Financial and Economic Impact of Worker's Compensation Essay

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Financial and Economic Impact of Worker's Compensation Regulations And Compliance

The program and concept of Workers' Compensation might appear to be a product of a civilized society and the modern era, but nothing could be further from the truth. In fact, Workers' Compensation has essentially been around for as long as people have been completing task for payment of some form of another, because people have always been getting hurt in some way, on the job. "The history of compensation for bodily injury begins shortly after the advent of written history itself1. The Nippur Tablet No. 3191 from ancient Sumeria in the Fertile Crescent outlines the law of Ur-Nammu, king of the city-state of Ur. It dates to approximately 2050 B.C.2. The law of Ur provided monetary compensation for specific injury to workers' body parts, including fractures. The code of Hammurabi from 1750 B.C. provided a similar set of rewards for specific injuries and their implied permanent impairments. Ancient Greek, Roman, Arab, and Chinese law provided sets of compensation schedules, with precise payments for the loss of a body part. For example, under ancient Arab law, loss of a joint of the thumb was worth one-half the value of a finger. The loss of a penis was compensated by the amount of length lost, and the value an ear was based on its surface area. All the early compensation schemes consisted of "schedules" such as this; specific injuries determined specific rewards" (Guyton, 1999). This compensation schema demonstrates the notion that is present today that not all injuries are as serious as others and that different injuries deserve different forms of payment.

Of course, one could make a strong case for the fact that this system was coarser than the one in place today (though some disgruntled workers might argue the opposite) as the value of a body part seems largely connected to its size. Today the concepts of "quality of life" and "pain and suffering" have been introduced and compensation can be immediately linked to these two issues. For example, the notion of a man being compensated for the loss of part of his penis based on the length of this organ that is lost is a completely ludicrous notion to a modern audience. The contemporary mentality is that once a man's penis is damaged or deformed in any sort of way, the appropriate compensation thus begins.

However, despite the fact that the notion of compensation for bodily injuries is as old as work itself, it didn't really leave an imprint upon modern society until the industrial revolution. Even though the industrial revolution was a crucial and exciting time for America and one which created an enormous push for modernity and progress, there was a price to pay for the rapidity of expansion. It was indeed the machine age, and human beings were the ones creating and operating these machines. At the same time, there was a certain give and take push and pull and margin of error and mistakes that had to occur. "As economic and industrial activities flourished, the number of work injuries also grew. The increasing use of machinery, new concepts of producing goods, and the pressure of increased demand for products resulted in more injury problems without solutions for employers and employees. For the most part, workers who were injured on the job had no recourse other than to sue their employers at common law, an expensive and time-consuming process. The court system was crowded, causing long delays. Compensation for injuries was usually insufficient and uncertain. The employee sometimes was forced to bear the expense of injury himself or had to throw himself on the mercy of welfare" ( This demonstrates the very real consequences of not having a proper system in place for workers to seek financial help within, for their injuries. Without a formal system of workers' compensation the very real consequences were things like clogged court systems, overuse of the welfare system, and generally large amounts of wounded employees who had nowhere else to turn and no way to support their families. This demonstrates how even though this emerging machine age was providing a definitive benefit to society; it was also damaging a large chunk of the workers contributing to a participating in this crucial time.

Eventually, "Laws were enacted to provide workers injured on the job with prompt, equitable, and guaranteed benefits. Injured workers received medical care and disability income irrespective of fault. Employers, in turn, were protected from potentially catastrophic loss by a stated amount of specific benefits for the injuries suffered by the employee. The worker was prohibited from filing suit while the employer was obligated to pay the mandated benefits" ( This clearly demonstrates how such a program protected both the company and the worker. The company benefited from knowing that they wouldn't be sued and forseeably put out of business indefinitely, and the employee benefited from knowing that he would be taken care of, if anything should happen to him on the job. Aside from signaling a higher level of humanity for workers and employers, giving both of them peace of mind, the modern emergence of workers' compensation meant that work was regulated in such a way that it wouldn't wreak havoc on the court system or on the welfare system.

Analysis of the Field

Workers' compensation is a vital component related to employment and safety, but at the same time, it's a program that doesn't simply exist because people want it to: it needs to have a strong financial backing and needs to be fiscally supported. Finding ways to make workers' compensation more affordable for employers is pivotal as the overall success and longevity of the program depends on it. One of the major issues present in worker's compensation today is as a result of increasing prescription drug costs. "Alex Swedlow, Vice-President of Research for the California Workers' Compensation Research Institute, reported on CWCI project which reviewed workers' compensation pharmaceutical costs. Through analysis of detailed claim specific medical data, CWCI uncovered some very specific causes for the growth in pharmaceutical costs. One interesting result was the rise in physicians dispensing drugs within their own clinics; this practice allows physicians to circumvent pharmacy fee schedule restrictions through clever repackaging techniques" (, 2010). This highlights an issue that's neither the fault of the employee or the employer; rather it demonstrates a fault of one of the parties: involved doctors.

Doctors, it appears, are taking the opportunity to raise prices, simply by virtue of the fact that they can. While this increases profits for them, it means that certain workers' comp benefits are becoming pricier, and with that, less affordable. However, part of the increased prescription costs is just by virtue of the fact that the drugs prescribed are pricier by nature. "Although a physician-dispensing is certainly contributing to the rise of drug costs, the most significant increase can be attributed to the shocking growth in opioid prescription use. The use of Schedule II drugs, which have restrictive applications for the relief of serious chronic pain, is being prescribed for a variety of claims that historically did not require such drugs. Swedlow's research showed prescription patterns in California in which a tiny fraction of physicians were generating a very large share of the opioid prescriptions" (, 2010). Opioids are extremely powerful drugs which are expensive by nature. However, this isn't the only reason that their usage is driving up the system costs all over the nation: opioids have an extreme and indelible impact on the lives of workers. "Workers on opioids are often highly dependent, face delays in return to work, and may suffer other physical or psychological challenges due to addiction" (, 2010).

This issue with workers' compensation and the rate of prescription of opioids is completely out of control. It has been calculated that between 55-86% of all Workers comp claimants are on opioids of some sort as a means of soothing chronic pain (Morgan, 2012). However, the problem with this fact is that it's generally an effective long-term drug when it comes to conditions like cancer treatments (Morgan, 2012). In fact, there's hard evidence which points to the prevalence of opioids doing more harm than good; the Center for Disease Control cites how deaths related to the usage of painkillers has increased at least 300% in the last 13 years, more than the deaths connected to cocaine or heroin usage combined (Morgan, 2012). In fact, the incorrect usage or abuse-related addiction to painkillers was accountable for half a million trips to the ER in 2009, a number which had doubled in just half a decade (Morgan, 2012). If these numbers demonstrate anything, they showcase the vital need of a better means of regulation for opioid use and workers. It's a heavy-handed approach which demonstrates poor health care techniques and shoddy judgment on behalf of medical professionals. It's so problematic as opioids are far too potent, powerful and addictive forms of substance to give individuals dealing with chronic…[continue]

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