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   Dan Walters: Schwarzenegger's another captive of the workers' comp
   tar pit

       By Dan Walters -- Bee Columnist
       Published Wednesday, April 20, 2005

FOR EONS, CARNIVOROUS animals pursuing each other for food would become
trapped in what we now call La Brea Tar Pits, a thick pool of petroleum
west of downtown Los Angeles, and perish, making it one of the globe's
richest sources of prehistoric remains.

Workers' compensation - the system that compensates workers for
job-related illnesses and injuries - has been such a tar pit, entrapping
generations of California politicians who entered its adhesive politics.

The system's political attraction is its huge pool of money, about $20
billion a year. Employers who finance the system, workers who depend on
it, insurers who manage it, and lawyers, medical care providers and
others who drink from it squabble constantly over who pays what and who
gets what.

No faction is ever satisfied with the status quo, and machinations to
change the rules of the workers' comp game ensnare politicians from the
governor down. Every recent governor has tried to "fix" the system. Some
have even claimed success, only to learn that workers' comp is not a
linear problem to be solved, but a perpetual process. Any move that
pleases one faction merely sparks a backlash from others, enriching a
permanent subculture of lobbyists, campaign fundraisers, media flacks
and others who profit from political conflict.

Arnold Schwarzenegger is the latest governor to discover the perpetual
nature of comp politics. Business groups backed his 2003 election in
part because of their anger at sharply rising workers' comp insurance
premiums, which they attributed to predecessor Gray Davis' signature on
a multibillion-dollar benefit increase in 2002.

In fact, rate increases were more accurately attributed to rising
medical costs and the spillover effects of a decadelong experiment in
workers' comp insurance deregulation, which initially reduced premiums
but then resulted in sharp increases as cutthroat competition for market
share drove insurers from the market and as insurers' investment
earnings declined.

Nevertheless, Schwarzenegger pledged to fix workers' comp and supported
an employer-sponsored initiative that would have made radical changes in
the system. The Legislature's Democratic leaders, fearing that a
Schwarzenegger-backed initiative would pass, stiff-armed their allies in
labor unions and workers' comp attorneys and agreed to a milder
legislative measure, which Schwarzenegger signed a year ago Tuesday.

Schwarzenegger touted the reforms as proof that his pushy approach to
governing was bearing fruit. There's no doubt that they are lowering
employers' costs, although not as much as the Republican governor had
implied. The state Division of Workers' Compensation, in a report issued
to mark the first anniversary of the reforms, says that by late this
year, employers should see reductions of more than 26 percent from the
peak rates of 2003.

There is, however, buyers' remorse among Democratic politicians because
labor unions and lawyers have been howling about it ever since. They
staged noisy rallies in Los Angeles and at the Capitol on Tuesday to
complain that injured workers are being unfairly denied benefits, and
many of the Democrats who voted for the measure joined the protests. As
part of their penance, Democrats are holding up confirmation of Andrea
Hoch as director of the workers' comp agency, blaming her regulations
for hurting workers.

Democrats say that when they voted for the measure, they didn't know it
would have the effects it has had - which is more than a little
disingenuous. Everyone knew the key to large-scale savings was to
toughen the standards for so-called "permanent partial" disabilities.
That's what backers of the measure wanted it to do, that's what it did
and that's what the opponents don't like. When Democrats imply that they
were duped, they're either lying or admitting that they aren't very smart.

Schwarzenegger said Tuesday he's "pleased that we are already seeing
tremendous results," but may have reason to regret his much-touted
reform as well. It deluded him into thinking that he had discovered the
magic formula for moving a Democrat-dominated Legislature, and it added
fuel to his multifront battle with the unions and the Democrats over
other ballot measures this year.

           About the writer:
       * Reach Dan Walters at (916) 321-1195 or dwalters@sacbee.com

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