Identifying Permanently Disabled Workers with Disproportionate Earnings Losses for Supplemental Payments

RAND working papers are intended to share researchers' latest findings and to solicit informal peer review. They have been approved for circulation by (RAND's Center for Health and Safety in the Workplace) but have not been formally edited or peer reviewed. Unless otherwise indicated, working papers can be quoted and cited without permission of the author, provided the source is clearly referred to as a working paper. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors. RAND ® is a registered trademark. ii Preface In September of 2012, the State of California adopted Senate Bill 863, a sweeping reform of the state's workers' compensation system. The goal of the bill was to contain medical costs for injured workers while restoring some of the permanent disability benefits that had been lost from previous reform efforts. The bill made many changes to the disability benefit system, one of which was the creation of a " return-to-work program. " This program, which is to be funded at $120 million per year, would provide supplemental payments to injured workers whose permanent disability benefits are disproportionately low in comparison to their earnings loss. The bill provided the Director of the Department of Industrial Relations (DIR) wide leeway in the design and implementation of the program. In addition, the bill required the Director in consultation with the California Commission on Health and Safety and Workers' Compensation (CHSWC) to determine eligibility and the amount of payments to be made based on a study. This study represents RAND's efforts to help DIR and CHSWC to develop a methodology for the eligibility determination and benefit amounts for the new Return-to-Work program. This work builds on many previous RAND efforts to help CHSWC, DIR and the State of California improve the adequacy and efficiency of the workers' compensation system through research and analysis. The RAND Center for Health and Safety in the Workplace is dedicated to reducing workplace injuries and illnesses. The center provides objective, innovative, cross-cutting research to improve understanding of the complex network of issues that affect occupational safety, health, and workers' compensation. Its vision is to become the nation's leader in improving workers' health and safety policy. Program research is supported by government agencies, foundations, and the private sector. The center is housed in the RAND Safety and Justice Program, which addresses all aspects of public safety and the criminal justice system, …