Workers’ compensation laws may well have been an improvement over the previous system of tort liability, but many of the old problems still remained.
As if these reasons weren’t enough, the involvement of doctors proved troublesome. Unlike old age or unemployment insurance, workers’ compensation provided not just income support but also medical benefits. In the majority of cases involving serious injury, workers had to be examined by doctors approved by their employer or the insurance company, leading to claims that the extent of disability was habitually understated. The reverse was also possible. A committee investigating workers’ compensation in New York in 1932 discovered that doctors chosen by workers usually found major injuries and recommended the maximum benefits under law, while doctors chosen by employers or insurers often found no reason for an award (Bale 1989). Because disability is often subjective (Stone 1984), doctors could legitimately disagree on its severity even when a conflict of interest was absent. At a 1935 conference, medical experts from several states were presented with evidence from actual cases of permanent partial disability and asked to determine the severity. “Estimates on one case ranged from nothing (hysteria) to 80%, while another case saw estimates from 25 to 90%” (Bale 1989: 1116).
These difficulties only served to reinforce policy makers’ general unwillingness to tackle issues of medical care. Greater national involvement in health care was likely to generate not just waves of criticism from powerful groups of medical providers, but also to lead the government into the thicket of identifying and quantifying medical disability. With important new excursions into unemployment and old-age insurance on the agenda, as well as greater support for several existing means-tested programs, the national government’s capacity to provide social welfare might be stretched to the breaking point if it took on workers’ compensation as well. Improving workers’ compensation would take more than just an infusion of money from Washington.
In light of their other commitments and two decades of experience with workers’ compensation, the architects of the Social Security Act decided that the best course of action was to leave workers’ compensation alone. National involvement in workers’ compensation might have been good policy in the 1930s, for existing state laws were not working well. But it was clearly bad politics. The final CES report to the President mentioned workers’ compensation only briefly and towards the very end. Its two main recommendations were to encourage the few states without workers’ compensation laws to adopt them, and to have the Labor Department do whatever it could to make state laws more uniform and adequate. The government would offer states neither carrot nor stick; its main tools would be persuasion and exhortation. Though minor, these recommendations were dropped from the final bill.