Energy Employees Compensation: Obstacles Remain in Processing	 
Cases Efficiently and Ensuring a Source of Benefit Payments	 
(30-MAR-04, GAO-04-571T).					 
                                                                 
The Department of Energy (Energy) and its predecessor agencies	 
and contractors have employed thousands of people in the nuclear 
weapons production complex. Some employees were exposed to toxic 
substances, including radioactive and hazardous materials, during
this work, and many subsequently developed illnesses. Subtitle D 
of the Energy Employees Occupational Illness Compensation Program
Act of 2000 allows Energy to help its contractor employees file  
state workers' compensation claims for illnesses determined by a 
panel of physicians to be caused by exposure to toxic substances 
in the course of employment at an Energy facility. Congress	 
mandated that GAO study the effectiveness of the benefit program 
under Subtitle D of this Act. This testimony is based on GAO's	 
ongoing work on this issue and focuses on four key areas: (1) the
number, status, and characteristics of claims filed with Energy; 
(2) the extent to which Energy policies and procedures help	 
employees file timely claims for these state benefits; (3) the	 
extent to which there will be a "willing payer" of workers'	 
compensation benefits, that is, an insurer who--by order from or 
agreement with Energy--will not contest these claims; and (4) a  
framework that could be used for evaluating possible options for 
changing the program.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-571T					        
    ACCNO:   A09610						        
  TITLE:     Energy Employees Compensation: Obstacles Remain in       
Processing Cases Efficiently and Ensuring a Source of Benefit	 
Payments							 
     DATE:   03/30/2004 
  SUBJECT:   Claims processing					 
	     Claims settlement					 
	     Eligibility determinations 			 
	     Hazardous substances				 
	     Health hazards					 
	     Radiation exposure hazards 			 
	     Toxic substances					 
	     Workers compensation				 
	     Policies and procedures				 
	     Timeliness 					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-04-571T

United States General Accounting Office

GAO Testimony

Before the Committee on Energy and Natural Resources, U.S. Senate

For Release on Delivery

Expected at 10:00 a.m. EST ENERGY EMPLOYEES

Tuesday, March 30, 2004

COMPENSATION

Obstacles Remain in Processing Cases Efficiently and Ensuring a Source of
                                Benefit Payments

Statement of Robert E. Robertson, Director Education, Workforce, and Income
Security Issues

GAO-04-571T

Highlights of GAO-04-571T, testimony before the Committee on Energy and
Natural Resources, U.S. Senate

The Department of Energy (Energy) and its predecessor agencies and
contractors have employed thousands of people in the nuclear weapons
production complex. Some employees were exposed to toxic substances,
including radioactive and hazardous materials, during this work, and many
subsequently developed illnesses. Subtitle D of the Energy Employees
Occupational Illness Compensation Program Act of 2000 allows Energy to
help its contractor employees file state workers' compensation claims for
illnesses determined by a panel of physicians to be caused by exposure to
toxic substances in the course of employment at an Energy facility.

Congress mandated that GAO study the effectiveness of the benefit program
under Subtitle D of this Act. This testimony is based on GAO's ongoing
work on this issue and focuses on four key areas: (1) the number, status,
and characteristics of claims filed with Energy; (2) the extent to which
Energy policies and procedures help employees file timely claims for these
state benefits; (3) the extent to which there will be a "willing payer" of
workers' compensation benefits, that is, an insurer who-by order from or
agreement with Energy-will not contest these claims; and (4) a framework
that could be used for evaluating possible options for changing the
program.

March 30, 2004

ENERGY EMPLOYEES COMPENSATION

Obstacles Remain in Processing Cases Efficiently and Ensuring a Source of
Benefit Payments

During the first 2  1/2 years of the program, ending December 31, 2003,
Energy had completely processed about 6 percent of the more than 23,000
cases that had been filed. Energy had begun processing of nearly 35
percent of cases, but processing had not yet begun on nearly 60 percent of
the cases.

While Energy got off to a slow start in processing cases, it is now
processing enough cases that there is a backlog of cases waiting for
review by a physician panel. Energy has taken some steps intended to
reduce this backlog, such as reducing the number of physicians needed for
some panels. Nonetheless, a shortage of qualified physicians continues to
constrain the agency's capacity to decide cases more quickly.
Consequently, claimants will likely continue to experience lengthy delays
in receiving the determinations they need to file workers' compensation
claims.

GAO estimates that more than half of the cases associated with Energy
facilities in 9 states that account for more than three-quarters of all
Subtitle D cases filed are likely to have a willing payer of benefits.
Another quarter of the cases in these 9 states, while not technically
having a willing payer, have workers' compensation coverage provided by an
insurer that has stated that it will not contest these claims. However,
the remaining 20 percent of cases lack willing payers and are likely to be
contested, which means that many of these cases may be less likely to
receive compensation. Because of data limitations, these percentages
provide an order of magnitude estimate of the extent to which claimants
will have willing payers. The estimates are not a prediction of actual
benefit outcomes for claimants.

In this testimony, GAO also provides a framework for evaluating potential
options for changing the program to address the willing payer issue. This
framework includes a range of issues that would help the Congress assess
options if it chooses to change the current program. One of these issues
in particular-the federal cost implications-should be carefully considered
in the context of the current federal fiscal environment.

www.gao.gov/cgi-bin/getrpt?GAO-04-571T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Robert E. Robertson at (202)
512-7215 or [email protected].

Mr. Chairman and Members of the Committee:

I am pleased to be here today to update the information we provided in our
November 21, 2003 testimony before you on our work regarding the
effectiveness of the benefit program under Subtitle D of the Energy
Employees Occupational Illness Compensation Program Act of 2000 (EEOICPA).
This legislation was designed to provide assistance to contractor
employees in obtaining compensation for occupational illnesses. Congress
mandated that we study this issue and report to the Senate Committees on
Energy and Natural Resources and Appropriations and the House Committees
on Energy and Commerce and Appropriations.

For the last several decades, the Department of Energy (Energy) and its
predecessor agencies and contractors have employed thousands of
individuals in secret and dangerous work in the nuclear weapons production
complex. Over the years, employees were unknowingly exposed to toxic
substances, including radioactive and hazardous materials, and studies
such as one commissioned by the National Economic Council have shown that
many of these employees subsequently developed serious illnesses. EEOICPA
established two programs to help secure compensation for employees who
developed occupational illnesses or for their survivors. Congressional
Committees, as well as individual Members of Congress, claimants, and
advocates have raised concerns regarding Energy's processing of claims and
the availability of benefits once claims have been decided.

Enacted as title XXXVI of the Floyd D. Spence National Defense
Authorization Act for Fiscal Year 2001, which was signed into law on
October 30, 2000, this legislation has two major components. Subtitle B
provides eligible workers who were exposed to radiation or other toxic
substances and who subsequently developed illnesses such as cancer and
lung disease a one-time payment of up to $150,000 and covers future
medical expenses related to the illness. The Department of Labor
administers these benefits, payable from a compensation fund established
by the same legislation. Subtitle D allows Energy to help its contractor
employees file state workers' compensation claims for illnesses determined
by a panel of physicians to be caused by exposure to toxic substances in
the course of employment at an Energy facility.

My testimony today reflects our ongoing review of the effectiveness of
Energy's implementation of Subtitle D. Our work is focused on four key
areas: (1) the number, status, and characteristics of claims filed with
Energy; (2) the extent to which Energy policies and procedures help

employees file timely claims for state workers' compensation benefits; (3)
the extent to which there will be a "willing payer" of workers'
compensation benefits; that is, an insurer who-by order from, or agreement
with, Energy-will not contest these claims; and (4) a framework that could
be used for evaluating possible options for changing the program in the
event that there may not be willing payers of benefits.

In summary, as of December 31, 2003, Energy had fully processed about 6
percent of the more than 23,000 cases received. Most of the fully
processed cases had been found ineligible because of either a lack of
employment at an eligible facility or an illness related to toxic
exposure. While Energy got off to a slow start in processing cases, it is
now processing enough cases that there is a backlog of cases waiting for
review by a physician panel. The agency has taken some steps to reduce
this backlog; nonetheless, a shortage of qualified physicians continues to
constrain Energy's capacity to decide cases more quickly. In the meantime,
Energy has not kept claimants sufficiently informed about the delays in
the processing of their claims as well as what claimants can expect as
they proceed with state workers' compensation claims.

While the workers' compensation claims from about 80 percent of the cases
associated with major Energy facilities in 9 states are not likely to be
contested by employers or their insurers, actual compensation is not
certain. This figure is based primarily on the method of workers'
compensation coverage used by the Energy contractors and is not an
estimate of the number of cases that will ultimately be paid.
Specifically, slightly more than half the cases associated with facilities
in the 9 states are likely to have a willing payer of benefits and another
quarter of the cases, while not having willing payers, have workers'
compensation coverage provided by an insurer that has stated that it will
not contest the claim for benefits. However, the remaining 20 percent of
cases lack willing payers and are likely to be contested, which means that
many of these cases may be less likely to receive compensation. Because of
data limitations, these percentages provide an order of magnitude estimate
of the extent to which claimants will have willing payers. The estimates
are not a prediction of actual benefit outcomes for claimants.

Various options are available to improve payment outcomes for the cases
that receive a positive physician panel determination, but lack willing
payers under the current program. If it were decided that the program
should be modified, the options for changing it range from adding a
federal benefit to the existing program for cases that lack a willing
payer to designing a completely new program. Congress would need to
examine

these options in terms of several issues, including the source, method,
and amount of the federal funding required to pay benefits; the length of
time needed to implement changes; the criteria for determining who is
eligible; and the equitable treatment of claimants. In particular, the
federal cost implications of these options should be carefully considered
in the context of the current federal fiscal environment.

To perform our review, we analyzed data extracted from Energy's Subtitle D
case management system for applications filed through June 30, 2003, and
again through December 31, 2003.1 We also reviewed the provisions of, and
interviewed officials with, the workers' compensation programs in nine
states with Energy facilities accounting for more than three-quarters of
Subtitle D cases filed, and we interviewed the contractors operating the
major facilities in these states. In addition, we conducted site visits to
three Energy facilities in Oak Ridge, Tennessee, the state with facilities
accounting for the largest number of Subtitle D claims. We also
interviewed key program officials and other experts. Although our review
is continuing, we conducted our work for this testimony from April 2003
through March 2004 in accordance with generally accepted government
auditing standards.

Background 	Energy oversees a nationwide network of 40 contractor-operated
industrial sites and research laboratories that have historically employed
more than 600,000 workers in the production and testing of nuclear
weapons. In implementing EEOICPA, the President acknowledged that it had
been Energy's past policy to encourage and assist its contractors in
opposing workers' claims for state workers' compensation benefits based on
illnesses said to be caused by exposure to toxic substances at Energy
facilities.2 Under the new law, workers or their survivors could apply for
assistance from Energy in pursuing state workers' compensation benefits,
and if they received a positive determination from Energy, the agency
would direct its contractors to not contest the workers' compensation
claims or awards. Energy's rules to implement the new program became

1We collected data as of this date to enable us to assess the reliability
of Energy's data by (1) performing electronic testing for obvious errors
in accuracy and completeness, (2) reviewing available documentation, and
(3) interviewing agency officials and contractors knowledgeable about the
data. We determined that the data elements used were sufficiently reliable
for our purposes.

2Executive Order 13179 of December 7, 2000.

effective in September 2002, and the agency began to process the
applications it had been accepting since July 2001, when the law took
effect.

Energy's claims process has several steps. First, claimants file
applications and provide all available medical evidence. Energy then
develops the claims by requesting records of employment, medical
treatment, and exposure to toxic substances from the Energy facilities at
which the workers were employed. If Energy determines that the worker was
not employed by one of its facilities or did not have an illness that
could be caused by exposure to toxic substances, the agency finds the
claimant ineligible. For all others, once development is complete, a panel
of three physicians reviews the case and decides whether exposure to a
toxic substance during employment at an Energy facility was at least as
likely as not to have caused, contributed to, or aggravated the claimed
medical condition. The panel physicians are appointed by the National
Institute for Occupational Safety and Health (NIOSH) but paid by Energy
for this work. Claimants receiving positive determinations are advised
that they may wish to file claims for state workers' compensation
benefits. Claimants found ineligible or receiving negative determinations
may appeal to Energy's Office of Hearings and Appeals.

Figure 1. Energy's Claims Process

Source: GAO analysis of Energy Claims Process.

Each of the 50 states and the District of Columbia has its own workers'
compensation program to provide benefits to workers who are injured on the
job or contract a work-related illness. Benefits include medical treatment
and cash payments that partially replace lost wages. Collectively, these
state programs paid more than $46 billion in cash and medical benefits in
2001. In general, employers finance workers' compensation programs.
Depending on state law, employers finance these programs through one of
three methods: (1) they pay insurance premiums to a private insurance
carrier, (2) they contribute to a state workers' compensation fund, or (3)
they set funds aside for this purpose as self-insurance. Although state
workers' compensation laws were enacted in

part as an attempt to avoid litigation over workplace accidents, the
workers' compensation process is still generally adversarial, with
employers and their insurers tending to contest aspects of claims that
they consider not valid.

State workers' compensation programs vary as to the level of benefits,
length of payments, and time limits for filing. For example, in 1999, the
maximum weekly benefit for a total disability in New Mexico was less than
$400, while in Iowa it was approximately $950. In addition, in Idaho, the
weekly benefit for total disability would be reduced after 52 weeks, while
in Iowa benefits would continue at the original rate for the duration of
the disability. Further, in Tennessee, a claim must be filed within 1 year
of the beginning of incapacity or death. In contrast, in Kentucky a claim
must be filed within 3 years of either the last exposure to most
substances or onset of disease symptoms, but within 20 years of exposure
to radiation or asbestos.

  Energy Has Processed Few Cases And Insufficient Strategic Planning And Data
  Collection Complicate Program Management

As of December 31, 2003, Energy had completely processed about 6 percent
of the more than 23,000 cases that had been filed. Energy had begun
processing of nearly 35 percent of cases, but processing had not yet begun
on nearly 60 percent of the cases. Insufficient strategic planning and
systems limitations complicate assessment of Energy's achievement of case
processing goals. Further, these limitations make it difficult to assess
achievement of other broader goals, related to program objectives, such as
the quality of the assistance given to claimants in filing for state
workers' compensation.

Energy Has Fully Processed about 6 Percent of Its Cases

During the first 2  1/2 years of the program, ending December 31, 2003,
Energy had fully processed about 6 percent of the more than 23,000 claims
it received. The majority of the fully processed claims (about 5 percent
of all cases) had been found ineligible because of either a lack of
employment at an eligible facility or an illness related to toxic
exposure. In the last 6 months of 2003, Energy more than tripled the
number of cases receiving a final determination from a physician panel,
from 42 to 150. These 150 cases represent less than 1 percent of the more
than 23,000 cases filed.

While cases filed are associated with facilities in 43 states or
territories, the majority of cases are associated with Energy facilities
in 9 states. Facilities in Colorado, Idaho, Iowa, Kentucky, New Mexico,
Ohio, South Carolina, Tennessee, and Washington account for more than 75
percent of

cases received by December 31, 2003. The largest group of cases is
associated with facilities in Tennessee.

Figure 2. Distribution of Cases by Employee's Last Energy Facility Worked

Source: GAO analysis of Energy data.

Note: Facility information is missing or unknown for 1,859 cases.

A majority of all cases were filed during the first year of program
implementation, but new cases continue to be filed. Nationwide, the number
of cases filed increased by 22 percent in the last 6 months of 2003 from
fewer than 19,000 to more than 23,000. However, the rate of increase in
cases filed was not uniform across the 9 states with facilities that
account for more than three-quarters of all cases. For example, cases
associated with facilities in Washington increased by 8 percent during the
6-month period while cases in New Mexico increased by 34 percent and cases
in Ohio increased by 80 percent.

As of the end of calendar year 2003, Energy had not yet begun processing
nearly 60 percent of the cases, and an additional 35 percent of cases were
in processing. The majority of cases being processed were in the case
development stage, where Energy requests information from the facility at
which the claimant was employed. Of the cases still in processing, about 2
percent were ready for physician panel review and 3 percent were
undergoing panel review.

Energy reports that, in recent months, it has considerably accelerated the
rate at which it is completing the development of cases that are ready for
physician panel review. Since our testimony in November 2003, Energy's
case development process has met the agency's goal of completing the
development on 100 cases per week, which is considerably higher than the
average of about 30 cases per week it was completing in September 2003.
Moreover, since our prior testimony, Energy has also completed a
comprehensive review of its Subtitle D program that resulted in a plan
that identifies strategies for further accelerating its case processing.
This plan sets a goal of eliminating the entire case backlog by the end of
fiscal year 2006 and is dependent, in part, on Energy's shifting
additional funds into this program.

Insufficient Strategic Planning and Data Collection Limit Energy's Ability
to Determine Whether Program Goals Are Being Met

Insufficient strategic planning regarding system design, data collection,
and tracking of outcomes has made it more difficult for Energy officials
to manage some aspects of the program and for those with oversight
responsibilities to determine whether Energy is meeting the goal of
providing assistance in filing for workers' compensation. The data system
used by Energy to aid in case management was developed by contractors
without detailed specifications from Energy. Furthermore, the system was
developed before Energy established its processing goals, and the changes
Energy implemented to improve its ability to track certain information
have resulted in more recent status data being not completely comparable
with older status data.

Because it did not adequately plan for the various uses of its data,
Energy lacks some of the information needed to analyze how cases will fare
when they enter the state workers' compensation systems or to track their
outcomes. Specifically, it is difficult for Energy to predict whether
willing payers of workers' compensation benefits will exist using case
management system data because the information about the specific employer
for whom the claimant worked is not collected in a format that can be
systematically analyzed. Since employers are liable for workers'
compensation coverage, specific employer information is important in

  A Shortage of Qualified Physicians To Issue Determinations Delays Filing of
  Workers' Compensation Claims And Claimants May Receive Inadequate Information
  To Prepare Them To Pursue These Claims

determining whether a willing payer exists. In addition, while Energy has
not been systematically tracking whether claimants subsequently file
workers' compensation claims or the decisions on these claims, Energy now
plans to develop this capability.

Energy was slow in implementing its initial case processing operation, but
it is now processing enough cases so that there is a backlog of cases
awaiting physician panel review. With panels operating at full capacity,
the small pool of physicians qualified to serve on the panels may
ultimately limit the agency's ability to produce more timely
determinations. Claimants have experienced lengthy delays in receiving the
determinations they need to file workers' compensation claims and have
received little information about claims status as well as what they can
expect from this process. Energy has taken some steps intended to reduce
the backlog of cases.

The Ability to Produce More Timely Decisions May Be Limited by the Small
Pool of Qualified Physicians and Gaps in Information They Need to Quickly
Decide Cases

Additional resources have allowed Energy to speed initial case
development, and it has been processing enough cases to produce a backlog
of cases waiting for physician panel review. However, the limited pool of
qualified physicians for panels may continue to prevent significant
improvements in processing time. Under the rules Energy originally
established for this program that required that each case be reviewed by a
panel of 3 physicians and given the 130 physicians currently available, it
could have taken more than 13 years to process all cases pending as of
December 31, without consideration of the hundreds of new cases the agency
is receiving each month.3 However, in an effort to make the panel process
more efficient, Energy published new rules on March 24, 2004,

3This 13-year estimate assumes that none of the pending cases would be
determined ineligible on the basis of noncovered employment or illnesses
because we did not possess a sufficient basis for projecting the number of
pending cases that would be determined ineligible in the future.

that re-defined a physician panel as one or more physicians appointed to
evaluate these cases and changed the timeframes for completing their
review. In addition, the agency began holding a full-time physician panel
in Washington, D.C. in January 2004, staffed by physicians who are willing
to serve full-time for a 2-or 3-week period.

Energy and NIOSH officials have taken steps to expand the number of
physicians who would qualify to serve on the panels and to recruit more
physicians, including some willing to work full-time. While Energy has
made several requests that NIOSH appoint additional physicians to staff
the panels, such as requesting 500 physicians in June 2003, NIOSH
officials have indicated that the pool of physicians with the appropriate
credentials and experience is limited.4 The criteria NIOSH originally used
to evaluate qualifications for appointing physicians to these panels
included: (1) board certification in a primary discipline; (2) knowledge
of occupational medicine; (3) minimum of 5 years of relevant clinical
practice following residency; and (4) reputation for good medical
judgment, impartiality, and efficiency. NIOSH recently modified these
qualifications, primarily to reduce the amount of required clinical
experience so that physicians with experience in relevant clinical or
public health practice or research, academic, consulting, or private
sector work can now qualify to serve on the panels. NIOSH has revised its
recruiting materials to reflect this change and to point out that Energy
is also interested in physicians willing to serve on panels full-time.
However, a NIOSH official indicated that only a handful of physicians
would likely be interested in serving full-time on the panels.

Energy officials have also explored additional sources from which NIOSH
might recruit qualified physicians, but they have expressed concerns that
the current statutory cap on the rate of pay for panel physicians may
limit the willingness of physicians from these sources to serve on the
panels. For example, Energy officials have suggested that physicians in
the military services might be used on a part-time basis, but the rate of
pay for their military work exceeds the current cap. Similarly, physicians
from the Public Health Service could serve on temporary full-time details
as panel physicians. To elevate the rate of pay for panel physicians to a
level that is consistent with the rate physicians from these sources
normally receive,

4In March 2004, Energy requested additional physicians from NIOSH that
would result in tripling the number of full-time equivalent physicians in
2004 and increasing the number of full-time equivalent physicians by a
factor of 6 in 2005.

Energy officials plan to develop a legislative proposal that will modify
the current cap on the rate of pay and would also expand Energy's hiring
authority.

Panel physicians have also suggested methods to Energy for improving the
efficiency of the panels. For example, some physicians have said that more
complete profiles of the types and locations of specific toxic substances
at each facility would speed their ability to decide cases. While Energy
officials reported that they have completed facility overviews for about
half the major sites, specific site reference data are available for only
a few sites. Energy officials told us that, in their view, the available
information is sufficient for decision making by the panels. However,
based on feedback from the physicians, Energy officials are exploring
whether developing additional site information would be cost beneficial.

Energy Has Not Sufficiently Communicated Case Status and Expectations
about the Process to Claimants

Energy has not always provided claimants with complete and timely
information about what they could achieve in filing under this program.
Energy officials concede that claimants who filed in the early days of the
program may not have been provided enough information to understand the
benefits they were filing for. As a consequence, some claimants who filed
under both Subtitle B and Subtitle D early in the program later withdrew
their claims under Subtitle D because they had intended to file only for
Subtitle B benefits or because they had not understood that they would
still have to file for state workers' compensation benefits after
receiving a positive determination from a physician panel. After the final
regulations were published in August 2002, Energy officials said that
claimants had a better understanding of the benefits for which they were
applying.

Energy has not kept claimants sufficiently informed about the status of
their claims under Subtitle D. Until recently, Energy's policy was to
provide no written communication about claims status between the
acknowledgement letters it sent shortly after receiving applications and
the point it began to process claims. Since nearly half of the claims
filed in the first year of the program remained unprocessed as of December
31, 2003, these claimants would have received no information about the
status of their claims for more than 1 year. Energy recently decided to
change this policy and provide letters at 6-month intervals to all
claimants with pending claims. Although the first of these standardized
letters sent to claimants in the fall of 2003 did not provide information
about individual claims status, it did inform claimants about a new
service on the program's redesigned Web site through which claimants can
check on the status of

their claim. However, this new capability does not provide claimants with
information about the timeframes during which their claims are likely to
be processed and claimants would need to re-check the status periodically
to determine whether the status of the claim has changed.

Claimants may not be given sufficient information as to what they are
likely to encounter when they file for state workers' compensation
benefits. Energy's letter to claimants transmitting a positive
determination from a physician panel does not always provide enough
information about how they would go about filing for state workers'
compensation benefits. For example, a contractor in Tennessee reported
that a worker was directed by Energy's letter received in September 2003
to file a claim with the state office in Nashville when Tennessee's rules
require that the claim be filed with the employer. The contractor reported
the problem to Energy in the same month, but Energy letters sent to
Tennessee claimants in October and December 2003 continued to direct
claimants to the state office. Finally, claimants are not informed as to
whether there is likely to be a willing payer of workers' compensation
benefits and what this means for the processing of that claim.
Specifically, advocates for claimants have indicated that claimants may be
unprepared for the adversarial nature of the workers' compensation process
when an insurer or state fund contests the claim.

The workers' compensation claims for the majority of cases associated with
major Energy facilities in 9 states5 are likely to have no challenges to

their claims for state workers' compensation benefits. Specifically, based
on additional analysis of workers' compensation programs and the different
types of workers' compensation coverage used by the major contractors, it
appears that slightly more than half of the cases will potentially have a
willing payer-that is, contractors that will not contest the claims for
benefits as ordered by Energy. Another 25 percent of the cases, while not
technically having a willing payer, have workers' compensation coverage
provided by an insurer that has stated that it will not contest these
claims and is currently processing several workers' compensation claims
without contesting them. The remaining 20 percent of cases in the 9 states
we analyzed are likely to be contested. Because of

  Workers' Compensation Claims For a Majority of Cases Are Not Likely to be
  Contested

5The cases in these 9 states represent more than three-quarters of the
cases filed nationwide. The results of our analysis cannot necessarily be
applied to the remaining 25 percent of the cases filed nationwide.

data limitations, these percentages provide an order of magnitude estimate
of the extent to which claimants will have willing payers.6 The estimates

are not a prediction of actual benefit outcomes for claimants.

As shown in table 1, the contractors for four major facilities in these
states are self-insured, which enables Energy to direct them to not
contest claims that receive a positive medical determination.7 In such
situations where there is a willing payer, the contractor's action to pay
the compensation consistent with Energy's order to not contest a claim
will override state workers' compensation provisions that might otherwise
result in denial of a claim, such as failure to file a claim within a
specified period of time. Similarly, the agreement by the commercial
insurer for the workers at the two facilities that constitute 25 percent
of the cases to pay the workers compensation claims will mostly likely
also supercede such state provisions. However, since the insurer is not
bound by Energy's orders and it does not have a formal agreement with
either Energy or the contractors to not contest these claims, there is
nothing to guarantee that the insurer will continue to process claims in
this manner.

6Because of data limitations, we assumed that: (1) all cases filed would
receive a positive determination by a physician panel, (2) all workers
lost wages because of the illness and were not previously compensated for
this loss, and (3) in all cases, the primary contractor rather than a
subcontractor at the Energy facility employed the worker.

7EEOICPA allows Energy, to the extent permitted by law, to direct its
contractors not to contest such workers' compensation claims. In addition,
the statute prohibits the inclusion of the costs of contesting such claims
as allowable costs under its contracts with the contractors; however,
Energy's regulations allow the costs incurred as the result of a workers'
compensation award to be reimbursed in the manner permitted under the
contracts.

    Table 1. Extent to Which Cases Will Potentially Be Contested in 9 States

Number of Cases Percentage of Likely Willing Payer Types of Workers as
reported in Cases in Outcome Available? Comp. Coverage Energy Facility,
State Energy data Category

             Contests are Not Likely Subtotal 9,426 Contests Likely

Yes Self-insurance o                  Paducah Gaseous Diffusion 2,133 55 % 
                                                  aPlant, Kentucky       
                      o               Los Alamos National Lab, New 1,380 
                                                            Mexico       
                      o     Oak Ridge K-25, X-10, and Y-12 Plants, 4,115 
                                                         Tennessee       
                      o                   Hanford Site, Washington 1,798 

         No                                     o  Idaho National  849   25 % 
                  Commercial Policy,             Engineering Lab,        
            Insurer Will Follow                             Idaho        
            Contractors Instructions      o  Savannah River Site, 3,375  
                     to Not                        South Carolina        
                             Contest                                     
                                                         Subtotal 4,224  
Subtotal                                                       13,650 80 % 

           No Commercial policy  o  Rocky Flats Plant, Colorado 1,630

     No      State Fund         o    Portsmouth Gaseous Diffusion        862 
                                              Plant, Ohio            
                                o      Feed Materials Production         286 
                                             Center, Ohio            
                                o          Mound Plant, Ohio              91 

                                 Subtotal 1,239

No	No Current  o  Iowa Ordnance Plant, Iowa 645 Contractor

Subtotal 3,514 20%

Source: GAO analysis of Energy data and interviews with current
contractors and state officials.

Note: The table includes the cases from the facilities in these states
with the largest number of cases filed but does not include the remaining
693 cases (4 percent) from other facilities in these states.

a A total of 2,370 cases have been filed for the Paducah Gaseous Diffusion
Plant, which has been operated since July 1998 by a private entity that
leases the facility. Energy recently decided that workers who have only
been employed by this private entity, and not by the prior contractors who
operated the facility, will not be eligible for the program. An Energy
contractor performing environmental cleanup at the site also employs
workers at the facility. This contractor is responsible for the workers'
compensation claims filed by its employees as well as those filed by
employees of the contractors who operated the facility prior to July 1998.
We apportioned 90 percent of the cases filed for the Paducah facility
(2,133) to the cleanup contractor because the facility was run by the
prior contractors for about 90 percent of its years in operation. We
apportioned the remaining 10 percent of the cases (237) to the private
entity and do not show these cases in the table, due to Energy's decision
that claims filed by the entity's workers would be ineligible for the
program. However, this apportionment involves some uncertainty because the
clean up contractor has not had an opportunity to analyze the effects of
Energy's policy decision.

About 20 percent of cases in the 9 states we analyzed are likely to be
contested. Therefore, in some instances, these cases may be less likely to
receive compensation than a comparable case for which there is a willing
payer, unless the claimant is able to overcome challenges to the claim. In
addition, contested cases can take longer to be resolved. For example, one
claimant whose claim is being contested by an insurer was told by her
attorney that because of discovery and deposition motions by the opposing
attorney, it would be two years before her case was heard on its merits.
Specifically, the cases that lack willing payers involve contractors that
(1) have a commercial insurance policy, (2) use a state fund to pay
workers' compensation claims, or (3) do not have a current contract with
Energy. In each of these situations, Energy maintains that it lacks the
authority to make or enforce an order to not contest claims. For instance,
an Ohio Bureau of Workers' Compensation official said that the state would
not automatically approve a case, but would evaluate each workers'
compensation case carefully to ensure that it was valid and thereby
protect its state fund. Further, although the contractor in Colorado with
a commercial policy attempted to enter into agreements with prior
contractors and their insurers to not contest claims, the parties have not
yet agreed and several workers' compensation claims filed with the state
program are currently being contested.

Various options are available to improve payment outcomes for the cases
that receive a positive determination from Energy, but lack willing payers
under the current program. If it chooses to change the current program,
Congress would need to examine these options in terms of several issues,
including the source, method, and amount of the federal funding required
to pay benefits; the length of time needed to implement changes; the
criteria for determining who is eligible; and the equitable treatment of
claimants. In particular, the cost implications of these options for the
federal government should be carefully considered in the context of the
current federal fiscal environment.

  Several Issues Should Be Considered in Evaluating Options for Improving the
  Likelihood of Willing Payers

Options for Changing the Current Program

We identified four possible options for improving the likelihood of
willing payers, some of which have been offered in proposed legislation.
While not exhaustive, the options range from adding a federal benefit to
the existing program for cases that lack a willing payer to addressing the
willing payer issue as part of designing a new program that would allow
policymakers to decide issues such as the eligibility criteria and the
type and amount of benefits without being encumbered by existing program
structures. A key difference among the options is the type of benefit that
would be provided.

Option 1-State workers' compensation with federal back up. This option
would retain state workers' compensation structure as under the current
Subtitle D program but add a federal benefit for cases that receive a
positive physician panel determination but lack a willing payer of state
workers' compensation benefits. For example, claims involving employees of
current contractors that self-insure for workers' compensation coverage
would continue to be processed through the state programs. However, claims
without willing payers such as those involving contractors that use
commercial insurers or state funds likely to contest workers' compensation
claims could be paid a federal benefit that approximates the amount that
would have been received under the relevant state program.

Option 2-Federal workers' compensation model. This option would move the
administration of the Subtitle D benefit from the state programs entirely
to the federal arena, but would retain the workers' compensation concept
for providing partial replacement of lost wages as well as medical
benefits. For example, claims with positive physician panel determinations
could be evaluated under the eligibility criteria of the Federal Employees
Compensation Act8 and, if found eligible, could be paid benefits
consistent with the criteria of that program.

Option 3-Expanded Subtitle B program that does not use a workers'
compensation model. Under this option, the current Subtitle B program
would be expanded to include the other illnesses resulting from radiation
and toxic exposures that are currently considered under the Subtitle D
program. The Subtitle D program would be eliminated as a separate program
and, if found eligible, claimants would receive a lump-sum payment and
coverage of future medical expenses related to the workers' illnesses,
assuming they had not already received benefits under Subtitle B. The
Department of Labor would need to expand its regulations to specify which
illnesses would be covered and the criteria for establishing eligibility
for each of these illnesses. In addition, since the current programs have
differing standards for determining whether the

8The Federal Employees' Compensation Act (5 U.S.C. 8101, et seq.) provides
workers' compensation coverage for federal and postal employees, who are
not covered by the state programs.

worker's illness was related to his employment9, it would have to be
decided which standard would be used for the new category of illnesses.

Option 4-New federal program that uses a different type of benefit
structure. This option would address the willing payer issue as part of
developing a new program that involves moving away from the workers'
compensation and Subtitle B structures and establishing a new federal
benefit administered by a structure that conforms to the type of the
benefit and its eligibility criteria. This option would provide an
opportunity to consider anew the purpose of the Subtitle D provisions. As
a starting point, policymakers could consider different existing models
such as the Radiation Exposure Compensation Act, designed to provide
partial restitution to individuals whose health was put at risk because of
their exposure even when their illnesses do not result in ongoing
disability. But they could also choose to build an entirely new program
that is not based on any existing model.

Various Issues Should Be Considered in Deciding Whether Changes Are Needed
and Assessing the Options

In deciding whether and how to change the Subtitle D program to ensure a
source of benefit payments for claims that would be found eligible if they
had a willing payer, policymakers will need to consider the trade-offs
involved. Table 2 arrays the relevant issues to provide a framework for
evaluating the range of options in a logical sequence. We have constructed
the sequence of issues in this framework in terms of the purpose and type
of benefit as being the focal point for the evaluation, with consideration
of the other issues flowing from that first decision. For example,
decisions about eligibility criteria would need to consider issues
relating to within-state and across-state equity for Subtitle D claimants.
The framework would also provide for decisions on issues such as the
source of federal funding-trust fund or increased appropriations-and the
appropriate federal agency to administer the benefit. For each of the
options, the type of benefit would suggest which agency should be chosen
to administer the benefit and would depend, in part, on an agency's
capacity to administer a benefit program. In examining these issues, the
effects on federal costs would have to be carefully considered.
Ultimately, policymakers will need

9Under Subtitle B, an individual with specified types of cancer shall be
determined to have sustained that condition in the performance of duty if
the cancer was at least as likely as not related to employment at a
specified facility. Under Subtitle D, a physician panel must decide
whether it is at least as likely as not that exposure to a toxic substance
in the course of employment was a significant factor in aggravating,
contributing to, or causing the illness or death of the worker.

to weigh the relative importance of these issues in deciding whether and
how to proceed.

Purpose and Type of Benefit

In evaluating how the purpose and type of benefit now available under
Subtitle D could be changed, policymakers would first need to focus on the
goals they wish to achieve in providing compensation to this group of
individuals. If the goal is to compensate only those individuals who can
demonstrate lost wages because of their illnesses, a recurring cash
benefit in an amount that relates to former earnings might be in order and
a workers' compensation option, either a state benefits with a federal
back up or a federal workers' compensation benefit, would promote this
purpose. If, on the other hand, the goal is to compensate claimants for
all cases in which workers were disabled because of their employment-even
when workers continue to work and have not lost wages-the option to expand
Subtitle B would allow a benefit such as a flat payment amount not tied to
former earnings.

For consideration of a new federal program option, it might be useful to
also consider other federal programs dealing with the consequences of
exposure to radiation as a starting point. For example, the Radiation
Exposure Compensation Act was designed to provide partial restitution to
individuals whose health was put at risk because of their exposure.
Similar to Subtitle B, the act created a federal trust fund, which
provides for payments to individuals who can establish that they have
certain diseases and that they were exposed to radiation at certain
locations and at specified times. However, this payment is not dependent
on demonstrating ongoing disability or actual losses resulting from the
disease.

Eligibility Criteria and Equity of Outcomes

The options could also have different effects with respect to eligibility
criteria and the equity of benefit outcomes for current Subtitle D
claimants based on these criteria. By equity of outcomes, we mean that
claimants with similar illnesses and circumstances receive similar benefit
outcomes. The current program may not provide equity for all Subtitle D
claimants within a state because a claim that has a willing payer could
receive a different outcome than a similar claim that does not have a
willing payer, but at least three of the options could provide
within-state equity. With respect to across-state equity, the current
program and the option to provide a federal back up to the state workers'
compensation programs would not achieve equity for Subtitle D claimants in
different states. In contrast, the option based on a federal workers'
compensation model as

well as the expanded Subtitle B option would be more successful in
achieving across-state equity.10

Regardless of the option, changes made to Subtitle D could also
potentially result in differing treatment of claims decided before and
after the implementation of the change. In addition, changing the program
to remove the assistance in filing workers' compensation claims may be
seen as depriving a claimant of an existing right. Further, any changes
could also have implications beyond EEOICPA, to the extent that the
changes to Subtitle D could establish precedents for federal compensation
to private sector employees in other industries who were made ill by their
employment.

                                 Federal Costs

Effects on federal costs would depend on the generosity of the benefit in
the option chosen and the procedures established for processing claims for
benefits. Under the current program, workers' compensation benefits that
are paid without contest will come from contract dollars that ultimately
come from federal sources - there is no specific federal appropriation for
this purpose. Because all of the options are designed to improve the
likelihood of payment for claimants who meet all other criteria, it is
likely that federal costs would be higher for all options than under the
current program. Specifically, federal costs would increase for the option
to provide a federal back up to the state workers' compensation program
because it would ensure payment at rates similar to the state programs for
the significant minority of claimants whose claims are likely to be
contested and possibly denied under the state programs. Further, the
federal costs of adopting a federal workers' compensation option would be
higher than under the first option because all claimants - those who would
have been paid under the state programs as well as those whose claims
would have been contested under the state programs - would be eligible for
a federal benefit similar to the benefit for federal employees. In
general, federal workers' compensation benefits are more generous than
state benefits because they replaces a higher proportion of the worker's
salary than many states and the federal maximum rate of wage replacement
is higher than all the state maximum rates.

10An additional within-state equity issue involves the comparative
treatment of Subtitle D claimants and all other workers' compensation
claimants in the same state.

For either of the two options above, a decision to offset the Subtitle D
benefits against the Subtitle B benefit could lessen the effect of the
increased costs, given reports by Energy officials that more than 90
percent of Subtitle D claimants have also filed for Subtitle B benefits.11
However, the degree of this effect is difficult to determine because many
of the claimants who have filed under both programs may be denied Subtitle
B benefits. The key distinction would be whether workers who sustained
certain types of illnesses based on their Energy employment should be
compensated under both programs as opposed to recourse under only one or
the other. If they were able to seek compensation from only one program,
the claimant's ability to elect one or the other based on individual needs
should be considered.

The effects on federal cost of an expanded Subtitle B option or a new
federal program option are more difficult to assess. In many cases, the
Subtitle B benefit of up to $150,000 could exceed the cost of the lifetime
benefit for some claimants under either of the workers' compensation
options, resulting in higher federal costs. However, the extent of these
higher costs could be mitigated by the fact that many of the claimants who
would have filed for both benefits in the current system would be eligible
for only one cash benefit regardless of the number or type of illnesses.
The degree of cost or savings would be difficult to assess without
additional information on the specific claims outcomes in the current
Subtitle B program. The effects on federal costs for the new federal
program option would depend on the type and generosity of the benefit
selected.

11Under the current Subtitle B and Subtitle D programs, benefits are not
offset against each other.

Table 2. Framework for Evaluating Options to Change the Subtitle D Program

                    Option 1-State                               
                            workers'  Option 2-Federal Option 3- 
                   compensation with workers' compensation       Option 4-New 
                                     Expanded Subtitle           
                                                                 federal      
Current program  federal back-up              model B program benefit      

Purpose and Varies by state, but Same as under current Still a workers'

type of benefit generally includes state programs. compensation benefit,
medical treatment and generally includes cash payments that medical
treatment and partially replace lost cash payments that wages. partially
replace lost wages.

Same as for current Subtitle B- coverage of future medical treatment and a
one-time payment of up to $150,000 as compensation for disability or death
because of exposure to radiation or toxic substance.

Open for consideration.

Eligibility Vary by state, but For federal back-up Uses criteria of
workers' Same as for current Open for

criteria 	generally apply to benefit, should be compensation program
Subtitle B claimants consideration- workers who contract similar to
criteria under for federal employees. who worked for should flow from a
work-related illness current state Energy contractors. type of benefit and
and who lose work programs. the nature of the time because of the
population it is illness. designed to

compensate.

Interaction with Benefits are not offset Open for Subtitle B against each
other. consideration.

Open for consideration.	No interaction issues. Claimants would be eligible
for only one payment regardless of number of illnesses. Because there is a
large overlap in claimants filing under both programs, this could
potentially reduce the total number of claims that would remain to be
processed once combined.

Open for consideration. Depends on the nature of the benefit.

Equity of Outcomes within Subtitle D

within  Similar    Similar cases     Similar    Similar                    
states  cases in   in the          cases in the cases in       Open for
           the                                     the         
           same state   same state    same state   same state                 
             could         could      could           could    consideration.
                                      receive                  
            receive   receive similar   similar      receive   
           differing         benefits   benefits     similar   
           benefits.   regardless of   regardless  benefits    
                                      of employer. regardless  
                                                       of      
                         employer.                  employer.  

                             Option 1-State                    
                                workers'     Option 2-Federal  
                                                 Option 3-     
                            compensation     workers'                         
                            with             compensation        Option 4-New
                                             Expanded Subtitle 
           Current program  federal back-up   model B program  federal        
                                                               benefit        
across                                    Similar cases in                 
states  Similar cases in Similar cases in different Similar 
                                                 cases in         Open for
           different states different states   states could                   
           could            could            receive different consideration
                                                  states       
                                                  similar      
               receive          receive        compensation.   
              differing        differing       could receive   
            compensation.    compensation.             similar 
                                                  compensation 

              Most eligible   Same as   Would    Trust fund                   
    Funding       cases       current   need new already         Open for
                                        federal               
                with willing program             established                  
source for    payers will for cases   source       by      consideration-
                             with                             
    benefits      be paid by  willing            Section 3612  Appropriations 
                 contractors payer, but               of                   or 
              from contract  would need            EEOICPA.     trust fund.   
                  funds       a source                        
              from federal      for                           
              sources.        federal                         
                              back-up                         
                              benefit.                        

      Federal    Energy For federal Department of Department     Open for     
                           benefit,                   of      
administrator         selection  Labor/Office  Labor-same  consideration-  
                         criteria   of Workers'       as      
                             should Compensation  current     depends on type 
                        include how               Subtitle B               of 
                            quickly  administers                     benefit, 
                             agency    current                     experience 
                              could                program.   
                          implement program; also                   in        
                            and how                            administering  
                        well it was  administers                  benefit     
                        situated to  Subtitle B                  program,     
                        process and program.                      and funding 
                            pay     Energy would                      source. 
                             cases. still need to             
                             Energy    secure                 
                              would                           
                         still need   records.                
                          to secure                           
                        records for                           
                          all cases                           
                        and process                           
                             claims                           
                               with                           
                            willing                           
                            payers.                           

Timeframe for Program is

implementation 	implemented, but few cases have been completely processed.

         Relatively short to Longer Longer than Option  Potentially longest   
                     than Option 1.                     
              implement since it is     1- structure in       of all options. 
           Infrastructure in place,                     
              based on existing but place to administer            Depends on 
                    regulations for                     
            program. Infrastructure existing Subtitle B     administrator and 
          existing federal workers'                     
                   would have to be                                   whether 
               compensation program         program-new 
        established and rules would    rules need to be infrastructure exists 
                         need to be                     
               developed to provide       developed for   or would need to be 
              expanded to cover new                     
               for federal benefits          evaluating      built. In either 
                           benefit.                     
           that mirror those of the additional                 event, need to 
                                    illnesses.          
                    state programs.                         publish rules and 
                                                                    establish 
                                                                  procedures. 

                    Option 1-State                               
                            workers'  Option 2-Federal Option 3- 
                   compensation with workers' compensation       Option 4-New 
                                     Expanded Subtitle           
                                                                 federal      
Current program  federal back-up              model B program benefit      

Federal cost 	For cases that are not contested, benefits that are paid
will ultimately come from contract dollars from federal sources (Energy
and Defense).

Federal costs could increase since benefits for cases without willing
payers would be paid directly from federal funds.

Federal costs could be greater than for current program since benefits
would be based on the often more generous workers' compensation program
for federal workers.

To the extent that the option would ensure a source of benefits, could
increase federal costs. However, the extent of these higher costs could be
mitigated because many of the claimants who would have filed for Subtitle
B and D benefits in the current system would be eligible for only one cash
benefit regardless of the number or type of illnesses.

Open for consideration- Depends on type of benefit and eligibility
criteria.

                             Source: GAO analysis.

  Contacts and Acknowledgments

(130371)

Mr. Chairman, this completes my prepared statement. I would be happy to
respond to any questions you or other Members of the Committee may have at
this time.

For information regarding this testimony, please contact Robert E.
Robertson, Director, or Andrew Sherrill, Assistant Director, Education,
Workforce, and Income Security, at (202) 512-7215. Individuals making
contributions to this testimony include Amy E. Buck, Melinda L. Cordero,
and Beverly Crawford.

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

  GAO's Mission

Obtaining Copies of GAO Reports and Testimony

The General Accounting Office, the audit, evaluation and investigative arm
of Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability of
the federal government for the American people. GAO examines the use of
public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO's Web site (www.gao.gov) contains abstracts
and full-text files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document files.
To have GAO e-mail this list to you every afternoon, go to www.gao.gov and
select "Subscribe to e-mail alerts" under the "Order GAO Products"
heading.

Order by Mail or Phone 	The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out
to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:

U.S. General Accounting Office 441 G Street NW, Room LM Washington, D.C.
20548

To order by Phone: 	Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud,	Contact: Web site: www.gao.gov/fraudnet/fraudnet.htm

  Waste, and Abuse in E-mail: [email protected]

Federal Programs Automated answering system: (800) 424-5454 or (202)
512-7470

Jeff Nelligan, Managing Director, [email protected] (202) 512-4800

Public Affairs 	U.S. General Accounting Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
*** End of document. ***