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compensated nationally. First, about 75 percent of all workers are employed in States where one or more arbitrary restrictions bar compensation for occupational disease. Frequently, statutes of limitations with no relationship to the time required for diseases with long latencies to manifest, preclude compensation. Second, the burden of

proof is upon the claimants under most compensation laws to establish the work-relatedness of individual cases of illness even if epidemiologic evidence establishes clear linkages with work exposures.

We expect the Department of Labor's study of occupational respiratory diseases now underway which was mandated by the Black Lung Benefits

Reform Act of 1977, to significantly aid our understanding of this problem.

Another area needing significant improvement is the involvement of State workers' compensation agencies in the restoration of disabled workers to gainful employment. Only 30 percent of disabled workers are entitled to vocational rehabilitation benefits from their employers, and a much smaller

percentage actually receive any vocational rehabili

tation services. In addition, less than five

percent of disabled workers have any right to

reemployment with their preinjury employers.

The absence of such a right reduces employer incentives to provide rehabilitation and restore the injured worker to gainful economic activity.

Despite these statutory limitations, several State workers' compensation agencies have recently begun to assume more responsibility for supervising

the rehabilitation of disabled workers.

There is also reason to be concerned about the efficiency of a system in which a large portion of employer-paid dollars do not go toward the compensation of workers. Some 35 percent of employers' workers' compensation costs go to pay overhead expenses, including about 10 percent for litigation costs on behalf of employers. The remaining 65 percent is paid out in benefits to claimants. However about 8 percent of the

benefits paid to workers go to pay claimant attorney

fees, leaving about 60 percent of the amount paid

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workers and their survivors.

As might be expected, litigation and hence overhead costs increase with the severity of the disability. Litigation reaches as high as 90 percent for some categories of occupational disease. Next to occuptional diseases, the most litigated and most costly category of workers' compensation claims are those for permanent partial disabilities. California, Florida and Michigan are just a few of the States in which permanent partial disability claims dominate the system.

Effective reform of the workers' compensation system must, therefore, not only seek to correct deficiences in benefits and coverage, but also must seek to achieve more equitable and efficient allocation of the costs of compensation and more effective methods of delivering benefits.

To summarize, the States have made important strides in workers' compensation reform since 1972.

Nevertheless, too many workers with employment related disabilities and many of the families

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of workers who die from job related injuries or diseases still do not receive the level and kinds of workers' compensation benefits they need and deserve and are forced to turn to other sources of income support in the aftermath of a disabling employment injury or death. Moreover, there is. clear evidence that State reform efforts have slowed.

Other Important Areas of Concern

Over the years the Department of Labor has played an active role in promoting the equitable and effective reform of workers' compensation. This involvement has included research as well as working cooperatively with the States through our technical assistance program. These continuing efforts have, in many instances, led to concrete improvements in State programs. We have also, in the course of these efforts, come to understand the critical importance of adequate benefit levels, of providing compensation for occupational diseases and, rehabilitating disabled workers and understand

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more fully the economic disincentives that work

against efforts to achieve reform. All too often we have found that the workers' rights to full coverage and adequate benefits have been sacrificed to the interests of employers to gain a competitive advantage over employers in other States by maintaining an inadequate workers compensation system. While these factors have led us to the conclusion that Federal standards will be necessary to overcome these economic factors, we have also come to the realization that certain matters which have not captured much attention in the past also need to be addressed. Among these are the costs of reform, the integration and interrelationships of workers compensation with health and safety programs, income maintenance programs, and medical benefits programs, and the development of efficient and viable enforcement strategies. Moreover,

too little has been done to solve the very difficult

problems raised by permanent partial disabilities,

and the need to develop improved data.

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