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Making Michigan more competitive means, among other things, restraining its workers compensation costs-a battle the state is clearly winning.
Since 1991, the average settlement in Michigan has fallen nearly eight percent and now stands below the national average. Premium costs to employers are declining and, under Governor John Engler, even the size of the bureaucracy that oversees the state's role in the marketplace has shrunk by 40 percent. And last year, in the largest sale of an asset by any state in history, Michigan sold its Accident Fund and removed itself from the business of providing workers compensation insurance altogether. More than 200 private firms do that in a highly competitive marketplace.
Michigan's Workers Disability Compensation Act is designed to guarantee workers who are injured on the job, either temporarily or permanently, a source of income to replace what they cannot earn. It also provides appropriate medical treatment and, if needed, vocational rehabilitation so that the injured worker can return to gainful employment as soon as possible. These are, without question, worthwhile objectives. The recent cost-cutting reforms improved matters greatly, but further improvement is both possible and desirable.
One measure for judging how well a workers compensation system works is how quickly injured workers are returned to employment. Does it create incentives for people to remain out of the workforce longer than necessary?
Another measure is how well the system succeeds in preventing those who are not truly injured from claiming that they are and thereby collecting benefits. If people find that it is easy to collect just for alleging that they are unable to work, some will do so. By either of these measures, Michigan's system can still be made more efficient.
Getting the injured back to work. Michigan's biggest employer is General Motors. GM also has operations in 25 other states. Forty-four percent of GM's U.S. workforce is in Michigan and 40 percent of the firm's lost-time injuries occur here. However, 80 percent of GM's long-term workers compensation cases-those where disability lasts for 18 months or more-occur here. Ford and Chrysler have had similar experiences. In Michigan, an injured worker is roughly twice as likely to end up on long-term disability as are injured workers in the rest of the country. Of all the people receiving workers compensation benefits in Michigan (approximately 50,000), 55 percent sustained their injuries in 1991 or before. Why do we perform so poorly in getting people back into the workforce?
The main reason is found in our definition of disability. A recently-injured worker should be given a reasonable length of time to recover and return to his former job; he should not immediately be expected to take a job that differs greatly from that which he has been doing. Once he has recovered as far as he is going to, he should be expected to take the best job consistent with his physical condition. But the Michigan courts have taken the view that if a worker is disabled from doing his former job, he is then disabled under the terms of the statute and eligible to collect benefits even though there are many other jobs that he could do.
Our law also permits recovered workers to refuse job offers and to continue collecting benefits if they have decided to relocate. Suppose, for example, that an auto worker in Flint is injured. After a year, he has recovered sufficiently that he is offered his old job back. He decides instead to move to Traverse City, where there are no auto plants. Amazingly, the law says that he is still eligible to receive benefits. Obviously, the law needs improvement.
Screening out dubious cases. Michigan courts have ruled that a worker can be disabled without having suffered any physical injury. A person can be regarded as disabled if he is or says he is mentally unable to work. In a recent decision, the Michigan Supreme Court ruled that a work-related incident involving normal, non-harassing behavior can lead to mental disability, even if the incident would not have such an impact on an emotionally normal person.
If an individual possesses a fragile personality so that the slightest perceived or misperceived event-a reprimand from a superior, for example- triggers what he argues is a disabling emotional reaction, his claim is compensable-an open invitation to abuse. Clearly, the law should place a higher standard of proof on claimants in such cases.
Michigan has had great success in improving workers compensation, but more progress is needed in getting the injured back to work and screening out dubious claims.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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