program is at a 
critical juncture. As I described at the beginning of my remarks, we 
have worked hard over the past decade to enhance service delivery, 
improve communications, control costs, and provide a prompt, reliable, 
and cost-effective workers' compensation benefit for injured workers 
and their employers. Federal agencies have made significant strides 
toward the safety, return-to-work, and timely claim processing goals of 
the ``SHARE'' initiative. Overall, the program has made major progress, 
but we still have major challenges, especially in achieving appropriate 
return-to-work outcomes.
    We would like to put the FECA program on an even more positive 
trajectory for the coming century. The fiscal year 2005 Budget's 
reproposal of legislation to update the benefit structure, adopt best 
practices of state workers' compensation systems, and strengthen 
return-to-work incentives will serve to reduce lost production days and 
bring the program into the modern age. With relatively modest changes 
to the system's structure, FECA can become far more effective, and can 
be held up as a model for other systems to emulate.
                                 ______
                                 
    Chairman Norwood. Dr. Hunt, you are now recognized for 5 
minutes.

         STATEMENT OF DR. H. ALLAN HUNT, KALAMAZOO, MI

    Dr. Hunt. Thank you, Mr. Chairman. I just want to preface 
my remarks by saying that I speak from 29 years of experience 
in workers' compensation research but, more specifically, from 
the experience of being a subject-matter expert in a study 
funded by the Employment Standards Administration last year 
called the Program Effectiveness Study of the FECA program.
    In my view, the FECA program operates predominantly like an 
exclusive State or provincial workers' compensation fund for 
Federal workers. Therefore, I have compared FECA performance 
with both U.S. and Canadian workers' compensation systems, in 
other words, both private and public workers' compensation 
systems.
    I want to focus just on two performance measures here 
today, promptness of payment and disability duration. When 
workers are injured, maintaining an uninterrupted stream of 
income is obviously one of their major concerns. Figure 1 in my 
testimony shows the promptness of payments results for 12 U.S. 
States available from the Workers' Compensation Research 
Institute.
    The typical elapsed time from date of injury to the first 
income replacement payments in those 12 States is 63 days or 2 
months. Only about 45 percent of wage-loss claims see their 
first payment within 21 days.
    Figure 2 in my testimony shows the same measurement for 
Canadian provincial systems, promptness of payment ranges from 
about 22 days in Alberta, British Columbia, and Nova Scotia to 
50 days in Prince Edward Island. Average is around 30 to 35 
days. Thus, the state-of-the-art in promptness of payment is 
not very good, certainly from the worker's perspective.
    The situation under FECA in which Mr. Hallmark has already 
referred to is not directly comparable because of the 
continuation-of-pay provisions. OWCP sets goals for 
adjudicating claims post-COP, which amount to 45 days, 90 
percent adjudication of traumatic claims and more for non-
traumatic, what they call extended claims.
    Generally speaking, they achieve those goals. But I don't 
regard them as very ambitious. Unfortunately, we don't have a 
measure of the distribution, so I can't really compare 
promptness of payment. However, just in scoping out where we 
are, it appears to me that promptness of payments in the FECA 
system is roughly comparable to that in U.S. workers' 
compensation systems.
    The other performance measure I want to mention is duration 
of disability. OWCP was not able to give us a precise statistic 
that enabled us to compare durations with other workers' 
compensation systems, but they were able to give us a rough 
indicator of the number of long-term claims which matches 
Canadian measures that are available.
    Figure 4 shows that there is considerable variability among 
Canadian provincial systems in the number of claims that are 
receiving benefits at the end of the second calendar year 
following injury. As you will see from the graph, the range is 
from 1.4 percent in the province of Alberta to 6.5 percent in 
New Brunswick.
    Figure 5 shows a comparable statistic for FECA claims by 
district office. The percent of lost time claims that are 
receiving payments at the end of the second calendar year 
following the injury roughly comparable to Canadian ranking 
from 1.8 percent to 4.8 percent.
    It is vital to mention that in neither case do we know if 
the claimant was continuously in payment status or in 
disability status since the injury. This is only a snapshot. 
However, it does not appear to me that FECA claims last 
significantly longer than those in Canadian workers' 
compensation systems. Unfortunately, we do not have a 
comparable measure for U.S. systems.
    The last measure I want to mention is in Figure 5 because I 
think OWCP deserves some kudos for this. Under GPRA, the 
measurement of lost-production days is what I regard as the 
best outcome measure that I have encountered in my 29 years in 
the workers' compensation world. It captures the desired 
outcome, namely, minimizing the work time lost due to 
occupational injuries and illnesses, in a single number.
    Figure 6 shows that OWCP has driven that lost-production 
day rate down by approximately one-third in the past decade 
through a disability management program called Quality Case 
Management. This does not represent the entire population, it 
is important to say, but it is a very significant improvement.
    During the course of this study, I was pleasantly surprised 
by the level of policy development, the commitment to the plan 
and the goal orientation of OWCP in administering FECA. I was 
particularly impressed with the field visits I made to the 
Dallas office. I was struck by the high level of understanding 
they had of the overall mission and their individual part in 
it. Their customer orientation was also, frankly, greater than 
I had expected beforehand.
    I also found that OWCP relies on their strategic plan and 
their annual performance plans in a way that would make the 
authors of GPRA proud. The plans are specific. Performance is 
measurable. And the goals are taken very seriously.
    So my conclusion is that OWCP is doing a very good job of 
administering FECA.
    Thank you.
    [The prepared statement of Dr. Hunt follows:]

             Statement of Dr. H. Allen Hunt, Kalamazoo, MI

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


                                ------                                

    Chairman Norwood. Ms. Carney, you are recognized for 5 
minutes.

   STATEMENT OF SUSAN M. CARNEY, HUMAN RELATIONS DEPARTMENT 
    DIRECTOR, AMERICAN POSTAL WORKERS UNION, WASHINGTON, DC

    Ms. Carney. Mr. Chairman and Members of the Subcommittee, I 
am the director of the Human Relations Department for the 
American Postal Workers Union AFL/CIO.
    I would also like to introduce Richard Boutwell, APWU 
Federal injury compensation specialist, who is here with me 
today to assist with some questions after my comments.
    On behalf of APWU, I would like to say that we appreciate 
the opportunity to present our views on behalf of the workers, 
regarding the Federal Employees' Compensation Act and its 
administration by the Office of Workers' Compensation Program.
    The impact of job-related injuries can be devastating to 
workers and their families in both their workplace and personal 
lives. Medical expenses and a loss of income often result in 
loss of property, damaged credit and consequential family 
problems.
    It is human nature to minimize the consequences or discount 
the effects of a medical condition until it strikes you or a 
close family member. I have a very different perception on the 
injured employee's quality of life. You see, I suffer from 
Carpal Tunnel and Thoracic Outlet Syndromes causal to my 
employment with the United States Postal Service.
    The simple acts that we all take for granted aren't so 
simple for me. Some examples are, driving, activities with my 
children, household chores. I am not even able to do my own 
hair without going to a salon because I can't keep my arms up 
long enough. I am not the same person I was before my injury. I 
am not the exception nor am I unique among the thousands of 
workers who are injured on the job each year.
    Federal workers' lives are not favorably changed by the 
workplace injuries. Employees who receive wage-loss 
compensation are placed in a leave-without-pay status. They 
cannot accrue sick leave or annual leave and cannot make or 
receive contributions to their thrift savings plan for 
retirement purposes, benefits they would otherwise be entitled 
to if not for their on-the-job injury.
    Partially disabled employees who are not able to work to 
work full-time are, according to the Officer of Personnel 
Management, part-time employees even if their employment status 
is career, full-time. Their base pay will be pro-rated, and the 
subsequent annuity reduction can be dramatic.
    Additionally, a disabled employee's pay rate for wage-loss 
compensation is frozen as of the date of the injury or first 
disability and does not increase as a result of contractual pay 
raises and COLAs or step increases.
    It has been suggested that a reduction in the wage-loss 
compensation formula would serve as an incentive for all 
claimants to return to work. This would subject injured workers 
to additional financial hardship and possible re-injury. This 
would not be a substitute--this should not be a substitute for 
the cures that modern medicine has to offer.
    It should also be mentioned that if an injured employee 
qualifies for Social Security Act benefits that are paid for 
disability, then FECA benefits will be reduced by the Social 
Security Act benefits attributable to the employee's Federal 
service. Continuation of pay is only paid for timely filed, 
traumatic injury claims, not occupational illnesses.
    According to the United States Postal Service statistics, 
the average COP usage is just 66.3 hours per traumatic injury. 
As for the argument that the 3-day waiting period, which I 
believe is what we have alluded to, would discourage frivolous 
or non-meritorious claims, this reasoning implies that it is 
permissible to penalize the worker whose injury was not severe 
enough.
    Non-meritorious claims are going to be denied by OWCP. When 
the claim is denied, the employee must reimburse the employer. 
Therefore, these non-meritorious claims are not a cost factor 
for the employer. And a 3-day waiting period is simply a 
pretext for an inequitable reduction of a reasonable wage-loss 
payment for the worker.
    We also hear arguments for creating a FECA retirement 
system. Compelling people to retire because they have reached a 
certain age is contrary to our national policy. As stated 
earlier, since injured employees are in a leave-without-pay 
status, for first employees, the maximum impact will result in 
their annuity funding being diminished by 15 percent of their 
basic pay and result in a loss of the accrued rate of the 
return on their TSP investment.
    Injured workers with disabilities are not able to earn 
supplemental income as so many healthy annuitants currently do. 
Disabled workers should not be held to a higher standard, 
singled out for financial hardship nor be expected to make do 
on a reduced annuity.
    Postal Service injury case rates have declined steadily, 
yet costs continue to rise due to medical fees. To cut costs, 
it is imperative to control the escalating prices of the 
medical industry.
    Less than 65 percent of the notice-of-injury/illness forms 
are received by OWCP from employing agencies within the time 
limits. We suggest that OWCP be granted enforcement powers 
regarding the employing agency's obligations under the act.
    While we recognize that OWCP has made significant changes 
to improve services, there are still deficiencies. We think 
that more claim examiners would be beneficial in the 
adjudication process of the claim in order to get the 
individual medical attention to return them back to suitable 
work.
    Additionally, we suggest that OWCP make genuine oversight 
with all contracting companies. We found that some of their 
contract agencies are nonresponsive. There is not an ability to 
terminate the contract with them. Ergonomic injuries alone cost 
billions of dollars annually. Repealing the ergonomic standards 
to quell the costs, there must be employer accountability to 
ensure a safe working environment that is mindful of unsafe 
conditions and of ergonomic standards.
    The Federal Employees' Compensation Act is a law based in 
equity. The employer gives up some of the defenses available 
under common law, and the employee similarly foregoes the full 
range of damages which would be awarded. It is a non-
adversarial process designed to provide a predictable level of 
reliability for the employer and predictable level of benefits 
for the employee.
    To amend the law in a manner which upsets this balance 
would be a disservice to the overriding concept of fairness 
that is the law's foundation. Unilaterally reducing benefits to 
the injured worker simply is an effort to lighten the financial 
liability of the employer and is not an equitable response to 
the increasing injury compensation costs. Injured workers 
already suffer losses, both financial and emotional, for which 
they can never be compensated. A reduction in benefits that 
were fairly established would unjustly increase the already 
substantial burden of their injuries and illnesses and 
literally add insult to injury.
    [The prepared statement of Ms. Carney follows:]

Statement of Susan M. Carney, Human Relations Director, American Postal 
                     Workers Union, Washington, DC

    Mr. Chairman and members of the subcommittee:
    I am Sue Carney, Director of the Human Relations Department of the 
American Postal Workers Union, AFL-CIO. I would also like to introduce 
Richard Boutwell, APWU Federal Injury Compensation Specialist and 
Assistant to the Human Relations Department. On behalf of APWU 
President William Burrus and our members I would like to say that we 
appreciate the opportunity to present our views regarding the Federal 
Employees' Compensation Act (FECA) and its administration by the 
Department of Labor, Employment Standards Administration, Office of 
Workers' Compensation Program (OWCP).
    The APWU is the largest postal union in the world, representing 
over 300,000 postal workers in the clerk, maintenance, and motor 
vehicle service crafts. We are employed in approximately 38,000 sites 
throughout the country, providing a public service in every city, town 
and community in our nation. Workplace injuries and illnesses 
negatively impact a significant number of postal employees. In 
recognition of this, it is a priority function of the APWU Human 
Relations Department to provide guidance to our members regarding their 
rights and responsibilities, as well as the employer's obligations to 
them under the Federal Employees' Compensation Act.
Overview
    Any analysis of federal injury compensation costs which focuses on 
the reduction of benefits runs counter to the sprit of FECA, and risks 
the creation of fundamental inequities for the injured worker. Any 
analysis which is based on the assumption that federal employees are 
somehow better off because they have become partially or totally 
disabled due to a workplace injury or illness is, at best, misguided.
    Before I discuss the FECA benefit structure, let me point to the 
very real losses suffered when a federal employee becomes partially or 
totally disabled due to an on-the- job injury or illness. The impact to 
injured workers and their families can be devastating in both their 
workplace and personal lives. Medical expenses and a loss of income 
often results in loss of property, damaged credit and consequential 
family problems. Regardless of the compassion you possess for the 
injured, or how fluent you are regarding various workers compensation 
programs, it is human nature for those who have never suffered a 
workplace injury to minimize the consequences or discount the effects 
of a medical condition until it strikes them or a close family member. 
Until then, diagnoses such as carpal tunnel syndrome, herniated discs, 
elbow tendonitis, rotator cuff tears, and closed-head injuries are just 
words on a page. Due to my personal experiences, I have a very 
different perception on the injured employee's quality of life. I 
suffer from carpal tunnel and thoracic outlet syndromes causal to my 
employment with the United States Postal Service. I have impairments of 
29% loss of use to my right arm and 15% loss of use to my left arm. The 
simple acts that we all take for granted aren't so simple for me. 
Imagine not being able to drive for any real distance, or having 
difficulty turning the doorknob to enter your own home, missing out on 
activities with your kids, requiring assistance with household chores, 
and having to go to the salon because you can't raise your arms long 
enough to style your own hair. My former husband has two herniated 
discs as a result of his employment with the USPS. Our family went 
months without his wage loss compensation benefit. It took five years 
for his back surgery to be approved. Our free time was spent in the 
doctor's office three times a week for physical therapy, injections, 
routine follow-up visits, completing forms or obtaining medical 
reports. He is not the same person he was physically or psychologically 
before his injury. We are not the exception nor are we unique among the 
thousands of workers who are injured on the job each year.
    Any injury compensation policy analysis which implies that federal 
workers' lives are favorably changed by their workplace injuries 
demonstrates a fundamental disconnect regarding the realities of life.
Benefits Lost
    Totally disabled employees or partially disabled employees who 
return to work less than full-time, and receive wage loss compensation 
are placed in a leave without pay (LWOP) status. Employees in a LWOP 
status cannot accrue sick or annual leave and cannot make or receive 
contributions to their Thrift Savings Plan for retirement. Benefits 
they would otherwise be entitled to if not for their on the job injury.
    And while their LWOP will count as creditable service for 
retirement purposes, partially disabled employees who are not able to 
return to work full-time are, according to the Office of Personnel 
Management, part-time employees, even if their employment status is 
career full-time. Their base pay will be pro-rated when their annuity 
is computed. The subsequent annuity reduction can be dramatic.
    Additionally, a disabled employee's pay rate for wage loss 
compensation is frozen as of the date of injury or first disability and 
does not increase as a result of contractual pay raises and COLAs, or 
step increases (a claimant will receive an OWCP COLA after receiving 
wage loss compensation for one year).
Benefits
    FECA's wage replacement rate is 66 2/3%, and if there is a 
dependent the rate is 75%. There is no income tax deduction from these 
injury compensation payments, but the employee's health care and 
optional life insurance premiums are still deducted. The average Postal 
Service bargaining unit employee has a base pay of under $42,000. At 
this pay rate it is highly unlikely that the injured bargaining unit 
employee is going to receive a net pay increase as a result of a 
disabling injury. When comparing FECA to state wage loss compensation 
rates, it should be noted that an average bargaining unit employee's 
weekly compensation of $538 would be less than the average maximum 
state wage weekly compensation of $559. It has been suggested that a 
reduction in the wage loss compensation formula would serve as an 
incentive for all claimants to return to work. Subjecting injured 
workers to additional financial hardship and possible re-injury should 
not be a substitute for the cures that modern medicine has to offer. It 
should also be mentioned that if an injured employee qualifies for 
Social Security Act (SSA) benefits that are paid for disability, then 
FECA benefits will be reduced by the SSA benefits attributable to the 
employee's federal service.
    Continuation of pay (COP) is paid only for timely filed traumatic 
injury claims. It is not paid for occupational illness claims. 
According to USPS statistics the average COP usage is just 66.3 hours 
per traumatic injury. Implementing a three-day waiting period would 
impose a 37% slash to the worker's pay that if not for the workplace 
injury they would be earning. As for the argument that the three-day 
waiting period would discourage ``frivolous'' or ``non-meritorious'' 
claims, this reasoning implies it's permissible to penalize the worker 
whose injury was not severe enough; the waiting period could prove to 
be counter productive. Putting it plainly, non-meritorious claims are 
going to be denied by OWCP. When the claim is denied the employee must 
reimburse the employer either by substituting leave for the COP, or by 
paying out of pocket. Therefore, these non-meritorious claims are not a 
cost factor for the employer, and a three-day waiting period is simply 
a pretext for an inequitable reduction of a reasonable wage loss 
payment for the worker.
    We also hear arguments for creating a ``FECA Retirement System,'' 
maintaining that a totally disabled person should be forced into OPM 
retirement at a certain age. We would argue that compelling people to 
retire because they have reached a certain age is contrary to national 
policy and implies that injured employees chose to become totally 
disabled in order to gain some financial advantage. Additionally, there 
is no equity in terminating wage loss compensation when an injured 
employee reaches some arbitrary age. Many people are working well 
beyond ``normal'' retirement age because they simply cannot afford to 
retire. As stated earlier, since injured employees are in a LWOP 
status, neither they nor their employing agency may make contributions 
to TSP. For FERS employees, the maximum impact would result in their 
annuity funding being diminished by 15% of their basic pay and the 
accrued rate of return on their TSP investment. Additionally, injured 
workers who continue to have disability causal to their employment 
would not be able to earn supplemental income to their annuity as so 
many healthy annuitants currently do. Disabled workers should not be 
held to a higher standard, singled out for financial hardship, nor be 
expected to make do on a reduced annuity.
Medical Costs
    Statistics from the Department of Labor indicate that Postal 
Service injury case rates have declined steadily since fiscal year 
2000, and continue to decline in fiscal year 2004, yet their federal 
injury compensation costs continue to rise. One major cost driver is 
the continuing increase in total amounts billed for medical services. 
In any efforts to cut costs, it is imperative to control the escalating 
prices of this powerful industry rather than reduce benefits to injured 
employees.
FECA Changes
    Department of Labor submission timeliness reports establish that 
less than 65% of notice of injury or illness forms (CA-1s/CA-2s) are 
received by OWCP from the employing agencies within the federally 
mandated time limits (ten working days), and less than 48% of wage loss 
compensation claim forms (CA-7s) are received by OWCP in a timely 
manner (five working days). These delays have a significant impact on 
timely adjudication of entitlement to benefits. Until OWCP receives 
these claim forms, they cannot begin the claim adjudication process. 
They are unable to initiate the process of evaluating the merits of the 
claim, to monitor both the medical treatment and the employee's return 
to medically suitable work. OWCP's internal analysis has demonstrated 
that the delayed submission of the forms for notice of injury and claim 
for wage loss compensation make a significant difference in the length 
of time an injured worker remains off the job, even when injuries and 
working conditions are similar.
    Under the current FECA, OWCP does not have any enforcement powers. 
They can only attempt to persuade and cajole federal agencies to submit 
claim forms within the time limits mandated by federal regulation. We 
suggest that OWCP be granted enforcement powers in regards to 
addressing the entire experience of injured workers, from the day of 
injury to their return to work. This is a change which would benefit 
the injured employee, the employer, and OWCP.
    Ergonomic injuries alone cost taxpayers, businesses and workers 
billions of dollars annually. OSHA estimates that each year, 1.8 
million workers suffer from musculoskeletal disorders and that 600,000 
people miss work because of them. The Labor Department estimated that 
``new safety rules'' for employers would prevent injury to about 
300,000 workers annually and save the U.S. economy $9 billion. 
Repealing the Ergonomic Standards may have relieved business groups of 
the financial burden to correct workplace safety violations, but it did 
nothing to quell the costs of injuries that they or U.S. taxpayers 
encounter because of them. The latter is a far greater burden than the 
cost of addressing the unsafe conditions. Therefore, if in fact the 
Safety, Health and Return-to-Employment Initiative and this committee 
are genuine in their goal of reducing the costs of injury, then there 
must be more than initiative goals beyond that of job performance. 
There must be employer accountability to ensure a safe work environment 
that is mindful of unsafe conditions and of ergonomic standards.
    Finally, we recognize OWCP has made efforts to improve services. 
They have made technological improvements in order to process claims 
more efficiently, which provides claims examiners with more immediate 
access to imaged records and reduces delays in claim processing. The 
implementation of a centralized mailroom that services all OWCP 
District Offices has reduce routing time to responsible claims staff, 
and reduced record-misplacement occurrences. Although OWCP has relieved 
its claims examiners of some clerical duties, claims examiners are 
still in short supply to adequately adjudicate claims in a timely 
manner. These shortages cause delays in prompt medical treatment, which 
results in prolonged recovery for claimants and hardships for both 
claimants and the employers.
    In another effort to expedite service, OWCP recently contracted 
with a single company, ACS, to approve all medical services requiring 
prior authorization and to handle its bill payment processes. 
Contracting out, however, has created some new problems. Claims 
examiners are no longer available to discuss medical bills, 
reimbursements and authorizations with claimants, their 
representatives, or their physicians. ACS representatives are not 
responsive, nor do they demonstrate consistency in applying the 
regulations, which has resulted in unnecessary delays. We suggest that 
when duties are contracted out that there be a Statement of Work 
Agreement that specifies obligations and includes relief to OWCP of the 
contract when a vendor fails to meet the terms of the agreement. 
Additionally, we suggest that OWCP maintain genuine oversight with all 
contracted companies.
Conclusion
    The Federal Employees' Compensation Act is a law based in equity. 
The employer gives up some of the defenses available under common law, 
and the employee similarly forgoes the full range of damages which 
could be awarded. It is a non-adversarial process designed to provide a 
predictable level of liability for the employer, and a predictable 
level of benefits for the employee. To amend the law in a manner which 
upsets this balance would be a disservice to the overriding concept of 
fairness that is the law's foundation. Unilaterally reducing benefits 
to the injured worker simply in an effort to lighten the financial 
liability of the employer is not an equitable response to the 
increasing injury compensation costs. Injured workers already suffer 
loses, both financial and emotional, for which they can never be 
compensated. A reduction in benefits that were fairly established would 
unjustly increase the already substantial burden of their injuries and 
illnesses, and literally add insult to injury.
    Thank you for this opportunity to address these important issues.
                                 ______
                                 
    Chairman Norwood. Mr. Lewis, you are now recognized for 5 
minutes.

 STATEMENT OF ELLIOT P. LEWIS, ASSISTANT INSPECTOR GENERAL FOR 
  AUDIT, OFFICE OF THE INSPECTOR GENERAL, U.S. DEPARTMENT OF 
                     LABOR, WASHINGTON, DC

    Mr. Lewis. Good afternoon, Mr. Chairman, and Members of the 
Subcommittee. Thank you for the opportunity to testify on the 
work of the Office of Inspector General, U.S. Department of 
Labor in the Federal Employees' Compensation Act Program.
    Today, I will highlight some of our recent audit and 
investigative work in FECA and outline legislative 
recommendations for improvement of this important program.
    I am accompanied by Stephen Cossu, the assistant inspector 
general who oversees investigations related to the program. I 
request that my written statement be included in the hearing 
record.
    Effective and efficient management of the FECA program 
works to the benefit of every claimant, Federal agency, and 
taxpayer. Through our oversight of the program, we have 
highlighted several challenges regarding internal controls and 
procedures. Weaknesses in internal controls increase the risk 
of improper payments to FECA claimants across the Federal 
Government and medical providers who serve them.
    Over the years, we have made recommendations for 
improvement in the areas of customer service and program 
integrity. And OWCP has recognized the need to implement 
changes in response to our concerns.
    However, we continue to identify weaknesses in several 
areas in the program. For example, during our audit of the 
Department's 2003 financial statements, we found that OWCP is 
not ensuring that claimants submit medical evidence to support 
continuing eligibility for compensation and medical benefits. 
This appeared to be due to OWCP's failure to comply with its 
own procedures rather than a lack of responsiveness on the part 
of the claimant. The ineffectiveness of this control increases 
the susceptibility of this multibillion dollar program to fraud 
and overpayments.
    Another area of concern involves the use of Social Security 
data. Use of this data is integral to the effective operation 
of the FECA program. In a September 2000 audit, we reviewed the 
potential use of cross-matching FECA data and Social Security 
wage data to combat fraud and overpayments within the program. 
As a result of our cross-match, we identified and referred for 
investigation 33 cases that showed a potential cost savings of 
$7 million to the FECA program. We believe that legislation 
allowing OWCP access to Social Security wage data could provide 
a cost-effective tool to identify and remove dishonest 
claimants who is conceal their earnings.
    We have long been concerned with OWCP's customer service. 
In OIG reports in 1999 and 2002, we recommended the Department 
improve its goal-setting and measurement of customer 
satisfaction. We are looking into the Department's 
implementation of our recommendations as part of a current 
evaluation on customer service.
    The OIG receives complaints, via our hotline, that cover a 
variety of matters and allegations. During FY 2003, the OIG 
hotline received 116 complaints related to OWCP and the FECA 
program. These complaints involved allegations of poor customer 
service, unfair practices, privacy concerns, mismanagement and 
fraud. Individual complaints are either addressed by the OIG or 
referred to OWCP.
    In further response to hotline complaints received and as a 
follow-up to our past work, we have initiated the following 
work in the FECA program: We are currently evaluating OWCP's 
handling of complaints of poor customer service. We are 
assessing the extent to which data-mining techniques can be 
used by the OIG and the Department to identify patterns of 
improper FECA payments, fraud and abuse. Our financial 
statement audit work for 2004 will specifically look at FECA's 
new medical bill payment system. And finally, we are reviewing 
the accuracy and validity of FECA-reported performance data.
    From an investigation point of view, the OIG investigates 
FECA fraud, such as claimants who have jobs that are 
incompatible with their disability and fraud committed against 
the FECA program by service providers. In 2003, the OIG opened 
154 cases, had 59 indictments, 49 convictions, and over $14 
million in monetary results in the FECA program area.
    In the past, the OIG has made recommendations to strengthen 
the program. These have included addressing the 3-day waiting 
period, addressing the move from FECA to some form of 
retirement benefit, and granting access to Social Security wage 
records and a national directory of new hires in order to 
identify claimants defrauding the program.
    In conclusion, Mr. Chairman, our findings and 
recommendations have focused on helping to make the FECA 
program operate more effectively and efficiently while ensuring 
the integrity of the program.
    This concludes my statement. Mr. Cossu and I will be 
pleased to answer any questions you or other Members of the 
Subcommittee may have. Thank you.
    [The prepared statement of Mr. Lewis follows:]

 Statement of Elliot P. Lewis, Assistant Inspector General for Audit, 
Office of the Inspector General, U.S. Department of Labor, Washington, 
                                   DC

    Good afternoon Mr. Chairman and members of the Subcommittee. Thank 
you for the opportunity to testify on the work of the Office of 
Inspector General (OIG), U.S. Department of Labor (DOL), in the Federal 
Employees' Compensation Act (FECA) program. My name is Elliot Lewis and 
I am the Assistant Inspector General for Audit at the OIG. Today I will 
highlight some of our recent audit and investigative work in FECA and 
outline legislative recommendations for improvement of this important 
program. I am accompanied by Stephen J. Cossu, Assistant Inspector 
General for Labor Racketeering and Fraud Investigations, who oversees 
investigations related to the program. He and I will be available to 
answer any questions the Subcommittee may have regarding the OIG's work 
in the FECA program.
            Background--Federal Employees' Compensation Act
    The U.S. Department of Labor (DOL) administers several programs and 
statutes designed to provide and protect the benefits of workers. FECA 
is a comprehensive workers' compensation law covering some 3 million 
Federal and Postal employees. It is designed to provide medical 
benefits, income replacement, and certain supportive services to 
Federal employees with work-related injuries or, in the case of deaths, 
survivor benefits to family members. The Office of Worker Compensation 
Programs (OWCP), which is within the Employment Standards 
Administration (ESA), is responsible for making eligibility 
determinations and for the initial reconsideration if a claim is 
denied. Benefits are paid from the Employees' Compensation Fund, which 
is principally funded through chargebacks to the Federal agency that 
employs the injured worker. Therefore, the FECA program affects the 
budgets of all Federal agencies, and quasi-Federal agencies such as the 
United States Postal Service.
    Recognizing the need to improve this program, this past January the 
Administration launched a Government-wide initiative to improve 
workplace safety and health and reduce the costs of injuries to workers 
and taxpayers. Known as the SHARE (Safety, Health, and Return-to-
Employment) initiative, it calls for all Departments to establish goals 
to lower workplace injury and illness case rates; lower lost-time 
injury and illness case rates; improve the timeliness of reporting 
injuries and illnesses; and reducing lost productivity days due to work 
injuries and illnesses. The Secretary of Labor has been designated to 
lead the initiative in terms coordinating the development of goals for 
each Department and measuring their performance. The OIG is encouraged 
by the goals of this initiative.
                    OIG Activities Relating to FECA
    Mr. Chairman, effective and efficient management of the FECA 
program works to the benefit of every claimant, Federal agency, and 
taxpayer. Through our oversight of the program, we have highlighted 
several challenges regarding internal controls and procedures. Our 
concerns have been included in our Annual Management Challenges Report 
for several years. Weaknesses in internal controls increase the risk of 
improper payments to FECA claimants across the Federal government, and 
medical providers who serve them. Over the years, we have made 
recommendations to OWCP for improvement in the areas of customer 
service and program integrity and OWCP has recognized the need to 
implement changes in response to our concerns.
Financial Statements Audits
    However, Mr. Chairman, we continue to identify weaknesses in 
several areas in the program. For example, during our audit of the 
fiscal year 2003 DOL Financial Statements, we found that OWCP is not 
ensuring that claimants submit medical evidence to support continuing 
eligibility for compensation and medical benefits. Claims Examiners are 
required to obtain and review medical evidence on a periodic basis to 
determine continuing claimant eligibility. Our audit found the lack of 
current medical evidence in 18 percent of sampled cases, which appeared 
to be due to OWCP's failure to comply with its own procedures rather 
than a lack of responsiveness on the part of the claimant. The 
ineffectiveness of this control increases the susceptibility of this 
multi-billion dollar program to fraud and overpayments.
Social Security Data
    Another area of concern involves the use of Social Security 
Administration (SSA) data. Use of this data is integral to the 
effective operation of the FECA program. In a September 2000 audit, we 
reviewed the potential use of crossmatching FECA data and SSA data to 
combat fraud and overpayments within the program. As a result of our 
crossmatch, we identified and referred for investigation, 33 cases that 
showed a potential cost recovery and cost avoidance of $7 million over 
10 years for the FECA program. We believe that legislation allowing 
OWCP access to SSA wage data could provide a cost-effective tool to 
identify and remove dishonest claimants who conceal their earnings.
Customer Service
    Our 1999 evaluation of OWCP's FECA customer service surveys 
revealed the existence of methodological flaws in several areas, 
including survey design, measurement of customer service, sampling, 
response rate, and survey operations. As a result, we made a number of 
recommendations to enhance the accuracy of the data by improving the 
survey methodology and thus helping OWCP judge and improve the quality 
of customer service provided. The agency agreed with most of our 
recommendations and incorporated them in its subsequent survey. 
However, OWCP has conducted no written survey since 2000, focusing 
instead on telephone surveys.
    A 2002 OIG report on FECA performance measures recommended, and the 
Department agreed, to establish a performance goal for customer 
satisfaction. We are looking at the Department's implementation of our 
recommendation as part of our current evaluation of FECA customer 
service, which I will address in a moment.
Hotline
    The OIG receives complaints via our hotline that cover a variety of 
matters and allegations. During fiscal year 2003, the OIG Hotline 
received 116 complaints related to OWCP and the FECA program. These 
complaints involved allegations of poor customer service, unfair 
practices, privacy concerns, mismanagement by OWCP, and fraud against 
the program. Some complaints are referred to OWCP for action and those 
dealing with allegations of fraud remain with the OIG.
Current Work
    In further response to hotline complaints received and as a follow-
up to our past work, we have several current work projects underway in 
the FECA program:
      Customer Service Evaluation--In this on-going review we 
are evaluating OWCP's handling of claimant complaints of poor customer 
service. Our objectives are to determine:
          The extent to which one OWCP district office 
        responded to and resolved complaints;
          If employing agencies are satisfied with OWCP 
        customer service; and
          If OWCP telephone surveys provide an adequate 
        indication of customer satisfaction.
    We would be pleased to share the results of our work upon its 
completion.
      Data Mining--We are currently assessing the extent to 
which data mining techniques can be used by the OIG and the Department 
to identify patterns of improper FECA payments, fraud, and abuse.
      Financial Statement Audit--The FECA program has 
implemented a new medical bill-processing system during fiscal year 
2003. Our DOL financial statement audit work for fiscal year 2004 will 
look at payments generated by the new system.
      FECA Data Validation--We are reviewing the accuracy and 
validity of Government Performance and Results Act performance data 
reported by the Department with respect to FECA.
Fraud
    From an investigations point of view, the OIG investigates claimant 
fraud and fraud committed against the FECA program by service 
providers. In fiscal year 2003, the OIG opened 154 cases, had 59 
indictments, 49 convictions, and over $14 million in monetary results 
in the FECA program area. We also closed 153 cases from fiscal year 
2003 and prior years.
    The following cases are representative of the types of fraud we 
regularly investigate:
      A former Department of Army employee was sentenced to six 
months' home confinement, 100 hours of community service, two years of 
supervised probation, and ordered to pay more than $150,000 in 
restitution for receiving benefits for an employment-related injury 
while he sold hay and livestock and, for a fee, delivered topsoil and 
gravel.
      A former Postal worker was sentenced to six months' home 
detention and five years' probation and ordered to pay $101,206 in 
restitution after pleading guilty to charges of making false statements 
to obtain Federal workers' compensation benefits. He was operating a 
tax business and a limousine business and not reporting this to OWCP as 
required. This investigation was conducted jointly with the U.S. Postal 
Inspection Service.
      An orthopedic clinic specializing in sports medicine 
agreed to pay $2.65 million to settle allegations of overbilling by 17 
of its physicians. This investigation, also conducted jointly with the 
U.S. Postal Inspection Service, was the result of a qui tam action 
filed by an employee who alleged that the clinic and its physicians 
knowingly overbilled government healthcare programs, including $110,000 
in overcharges to DOL's FECA program.
              Recommendations to Improve the FECA Program
    In the past, the OIG has made recommendations to strengthen the 
program. These include:
Changing the Continuation of Pay (COP) Period
    FECA currently has a provision that allows employees who sustain 
disabling job-related traumatic injuries to receive continuation of 
their regular pay for a period not to exceed 45 calendar days after the 
injuries. Currently, a three-day waiting period, before FECA benefits 
could begin, is at the end of the COP period, which does not serve to 
discourage frivolous claims. We recommend returning the three-day 
waiting period (before FECA benefits can start) to the beginning of the 
45-day continuation-of-pay period. This would require employees to use 
any accrued sick leave, annual leave, or leave-without-pay for that 
three-day waiting period, before their FECA benefits could begin. 
(Should the claim be approved by OWCP, any leave used during this 
three-day waiting period would be restored.)
Establishing a Retirement Age for Beneficiaries
    Currently, FECA beneficiaries are not required to retire at any 
age. Therefore, beneficiaries may remain on disability for life. This 
results in a strong incentive to continue to receive FECA benefits, 
since the tax-free benefits are much greater than any retirement 
earnings would be. The OIG recommends that a suitable retirement age be 
established under the Act for FECA claimants. Once the beneficiaries 
reach the specified retirement age, their retirement benefits would be 
adjusted downward to a specified level; however, medical benefits could 
still be paid by OWCP.
Accessing Earning Information
    Accessing Social Security wage information and the National 
Directory of New Hires, which is maintained by the Department of Health 
and Human Services, could be used by OWCP to document whether a 
claimant has outside employment. If it is determined that the claimant 
has unreported outside employment or income, any inappropriately paid 
benefits can be reduced or withdrawn. Access to Social Security wage 
information would also be useful to verify the validity of any Social 
Security numbers provided by the claimants. Unfortunately, OWCP can 
only access Social Security wage information if the claimant gives OWCP 
permission to do so. A refusal to grant such authorization has no 
adverse impact on the claim. Also the National Directory of New Hires, 
which contains employer-reported information on newly hired 
individuals, is not currently available to OWCP. Claimants who are 
defrauding the FECA program are unlikely to willingly grant OWCP or the 
OIG the authority to access information about their earnings. 
Provisions in law would be required for OWCP and the OIG to have access 
to Social Security data and the National Directory of New Hires, 
similar to the access already provided to several other Federal 
agencies.
                               Conclusion
    In conclusion Mr. Chairman, our findings and recommendations have 
focused on helping to make the FECA program operate more effectively 
and efficiently, while ensuring the integrity of the program. This 
concludes my written statement; Mr. Cossu and I would be pleased to 
answer any questions you or the other members of the Subcommittee may 
have.
                                 ______
                                 
    Chairman Norwood. Thank you very much, Mr. Lewis.
    To begin our questioning, I will call on Mrs. Biggert for 5 
minutes.
    Mrs. Biggert. Thank you, Mr. Chairman.
    And thank you all for coming today.
    Mr. Hallmark, has the use of private contractors for 
administrative processing made the program more efficient?
    Mr. Hallmark. Yes, I believe it has. We have used 
contractors for different parts of the FECA program for many 
years. And it has allowed us to expand and leverage our staff 
resources to accomplish the really labor-intensive aspects of 
this program.
    We have--as Mr. Lewis mentioned, we started a medical bill 
pay contract this past September. And that contract is still in 
the development stage. We are continuing to have fairly serious 
problems. Although, we believe they are on the road to 
improvement at the present moment.
    But as a principle, we find that contracting out for 
commercial aspects of what we do to be a successful strategy 
for the program.
    Mrs. Biggert. Does it make it more expensive?
    Mr. Hallmark. It is not cheap to do the work that we are 
accomplishing through the contractor. And part of the issue 
that we have, and Elliot mentioned it as well, and I think also 
Sue that we need to do a better job of administering those 
contracts to ensure that we do have the most efficient process. 
And that is something we are also working on.
    Mrs. Biggert. Have you had to let some of the contractors 
go because they weren't doing their job then?
    Mr. Hallmark. We literally have thousands of contractors. 
We contract for vocational rehabilitation services on an 
individual counselor basis, for nurse rehabilitation on an 
individual nurse basis, and large contracts for----
    Mrs. Biggert. So it is not a big company all the time that 
comes in?
    Mr. Hallmark. No. It is a whole range, from one-person 
operations to multi--our contract for medical services is with 
Lockheed Martin, fairly large entity. In some cases, we have 
had to deal with contractors and take actions to shift from one 
source to another. And that is just the nature of that 
business.
    Mrs. Biggert. Then, Mr. Hallmark, Ms. Carney noted in her 
testimony that OWCP has real power to compel agencies to submit 
claim forms within the time limit that has been mandated by 
Federal regulation. So how do you handle that, currently, 
particularly in a situation where an agency has failed 
repeatedly to submit claim forms in a timely manner?
    Mr. Hallmark. The FECA statute provides for a criminal 
penalty which, to my knowledge, has never been implemented.
    Obviously, if we are aware of--and we have been advised 
from time to time through history--of a situation where just a 
flat-out failure to report has occurred, and in those cases we 
would work with the agency and, if need be, with law 
enforcement officials to address the issue. And we have used 
the IG and the agency IGs to address those kinds of egregious 
situations.
    But by far, the more common situation is just the simple 
lack of promptness. And our approach to that has been, and I 
think it has been very successful, has basically been to work 
with the agencies and to build cooperation to make clear 
measurements and targets for improvement which we, for example, 
post on our Web site by agency. So we, in effect, use the power 
of publicity to encourage agencies to get better.
    And I can say, as I said in my opening remarks, since 1994 
or so, when we started really focusing on this, the agencies 
have gotten twice as good as they were. Now, they were horrible 
in 1994, to be honest. They are now, as Sue indicated, the 
average is about 65, 66, 67 percent timely. That is within 2 
weeks. That is not good enough. But I would say that the trend 
is very much positive. And the Postal Service, for example, has 
made incredible strides, and they are now up near their target 
of 90 percent, which they deserve credit for.
    Ms. Carney. While the Postal Service may have made some 
strides, it is a serious recurring problem. And I would like to 
also point to the Attorney General's Office as the person that 
we are supposed to go to when we file these complaints for 
noncompliance. And, as Mr. Hallmark has said, that has never 
happened because, of course, in the grand scale of things, we 
are certainly at the bottom of the food chain for such--when 
you compare terrorists versus the claim form didn't get there, 
obviously, we don't get the attention that----
    Mrs. Biggert. It is hard to tell you, it was lost in the 
mail.
    Ms. Carney. But in any case, and within OWCP's own--
Department of Labor's own study, it is a fact that, if we get 
the claims in to OWCP and processed in a timely fashion, then 
those employees recover more quickly because they are getting 
their claim adjudicated. They are getting medical services. And 
then they return to suitable work in a much more timely fashion 
than the person that has maybe the same condition but didn't 
get the claim, the receipt of claim. It is not an isolated 
problem with the Postal Service. It is widespread, and it has 
definitely----
    Mrs. Biggert. Let me ask Mr. Hallmark again, usually when 
some people are prompt, some people are early and some people 
are late, it just seems like human nature. Is that true of the 
agencies? Is it always the same agency that has the problem 
with getting the forms in on time?
    Mr. Hallmark. There are definitely patterns. If you look at 
our Web site, you can clearly see, there are some agencies that 
have not made progress, others that, as I say, have made 
dramatic progress. Several of the agencies have come to us and 
worked with the Department of Labor to, for example, transmit 
their claims electronically so that it cuts out lost in the 
mail. And we would like the Postal Service to do that, too, but 
they are resistant. That makes a big difference. Those agencies 
have moved ahead.
    One thing we have in our favor at this point--we don't have 
a criminal or a penalty kind of process that is really 
effective--but we do have the President's SHARE initiative, 
which sets goals not only to reduce the number of injuries that 
have occurred or will occur but also to process the FECA claims 
that do occur more rapidly. And each agency has a specific 
target for improving each year for the next 3 years in that 
area. And I think that will have an impact on the kind of 
issues that Ms. Carney is talking about.
    Chairman Norwood. Thank you, Mrs. Biggert.
    I wouldn't hold my breath, Mr. Hallmark, to get the Postal 
Service to start sending their claims in electronically.
    I would now like to recognize Major Owens for 5 minutes for 
questions.
    Mr. Owens. Talk about conflicts of interest here.
    Ms. Carney, what types of special difficulties would you 
see lower-income injured workers having facing--see them facing 
in the event that FECA benefits are terminated after age 65 in 
favor of some sort of retirement annuity?
    Ms. Carney. What difficulty?
    Mr. Owens. What kind of problems do you see them facing?
    Ms. Carney. First off, I don't think it is fair to even 
make a comparability issue between the FECA programs and the 
State programs. One of the issues is that, depending on where 
you live, the cost of living is substantially higher than other 
areas. The way FECA is currently set, with a slight increase 
for those that have dependents, addresses that. So I think that 
the compensation wage-loss would be of greater significance.
    There is also not a formality within State programs, State 
comp programs. As Federal employees, that is one of the 
benefits we all have: We are supposed to have formal--you know, 
common benefits.
    Mr. Owens. You mentioned carpal tunnel syndrome, the 
personal problem.
    Ms. Carney. Yes. Thoracic Outlet Syndrome and Carpal 
Tunnel.
    Mr. Owens. Could you describe a little bit how that was 
allowed as a legitimate claim when----
    Ms. Carney. How did I get it?
    Mr. Owens. No. No, not how you got it. When the new 
Administration came into power here, the President, along with 
the Republican majority in the Congress and the Senate, wiped 
out the ergonomic standards that we had spent 10 years laboring 
on. I want to know, how is your complaint legitimatized if we 
don't have those standards in place?
    Ms. Carney. Well, the machines that I worked on were 
certainly the culprit in my medical conditions. They are not 
ergonomically set for the human body to work on. And the 
functions that I did, had they been taken care of through the 
OSHA ergonomic standards, if I didn't have to do those 
particular functions, if I did them on a machine that was built 
more for the human being body type, as opposed to what we had 
to go through, I wouldn't be suffering.
    I would like to say, too, you know, my former husband--you 
want to talk about--we addressed time issues, my former husband 
also a Postal employee, also a back injury, two herniated 
discs, 5 years to get his back surgery approved.
    Mr. Owens. Thank you.
    Dr. Hunt, how many State workers' compensation systems 
remove retirement-age injured workers from their workers' 
compensation programs? Is there any State that is currently 
considering this?
    Dr. Hunt. I didn't catch the last part of that. Could you 
repeat that?
    Mr. Owens. Is there any State that is currently considering 
removing retirement-age injured workers from their workers' 
compensation programs?
    Dr. Hunt. I don't know if there are any that are currently 
doing it. I don't know the exact number. I can submit that for 
the record.
    [The information referred to follows:]

                 Retirement Offsets in State WC Systems

    I have briefly reviewed the OWCP publication State Workers' 
Compensation Laws and estimate that there are about 15 states that 
reduce wc benefits for receipt of SS retirement and/or employer pension 
payments. Usually this amounts to an offset of the employer contributed 
proportion only. The states that have some such offset include: AK, AR, 
CO, CT, FL, LA, ME, MI, ND, PA, RI, TN, UT, WA, WV.

H. Allen Hunt, Ph.D.
Assistant Executive Director
Upjohn Institute for Employment Research
Kalamazoo, MI
                                 ______
                                 
    Dr. Hunt. There are a number that have either a step-down 
or other arrangement at age 65, at the traditional retirement 
age. I don't know if it is comparable to what you are thinking 
about for FECA or not.
    Mr. Owens. Would you say one-half the States are doing it 
or one-fourth of the States?
    Dr. Hunt. I would think maybe a third of the States would 
be my ballpark guess.
    Mr. Owens. Mr. Hallmark, if the retirement age recipients 
are to be assimilated into a defined benefit plan such as FERS 
or CSRS, how would their number of service years and salary at 
retirement be estimated?
    Mr. Hallmark. Well, with great difficulty, I believe. The 
issue of how one would construct a provision to address the 
question of comparability between FECA benefits and OPM 
retirement benefits is an extremely complicated one. GAO 
studied it in the early 1990's and did a report laying out the 
difficulties with respect to the proposal that I think you are 
pointing to, which was that people actually be moved from the 
FECA rolls and into the OPM pension structure.
    And the complexities that you are alluding to, of where 
their salaries were in the non-funded nature of that kind of a 
shift, were pointed to with some clarity in that report. The 
provision that is part of the President's proposal in the 2005 
budget would not move individuals from the FECA roles to OPM 
but would simply create a different benefit level within the 
FECA structure and thereby eliminate those background 
complexities.
    Mr. Owens. My time is up. Thank you very much.
    Chairman Norwood. Mr. Kline, you are recognized for 5 
minutes.
    Mr. Kline. Thank you, Mr. Chairman. Thank you, gentlemen 
and lady, for being here today.
    I took very much to heart the Chairman's comments earlier 
that it is an educational experience. It certainly is for me. 
And I very much appreciate your testimony and the answers to 
the questions.
    I have so many here in front of me, I am not sure exactly 
where to start, except that I am trying to understand the issue 
of Social Security numbers and access to them and medical 
records. So let me start with a few for you, Mr. Lewis. We will 
see how my time holds up if I get in as many as I can.
    As I understand in your testimony, you state that OWCP does 
not always ensure that claimants submit medical evidence to 
support continuing eligibility for compensation of medical 
benefits. Do you have an estimate of the amount of overpayment 
made as a result?
    Mr. Lewis. I do not have an estimate of what the total 
amount could be as a result of that. We identify each year in 
our audit in how many cases where there should have been a 
request for follow-up medical evidence that either the request 
wasn't made or the evidence wasn't submitted. In our most 
recent work, we had looked at a random sample of 145 claims 
that fit that category. And I think it was 27 that were not 
compliant.
    Mr. Kline. Fifteen percent or so. Mental arithmetic is 
always a little risky for me.
    Let me see if I understand then the issue with Social 
Security records. Without access to Social Security records, 
how is it that OWCP would be able to identify and remove any 
dishonest claimants that there might be?
    Mr. Lewis. Well, there is self-reporting and certification 
in terms of any income that is earned and dependent status. 
There is also a voluntary authorization from claimants to 
confirm with Social Security on a one-time basis, and then 
leads or referrals that we may get, say, in our IG or in other 
agency IGs.
    Mr. Kline. Do I understand that you are recommending that 
OWCP have access to Social Security?
    Mr. Lewis. Yes, to the wage information to verify if 
someone begins working and has unreported wages.
    Mr. Kline. In your judgment, would this access to this 
information significantly reduce the cost of the program?
    Mr. Lewis. Well, as I said in the testimony, in our last 
look at that, we identified 33 cases that totaled $7 million. 
So we think that is a much more efficient approach than trying 
to tackle it person-by-person.
    Mr. Kline. OK.
    Mr. Hallmark, you mentioned, in response to an earlier 
question and I think in your testimony, the SHARE program. 
Could you just take another minute or so I have left and kind 
of elaborate on that a little bit and tell us what follow-up 
procedures are in place to ensure that the agencies are making 
progress toward meeting the goals?
    Mr. Hallmark. The SHARE initiative was announced in January 
of 2004 by the President. It incorporates goals set for each of 
the Federal agencies to reduce injuries that occur within their 
workplaces, to speed the filing of FECA forms and also to 
reduce lost-production days which is the measure that Dr. Hunt 
was referring to.
    All three--all of those goal areas are established by 
agency for 2004, 2005 and 2006. The Department of Labor, 
specifically OWCP and OSHA, will be working with each of the 
agencies to monitor their activities, give them the technical 
assistance to ensure that they are moving ahead along these 
goal paths. And we will be publishing results of their 
performance on a quarterly basis on our Web site. And we will 
be reporting to the President annually to indicate how well we 
see the whole program working.
    Mr. Kline. OK. Thank you very much.
    I see my time is about to expire. I have got one more, 
getting back to the medical evidence, medical records issue and 
again for you, Mr. Hallmark, what is OWCP doing now to improve 
the process of periodically getting the medical evidence?
    Mr. Hallmark. The finding of OIG was localized for the most 
part in one of our district offices. We have 12 offices. That 
office had the procedural breakdown.
    The good news is that we have the new IT system that I 
mentioned in my remarks is going into place this summer. That 
system will provide prompts to claims examiners and to workers 
automatically, instead of it having to be found. Those cases 
will pop up on their computer screen, and they will be guided 
through the process of ensuring that that data and evidence is 
procured as needed.
    Mr. Kline. OK. I understand now. Thank you very much.
    Chairman Norwood. Thank you, Mr. Kline.
    Mr. Greenwood, we are delighted to have you with the 
Subcommittee today, and you are now recognized.
    Mr. Greenwood. Thank you, Mr. Chairman.
    Mr. Hallmark, is there any requirement that beneficiaries 
re-certify periodically? Annually, do they have to recertify, 
both as to their medical status? And does that have to be 
signed off by a physician? How does that work?
    Mr. Hallmark. There is an annual recertification process 
with regard to employment and earnings and sort of basic status 
of the individual. The medical--the reevaluation of medical 
that Mr. Lewis was referring to is gradated depending on the 
status of the claimant.
    In some cases, where the individual has been on the rolls 
for a longer time period and has been judged to be in a more 
stable situation, we don't get a medical report every year. But 
there is a 1- or 2- or 3-year cycle whereby we would go back to 
that individual's physician to re-verify that the disability 
from the work injury is continuing and justifies the continuing 
payments.
    Mr. Greenwood. When there is fraud, in cases of fraud, why 
doesn't that periodical medical re-certification catch the 
fraud?
    Mr. Hallmark. Well, a number of reasons. One is that an 
individual may have a condition--and the vast majority of 
injuries that occur, the 170,000 that occur every year are 
genuine injuries. It is very rare that someone comes forward 
with a completely fraudulent case that doesn't exist.
    So when we go back to an individual who is on benefits now, 
they may very well have an injury. They may have a continuing 
condition that a physician will indicate, yes, that condition 
remains. However, the individual may still be able and may be, 
in fact, working in some situations that we are not aware of 
and failing to report it in the annual----
    Mr. Greenwood. So it is more the double-dipping that causes 
the fraud than just sort of malingering, if you will?
    Mr. Hallmark. Well, certainly fraud, if you sign the 
document saying you are not working and don't have any earnings 
and, in fact, you are working and do have earnings, that is the 
nature of the fraud that the IG finds.
    Mr. Greenwood. That is the nature, but that there is a 
continuing injury--what I am trying to understand here is, I go 
to my doctor--and I am required to re-certify. The doctor says, 
``Yes, the person is still injured.'' then the person is 
actually working another job and falsely reports that he is 
not. Did he pull one over on the doctor? I mean----
    Mr. Hallmark. The doctor is not aware of any----
    Mr. Greenwood. Not that he has got the other income, but 
that he is well enough to work.
    Mr. Hallmark. Most of the concerns that we are talking 
about here are complex. And they are not of the kind that 
typically are, yes, this person obviously is never going to 
work again or, no, this person can go right back to work. They 
are in the gray area. That is the nature of these injuries, 
many of which are musculoskeletal injuries and subject to a lot 
of variability and subjective findings.
    That is why I was referring to the whole issue of 
disincentives to return to work. The question many times is 
that the transition to going back to work, there is--it is 
rare, it is really quite rare that people are being fraudulent 
and drawing the benefit and being off somewhere working at 
another job. That happens, but I think the IG prosecutes 100 
cases a year out of the 50,000 long-term roll cases we have.
    Much more common is people who are continuing to draw that 
benefit, not working, not engaging in fraud, but the question 
is whether or not they shouldn't be back at work. And that is 
the gray area.
    Mr. Greenwood. If I am doing a manual labor, and I am 
injured so that I can't do manual labor, do I--am I--is the 
Federal Government able to compel that person on condition of 
continuing to receive the benefit to do another kind of labor 
that is less taxing on their physical body?
    Mr. Hallmark. There are sections in FECA for participating 
in a vocational rehabilitation program. So, yes, if an 
individual is a blue-collar worker who cannot do the craft, one 
of the things that we will do in our return-to-work effort is 
identify possible alternative employment and----
    Mr. Greenwood. One of the things that strikes me there is a 
shortage of claims managers, right?
    Didn't you say that, Ms. Carney, in your testimony? There 
is a shortage of claims managers.
    Ms. Carney. In my opinion.
    Mr. Greenwood. I wonder how many people are receiving FECA 
benefits who couldn't be claims managers. How hard a job does 
that have to be? How much training does it take to become a 
FECA claims manager?
    Mr. Hallmark. I think our claims examiners would indicate 
it is a very difficult job.
    Mr. Greenwood. I am sure it is, but you don't have to go to 
college for 9 years to learn how to do that, do you?
    Mr. Hallmark. It is a complex business, but, yes, we do 
have claims examiners who are former recipients of benefits who 
got involved and learned the program through that avenue. And 
that is fine.
    We do look for all kinds of different employment where 
people can be in that situation. But the big issue, the most--
the greatest difficulty in vocational rehabilitation is 
employee motivation.
    Mr. Greenwood. Nothing like taking away their benefits to 
get their motivation going, in my opinion.
    Mr. Hallmark. That is one of the avenues, but it is not 
dispositive at all times.
    Mr. Greenwood. Thank you, Mr. Chairman.
    Chairman Norwood. Thank you, Mr. Greenwood.
    I would like to ask the panel, all of us have a lot of 
questions for which there is not enough time to ask. And we 
will submit questions in writing, if we could. Perhaps that 
will help us a little bit. But I will recognize myself to sort 
of finish up.
    Ms. Carney, have you had surgery for your Carpal Tunnel?
    Ms. Carney. No. In my particular case, I have not. That is 
because my surgeon thought it was too life threatening. But----
    Chairman Norwood. Life threatening for Carpal Tunnel?
    Ms. Carney. Thoracic Outlet Syndrome gets too close to the 
jugular, too close to the spinal. They would have to cut me 
through the breast and through the stomach.
    Chairman Norwood. I am talking about the Carpal Tunnel.
    Ms. Carney. There is no point in fixing my Carpal Tunnel 
because of my Thoracic Outlet. They go, pardon the expression, 
hand in hand.
    Chairman Norwood. I am going to take my time with one 
question, Mr. Hallmark. I think it will take you the 5 minutes. 
I would like for to you walk me through what happens when a 
patient is injured. That point we know that a Federal employee 
is injured and sustains an injury, is that employee first seen 
by an OWCP doctor? Is that the first step? Are there deadlines 
for filing a claim with an employer? Just how would a typical 
claim proceed?
    Mr. Hallmark. I don't know if there is a typical claim, but 
basically the process is an individual's hurt on the job. 
Typically the--someone is aware of it. They may be referred 
immediately to--taken to an emergency room to address the 
traumatic injury that has occurred if it is a slip-and-fall or 
a vehicle accident, of which we get thousands. That individual 
would be treated by a physician, whoever was available in an 
emergency situation.
    The claim form would be compiled by the employing agency, 
signed off by the individual when they are able to come back to 
work and do that, and signed off by the supervisor in the shop. 
The employer then, if they are the Postal Service, mails us 
their claims form within 14 days of the date of injury. That is 
the goal. And as I said earlier, the Postal Service is pretty 
good about that.
    Chairman Norwood. How rigid are you with the 14 days?
    Mr. Hallmark. Well, the 14 days is a regulatory 
requirement. As I have indicated the current average for 
meeting that goal is about 67 percent governmentwide. And as 
Ms. Carney indicates, we don't have a regulatory penalty to 
apply.
    Chairman Norwood. So if you get it on the 21st day?
    Mr. Hallmark. We get it when we get it, and we start 
working as soon as we do. And as Ms. Carney indicates quite 
accurately----
    Chairman Norwood. So we need to take the 14 days out and 
just say turn it in when you are ready.
    Mr. Hallmark. Well, it is our goal for those forms to be 
sent to us as soon as possible, because as she indicates, if we 
don't know the claim has been filed, then when the medical bill 
is forwarded to us, we won't be able to process it. We will 
send it back to the doctor, and we get into the round of 
unhappiness and delays that creates the big problem.
    So what happens when the individual is injured, the claim 
comes to us. If the injury is very serious, we will assign a 
nurse, vocational nurse, to the case to try to help that 
individual understand what needs to be done medically to 
recover and then eventually get--work with the employing agency 
to go back to work.
    If they are off work for more than 45 days of continuation 
of pay, we would then start compensation under the FECA. The 
claimant and the agency would need to file what's called a CA-7 
form asking for wage replacement, and that should be done at 
the time that the continuation of pay is finished.
    Chairman Norwood. So what if medical treatment is going on 
during all of this time? Yes, you are out of the emergency 
room, but you are still having to go back and forth to your 
physician. Is that physician--anybody in private practice can 
do that?
    Mr. Hallmark. Yes. The claimant has the right to choose 
their physician, and that is a fundamental principle in the 
FECA program.
    Chairman Norwood. And the physician says, geez, I think you 
need this surgery for that carpal tunnel. Does that physician 
have to ask your permission to do that surgery?
    Mr. Hallmark. Yes.
    Chairman Norwood. So you have to preauthorize every case 
before the physician can go ahead and do the treatment.
    Mr. Hallmark. Not every medical procedure is required to be 
preauthorized, but invasive surgeries, the main purpose for 
that preauthorization--well, there is really two. One is to 
ensure that the procedure is, in our view, connected to the 
injury, because obviously these things could be complicated, 
and a surgery might be about something else. And the other is 
to ensure that it is an appropriate medical procedure for that 
individual, because the surgery, once it is conducted, might 
have consequences itself. And if we have authorized it, then 
those consequential injuries are now payable as part of the 
person's FECA claim.
    Chairman Norwood. So you actually--you think probably the 
doc won't tell you if this surgery is needed according to the 
injury. You all have to step in and make sure.
    Mr. Hallmark. Well, the doctor--typically the doctor is 
aiming to try to do what they think is best for the patient. 
That may or may not be something that we feel is appropriate 
for the Federal Government to pay for. So the request comes to 
us in--99 percent of the time in very good faith. But we have 
to make the determination does this particular surgery fall 
within our purview, and if it does, is it appropriate for this 
particular individual? So in perhaps two-thirds of surgery 
situations, we ask for a second opinion to ensure that it is 
safe and that it is appropriate.
    Chairman Norwood. How long does that take, to go between--a 
patient going to the physician, physician sending in a 
preauthorization to you saying we need the surgery, from there 
to a second opinion? How much time have we spent now?
    Mr. Hallmark. Well, it should take less than a week for the 
decision to be made by our claims examiner that, yes, this does 
need a second opinion or, no, it doesn't. And if it is a minor 
kind of procedure that is exploratory and one that is not 
particularly invasive, our contractor can sometimes do that on 
the phone or immediately. But if it is a substantial surgery, 
then within a week our claims examiner ought to have decided 
yes or no with regard to a second opinion.
    And then we have a different set of contractors who 
schedule the second opinions. I believe those--our goal is for 
those to occur as quickly as possible. I think it is probably 
typical to be a matter of 2 or 3 months by the time you 
schedule the examination and then get a report back from the 
physician. And obviously, if it is complex, it could be longer 
than that.
    Chairman Norwood. My time is expired. Let me just say I am 
going to explore this a little bit in writing with you. The 
people I have been hearing from in Texas are people I do 
respect, and when they tell me it takes 6 months, up to a year 
to have the preauthorization on surgery, it makes--it just 
makes a lot of questions come to mind.
    How much information do you have in your agency? Do you 
know how many requests for surgery you had in 2003?
    Mr. Hallmark. I don't know whether that particular number 
is available to me, but I will certainly look for it and get it 
to you.
    [The information referred to has been retained in the 
Committee's official files.]
    Chairman Norwood. Well, I am going to ask you that. And 
then I am going to ask you out of all of those surgeries that 
were requested in 2003, what percent of them received a denial 
the first time? Some people say 100 percent.
    Mr. Hallmark. Well, if that is the case--if it is 100 
percent, then people are not following procedures, because we 
have specific procedures that allow for approval without second 
opinion of exploratory arthroscopies and that sort of 
procedure. So there are fairly substantial categories of 
surgeries that we do intend at least to approve without review.
    Chairman Norwood. Well, I am not being critical. I am 
curious. I am trying to see what really does happen. Is my pal 
down in Texas just having a particular problem in his area, or 
is this something going on?
    Mr. Owens, would you like to----
    Mr. Owens. I just have one off-the-record question. Mr. 
Hallmark, one of our colleagues here asked you is it possible 
to train claimants to become claim managers? I will ask you is 
it possible to train claimants to become Congresspersons? Thank 
you.
    Chairman Norwood. Well, I can't close with that. It appears 
to me anybody can be a Congressman, training or not.
    Thank all of you for your time. I really do appreciate your 
testimony and your willingness to be here with us today, and 
participation and Mr. Lewis. I am going to have a bunch of 
questions for you, too, in writing. And if there is no further 
business, the Subcommittee stands adjourned.
    [Whereupon, at 2:52 p.m., the Subcommittee was adjourned.]

                                 
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