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Testimony:

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

United States General Accounting Office:

GAO:

For Release on Delivery Expected at 10:00 a.m. EST:

Tuesday, March 30, 2004:

ENERGY EMPLOYEES 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:

GAO Highlights:

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

Why GAO Did This Study:

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.

What GAO Found:

During the first 2 ½ 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 robertsonr@gao.gov.

[End of section]

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.[Footnote 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.[Footnote 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 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: Figure 1. Energy's Claims Process:

[See PDF for image]

[End of figure]

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 ½ 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:

[See PDF for image]

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

[End of figure]

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 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.

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:

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.[Footnote 3] 
However, in an effort to make the panel process more efficient, Energy 
published new rules on March 24, 2004, 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.[Footnote 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, 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.

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

The workers' compensation claims for the majority of cases associated 
with major Energy facilities in 9 states[Footnote 5] 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 data limitations, these percentages 
provide an order of magnitude estimate of the extent to which claimants 
will have willing payers.[Footnote 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.[Footnote 
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.

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

Likely Outcome; Contests are Not Likely: 
Willing Payer Available? Yes; 
Types of Workers Comp. Coverage: Self-insurance; 
Energy Facility, State: 
* Paducah Gaseous Diffusion Plant, Kentucky [A]; 
Number of Cases as reported in Energy data: 2,133;
* Los Alamos National Lab, New Mexico; 
Number of Cases as reported in Energy data: 1,380; 
* Oak Ridge K-25, X-10, and Y-12 Plants, Tennessee; 
Number of Cases as reported in Energy data: 4,155; 
* Hanford Site, Washington; 
Number of Cases as reported in Energy data: 1,798; 
Percentage of Cases in Category: 55 %.

Likely Outcome; Contests are Not Likely: 
Subtotal; Number of Cases as reported in Energy data:  9,426. 

Likely Outcome; Contests are Not Likely: 
Willing Payer Available? No; 
Types of Workers Comp. Coverage: Commercial Policy, Insurer Will Follow 
Contractors Instructions to Not Contest; 
Energy Facility, State: 
* Idaho National Engineering Lab, Idaho; 
Number of Cases as reported in Energy data: 849;
* Savannah River Site, South Carolina; 
Number of Cases as reported in Energy data: 3,375; 
Percentage of Cases in Category: 25 %.

Likely Outcome; Contests are Not Likely: 
Subtotal; Number of Cases as reported in Energy data:  4,224; 

Likely Outcome; Contests are Not Likely: Subtotal; 
Number of Cases as reported in Energy data: 13,650; 
Percentage of Cases in Category: 80 %.

Likely Outcome; Contests Likely:  
Willing Payer Available? No; 
Types of Workers Comp. Coverage:  Commercial policy; 
Energy Facility, State:  
* Rocky Flats Plant, Colorado; 
Number of Cases as reported in Energy data:  1,630. 

Likely Outcome; Contests Likely:  
Willing Payer Available? No; 
Types of Workers Comp. Coverage: State Fund; 
Energy Facility, State: 
* Portsmouth Gaseous Diffusion Plant, Ohio; 
Number of Cases as reported in Energy data: 862; 
* Feed Materials Production Center, Ohio; 
Number of Cases as reported in Energy data: 286; 
* Mound Plant, Ohio; 
Number of Cases as reported in Energy data: 91. 

Likely Outcome; Contests Likely:  
Subtotal; Number of Cases as reported in Energy data:  1,239; 

Likely Outcome; Contests Likely:  
Types of Workers Comp. Coverage:  No Current Contractor; 
Energy Facility, State:  
* Iowa Ordnance Plant, Iowa; 
Number of Cases as reported in Energy data:  645. 

Likely Outcome; Contests Likely: 
Subtotal; Number of Cases as reported in Energy data: 3,514; 
Percentage of Cases in Category: 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.

[End of table]

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.

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

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.

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 Act[Footnote 8] 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 worker's illness was related to his 
employment[Footnote 9], 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 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.[Footnote 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.

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.[Footnote 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.

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

Purpose and type of benefit; 
Current program: Varies by state, but generally includes medical 
treatment and cash payments that partially replace lost wages; 
Option 1--State workers' compensation with federal back-up: Same as 
under current state programs; 
Option 2--Federal workers' compensation model: Still a workers' 
compensation benefit, generally includes medical treatment and cash 
payments that partially replace lost wages; 
Option 3--Expanded Subtitle B program: 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; 
Option 4--New federal benefit: Open for consideration.

Eligibility criteria; 
Current program: Vary by state, but generally apply to workers who 
contract a work-related illness and who lose work time because of the 
illness; 
Option 1--State workers' compensation with federal back-up: For federal 
back-up benefit, should be similar to criteria under current state 
programs; 
Option 2--Federal workers' compensation model: Uses criteria of 
workers' compensation program for federal employees; 
Option 3--Expanded Subtitle B program: Same as for current Subtitle B 
claimants who worked for Energy contractors; 
Option 4--New federal benefit: Open for consideration--should flow 
from type of benefit and the nature of the population it is designed to 
compensate.

Interaction with Subtitle B; 
Current program: Benefits are not offset against each other; 
Option 1--State workers' compensation with federal back-up: Open for 
consideration; 
Option 2--Federal workers' compensation model: Open for consideration; 
Option 3--Expanded Subtitle B program: 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; 
Option 4--New federal benefit: Open for consideration. Depends on the 
nature of the benefit.

Equity of Outcomes within Subtitle D: within states; 
Current program: Similar cases in the same state could receive 
differing benefits; 
Option 1--State workers' compensation with federal back-up: Similar 
cases in the same state could receive similar benefits regardless of 
employer; 
Option 2--Federal workers' compensation model: Similar cases in the 
same state could receive similar benefits regardless of employer; 
Option 3--Expanded Subtitle B program: Similar cases in the same state 
could receive similar benefits regardless of employer; 
Option 4--New federal benefit: Open for consideration.

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

Funding source for benefits; 
Current program: Most eligible cases with willing payers will be paid 
by contractors from contract funds from federal sources; 
Option 1--State workers' compensation with federal back-up: Same as 
current program for cases with willing payer, but would need a source 
for federal back-up benefit; 
Option 2--Federal workers' compensation model: Would need new federal 
source; 
Option 3-- Expanded Subtitle B program: Trust fund already established 
by Section 3612 of EEOICPA; 
Option 4--New federal benefit: Open for consideration--Appropriations 
or trust fund.

Federal administrator; 
Current program: Energy; 
Option 1--State workers' compensation with federal back-up: For federal 
benefit, selection criteria should include how quickly agency could 
implement and how well it was situated to process and pay cases. Energy 
would still need to secure records for all cases and process claims 
with willing payers; 
Option 2--Federal workers' compensation model: Department of Labor/
Office of Workers' Compensation administers current program; 
also administers Subtitle B program. Energy would still need to secure 
records; 
Option 3--Expanded Subtitle B program: Department of Labor--same as 
current Subtitle B program; 
Option 4--New federal benefit: Open for consideration--depends on type 
of benefit, experience in administering benefit program, and funding 
source.

Timeframe for implementation; 
Current program: Program is implemented, but few cases have been 
completely processed; 
Option 1--State workers' compensation with federal back-up: Relatively 
short to implement since it is based on existing program. 
Infrastructure would have to be established and rules developed to 
provide for federal benefits that mirror those of the state programs; 
Option 2--Federal workers' compensation model: Longer than Option 1. 
Infrastructure in place, but regulations for existing federal workers' 
compensation program would need to be expanded to cover new benefit; 
Option 3--Expanded Subtitle B program: Longer than Option 1-structure 
in place to administer existing Subtitle B program--new rules need to 
be developed for evaluating additional illnesses; 
Option 4--New federal benefit: Potentially longest of all options. 
Depends on administrator and whether infrastructure exists or would 
need to be built. In either event, need to publish rules and establish 
procedures.

Federal cost; 
Current program: For cases that are not contested, benefits that are 
paid will ultimately come from contract dollars from federal sources 
(Energy and Defense); 
Option 1--State workers' compensation with federal back-up: Federal 
costs could increase since benefits for cases without willing payers 
would be paid directly from federal funds; 
Option 2--Federal workers' compensation model: 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; 
Option 3--Expanded Subtitle B program: 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; 
Option 4--New federal benefit: Open for consideration--Depends on type 
of benefit and eligibility criteria. 

Source: GAO analysis.

[End of table]

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.

Contacts and Acknowledgments:

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.

FOOTNOTES

[1] We 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. 

[2] Executive Order 13179 of December 7, 2000.

[3] This 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. 

[4] In 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.

[5] The 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.

[6] Because 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.

[7] EEOICPA 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.

[8] The 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.

[9] Under 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.

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

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