In 1998, the Oregon workers’ compensation system granted or reinstated 16 awards of Permanent Total Disability (PTD) benefits and rescinded six, for a net total of 10 claims awarded PTD benefits.

Declining PTD grants. The figure of 10 net PTD awards in 1998 continues the recent trend of relatively few awards. The large drop since 1988 in net awards is primarily the result of the declining number of PTD grants, as there has been no sustained increase in the number of benefit rescissions. In 1988, PTD grants totaled 73 at the Evaluation Unit of the Workers’ Compensation Division and 127 at the Hearings Division of the Workers’ Compensation Board, compared to 1998 figures of 9 and 6, respectively.

Changes to statute and administrative rules have had an effect on PTD grants. The 1987 reforms (House Bill 2900) mandated use, at all levels, of standards for evaluating permanent disabilities. New administrative rules on evaluating disability (OAR 436 chapters 30 and 35), implemented during 1988, provided a more uniform process for claim determination. A later amendment, effective in late 1990, codified case law that had strictly interpreted the statutory mandate that a potential PTD claimant seek regular and gainful employment. And, in 1995, the law was amended again to read that a gainful occupation is one that pays wages equal to or greater than the state mandated hourly minimum wage. This change is one reason why the number of PTD grants have decreased. Claimants seeking PTD because they are unable to “perform work at a gainful and suitable occupation” must obtain testimony from a certified vocational counselor (see excerpts from Oregon Administrative Rules).

Changes in claims handling are another likely factor behind the decrease in PTD grants. The SAIF Corporation, for example, created a “Critical Claims Unit” focused on management of claims for severe injuries.

Perhaps most significant in sustaining the trend of fewer PTD grants has been the claims disposition agreement (CDA, also known as compromise and release settlement), legalized by Senate Bill 1197 in 1990. In a CDA settlement, a worker typically gives up the right to future benefits, except medical services, in exchange for a lump-sum settlement. The agreements approved by the Workers' Compensation Board certainly include cases that would have been awarded PTD at some level of the system. The CDA also forestalls benefit rescissions resulting from insurer review and litigation, as well as subsequent reinstatements on appeal. Note, however, that a CDA is not a rescission of a PTD award because medical benefits, including palliative care, remain available.

In sum, there is no single explanation for the decline in PTD grants. Factors having a broad impact upon the workers’ compensation system, such as changes in Oregon’s economy, shifts in the industrial mix away from more hazardous forms of employment, and increased emphasis upon workplace safety and health, may have reduced injury severity, as well as incidence.

Costs. Reports by carriers of their net costs (average cost of grants multiplied by number of net grants) for 1998 PTD cases totaled $22.2 million, compared to $17.9 million in 1997 and about $64.9 million in 1988.¹

Following are costs and other claim characteristics for grants awarded in 1998, with comparisons made to earlier years.

Average total costs are six times higher than what they were in 1988. A 24 percent increase in average indemnity was dwarfed by a doubling in average medical costs in 1998, but the small number of claims also contributes to volatility in average costs. Average medical costs are more than 18 times what they were in 1988, due to the increasing cost of medical care within the system in general, and the likelihood that claims granted PTD represent injuries more severe than in the past.

The incurred costs for the PTD award make up a large portion of incurred indemnity, which may also include temporary and permanent partial disability, and rehabilitation. Factors influencing trends in PTD indemnity costs include the benefit schedule in effect for the date of injury and the worker’s weekly wage and life expectancy.

Insurers. In 1998, SAIF was the insurer in 37.5 percent of the PTD grants, compared to 60 percent the previous year. Private carriers covered 44 percent and self-insurers, 19 percent. In 1988, SAIF carried 61 percent of PTD grant cases.

For 1998 grants, the average lag from date of injury to date of order granting PTD benefits remained at 6.9 years, the same as the previous year.

Body part. In 1998, PTD grants involved injuries to the back in 25 percent of the cases. In 1997, the back was the injured body part in 10 percent of the cases, while in 1988, the back was involved in 57 percent of grants. Over the last 15 years, back injuries as a percentage of all accepted disabling claims reached a peak (31 percent) in 1986, declining thereafter to 25 percent currently. The change in back injuries as a percentage of all accepted disabling claims does not, by itself, explain the steep drop in back injuries leading to PTD awards.

Other claims characteristics. The small number of grant cases in recent years warrants caution in identifying trends in other claims characteristics. No meaningful differences were found between workers who were awarded PTDs in various industries or occupations. Over the last five years, injuries in manufacturing more than doubled that of any other industry.

For 1998 grants, the worker had been with the employer an average of four-and-a-half years when the injury or illness occurred, somewhat higher than the average of four years for 1997 and less than the average of five years for 1988. Men accounted for 87.5 percent of PTD claimants in 1998, compared to 95% the previous year.

For grants since 1994, injuries to muscles and tendons (includes sprains and strains) have been the most prominent nature of injury, accounting for 27 percent of cases. The event most often resulting in a PTD grant has been a fall, at 26 percent of cases. Structures and surfaces have been the most frequent source of injury leading to PTD, at 23 percent.

Determining Permanent Total Disability

436-030-0055 (1) A worker is permanently and totally disabled if permanently incapacitated from regularly performing work in a suitable and gainful occupation. For the purpose of this rule:

(a) “Incapacitated” from regularly performing work means that the worker does not have the necessary physical and mental capacity and the work skills to perform work.

(b) “Suitable occupation” means those occupations that exist in a theoretically normal labor market, within a reasonable geographic distance, for which a worker has the training or experience, and abilities to realistically perform the job duties, with or without rehabilitation.

(c) “Gainful occupation” is defined as: those types of general occupations that pay wages equivalent to, or greater than, the state mandated hourly minimum wage. Those types of general occupations that pay on a commission or piece-work basis, as opposed to a wage or salary basis, may not be “gainful employment” depending upon the facts of the individual situation.

(d) “Work skills” as used in this rule means: those skills acquired through experience or training that are necessary to gain and adequately perform skilled, semi-skilled or unskilled occupations. Unskilled types of general occupations require no specific skills that would be acquired through experience or training to be able to gain and adequately perform the unskilled occupation. Every worker has the necessary work skills to gain and adequately perform unskilled types of general occupations with a reasonable period of orientation.

(e) A “reasonable geographic distance” as used in this rule means either of the following unless the worker is medically precluded from commuting:

(A) The area within a 60-mile radius of claimant’s place of residence at the time of:

(i) the original injury; or
(ii) claimant’s last gainful employment; or
(iii) determination by the department; or
(iv) reconsideration by the Appellate Unit.

(B) The area in which a reasonable and prudent uninjured and unemployed person, possessing the same physical capacities, mental capacities, work skills and financial obligations as claimant does at the time of his rating of disability, would go to seek work.

(f) “Types of general occupations” as used in this rule means: groups of jobs which exist in a theoretically normal labor market, and share similar vocational purpose, skills, duties, physical circumstances, goals, and mental aptitudes. It does not refer to any specific job or place of employment for which a job or job opening currently exists.

(g) “Theoretically normal labor market” as used in OAR 436-030-0055 and 0065 means a labor market that is undistorted by such factors as local business booms and slumps or extremes of the normal cycle of economic activity or technology trends in the long-term labor market.

(2) Disability which existed before the injury shall be included in determining permanent total disability.

(3) In order for a worker to be determined permanently and totally disabled, a worker must:

(a) prove permanent and total disability;

(b) make reasonable effort to find work at a suitable and gainful occupation or actively participate in a vocational assistance program, unless medical or vocational findings, including the residuals of the compensable injury, make such efforts futile; and

(c) be willing to seek regular and gainful employment.

(4) When a worker retains some residual functional capacity and is not medically permanently and totally disabled, the worker must prove inability to regularly perform work at a gainful and suitable occupation, and the futility of seeking work if claimant has not made reasonable work search efforts, by competent written vocational testimony. Competent written vocational testimony is that which is available at the time of closure or reconsideration and comes from the opinions of persons fully certified by the State of Oregon to render vocational services. It does not include opinions by claimants, physicians or others not certified.

(5) Every Determination Order which grants permanent total disability shall notify the worker that:

(a) The claim shall be reexamined by the insurer at least once every two years, and may be reviewed more often if the insurer chooses.

(b) The insurer may require the worker to provide a sworn statement of the worker’s gross annual income for the preceding year. The worker shall make the statement on a form provided by the insurer in accordance with the requirements under section (6) of this rule.

 

If you have questions about the information contained in this document please contact by e-mail or phone: Julie Sutton, Research Analyst, Research & Analysis Section, Information Management Division  (503) 947-7349.

This document was originally published in December 1999.

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