Governor Rauner looks at Illinois Workers' Compensation Reform.
Illinois has every reason to succeed. We have the hardest-working people in America, the best infrastructure in America and the best location of any state. We have unlimited economic potential. Yet, despite these advantages, the state's economic policies have led to very weak economic growth and massive manufacturing job losses.
Illinois' total employment peaked in 2000. If Illinois simply kept pace with the rest of the nation in economic growth since then, we would have added 600,000 more jobs.
Nearly two years ago we unveiled an ambitious 44-point plan to create more jobs and spur economic growth. Since then--in the spirit of compromise--we've narrowed our focus to the most critical priorities--term limits, more jobs, lower property taxes, better schools and real pension reform. When it comes to job creation, we have continued to advocate for changes to the workers' compensation system because of its direct impact on state government and job creation. As part of a balanced budget, workers' compensation reform should be a core part of a comprehensive agreement.
When I meet with employers, both in Illinois and across the country, they cite two primary challenges for businesses in Illinois: the highest property tax burden in the nation and our uncompetitive workers' compensation system. Those costs are particularly harmful to businesses with large physical footprints and large workforces. So it shouldn't be a surprise that Illinois has lost 34 percent of its manufacturing jobs since 2000 alone, while other states, like Michigan, Indiana and Kentucky, are growing.
Workers' compensation is not just a business issue. It directly impacts taxpayers by costing state, county and municipal governments more than $400 million every year, plus additional costs for school districts and special purpose districts. Government employees file workers' compensation claims for injuries and illnesses more than 50 percent more often than private-sector workers.
Illinois employers spend approximately $3 billion per year on workers' compensation, including medical expenses and disability benefits. The most widely used national study, conducted by the state of Oregon, shows that Illinois jumped from 23rd to the third most expensive state in the nation following 2005 changes to the law. Bipartisan reforms in 2011 helped to reduce costs, but Illinois remains the most expensive state in the Midwest and is tied as the seventh most expensive state in the nation.
A balanced approach to reform could save employers and expand job opportunities for Illinois residents. It would mean that all participants in the system--employers, workers, medical providers, insurers, lawyers and the Workers' Compensation Commission--bring savings to the system. There are many elements that can and should be included in a reform package.
LOOK TO OTHER BLUE STATES
Forty-five percent of workers' compensation costs are for medical services. While the 2011 reforms cut maximum fees, the cost for certain procedures remains multiple times--three, four, five times--the comparable Medicare rate. We can rebalance the fee schedule to find savings while protecting access to quality care and still compensating providers fairly.
Illinois workers receive among the highest benefits in the nation. The compensation for most injuries in Illinois is two to three times the national average. While we are not proposing to reduce benefit levels, we have asked lawmakers to address circumstances for which the system was not designed.
The workers' compensation system has been forced to absorb the growing costs of obesity, heart disease, diabetes and other degenerative conditions. Most other states, including blue states like Massachusetts and Oregon, have responded by reforming their causation standards--a reform that Attorney General Lisa Madigan said in 2012 would "exclude those conditions which are primarily caused by the natural degenerative process which occurs during aging" and was necessary "to protect taxpayer dollars."
The court system has also increased the overall cost of the system. Recent judicial decisions have removed award caps for shoulder and hip injuries; "significantly expanded" the circumstances in which an injury to a traveling employee is compensable, according to Madigan; and undermined an employer's defense against claims caused by the intervening intentional conduct of the employee. We can reduce costs by restoring commonly accepted practices.
Many other good ideas have been proposed to make the system more efficient. Ultimately, we will all benefit from balanced reform: Employers will save costs, Illinois will be a more attractive place in which to create jobs, workers will still be protected in the case of a workplace injury while enjoying greater job opportunities, and the state and local governments will experience a broader tax base through growth.
If we cannot provide Illinois residents with good jobs and expand our tax base, the state will never be able to properly support education and human services to the level they deserve, and our pension liabilities will look even more daunting.
Change is not easy, but the status quo is unacceptable. We cannot afford to fail.