A Few Remarks on Workers’ Compensation and “Medicare for All”

With “Medicare for All” likely an entrenched topic of conversation during the upcoming national campaign season, I was pleased to see William Rabb’s piece last month in WorkCompCentral (behind a paywall here) on the role that workers’ compensation might play in a national single-payer system.

The first thing to bear in mind is that the original workers’ compensation statutes—the English Act of 1897 and the first U.S. workers’ compensation statute (N.Y.) upheld by the Supreme court in 1917—contained no provision for ongoing payment of medical benefits. (Most of the early U.S. systems paid for on-site first aid, and perhaps emergency medical care for a few weeks; New York paid for 60 days). The English passed national health care in 1911; and the Germans (who created the second of the great workers’ compensation systems originally considered by the United States) included workers’ compensation benefits as part of a comprehensive national benefit delivery system under Otto von Bismarck’s original 19^th century scheme. In Europe, the birthplace of workers’ compensation, payment of medical expense occasioned by workplace injury was divorced from indemnity payments very early on. So whatever else might be said about the feasibility of operating a work-injury system in which a national health entity paid for health care costs, while a state-based workers’ compensation program paid indemnity-only benefits, it would be historically inaccurate to claim such a system would violate the “original intent” of workers’ compensation.

Second, some of the discussants in Mr. Rabb’s piece were concerned that operation of an indemnity-only workers’ compensation system would reduce the premium revenue of insurance carriers, causing them to invest less in workplace safety, presumably because their policies would cover less. In other words, the less a carrier would be required to pay an insured under a policy, the less motivation the carrier would have to assure that high-cost claims would not be filed in the first place by encouraging employers to operate safely. Here, however, I think it must be remembered that insurance follows liability, liability does not follow insurance. Even if insurers find workers’ compensation less profitable—because the insurable risk has been limited to indemnity payments or because workplaces have become safer overall—the employers’ risk will never be zero because employers’ liability will never be zero (no tort reform of which I am aware has ever suggested the possibility that a state could lawfully deny any remedy for physical injury). A number of models were experimented with at the inception of workers’ compensation for exactly this reason. Mandatory workers’ compensation was first applied only to extrahazardous employments, and a number of states experimented with mixes of elective and mandatory systems—originally some states permitted both employers and employees to opt out. Much experimentation can be anticipated during transitional eras, and how to deter unsafe employment practices without simultaneously chilling socially useful activity is the durable problem of all injury law.

The preceding points get to the heart of what the discussion about the interplay between workers’ compensation and “Medicare for All” is really about – federalism. Workers’ compensation was explicitly excluded from ERISA (the federal statute minimally regulating voluntary employee benefit plans), way back in 1974, from federal benefit initiatives since then, and has been excluded from both the Sanders and Jayapal bills, to name the two proposals with which I am somewhat familiar. I would suggest that a large driver of the federal instinct to exclude workers’ compensation from benefit design centers on immunity from tort liability (exclusivity), or more precisely on a recognition of the delicate state-law balance between limitation of tort remedies on the one hand and providing adequate statutory benefits on the other. This has been seen historically as quintessentially a state law question.

Under present law, a plaintiff may not sue in tort an ERISA-governed employee benefit plan, or providers thereunder, as a result of ERISA preemption. And, as we know, employees generally may not sue their employers for work-related injuries arising from employer negligence. The difference is that ERISA tort immunity derives from federal public policy based on employers’ voluntary provision of employee benefits; workers’ compensation immunity derives from a state-based exchange of an ancient common law right and remedy for a putatively adequate statutory substitute.

“Medicare for All” changes the federal law assumptions upon which ERISA is built. The whole point of ERISA is to encourage voluntary provision of benefits by employers by not mandating any specific benefit levels and by sheltering operation of plans from most legal liability. Medicare for All would be the product of a mandatory system of taxation. It remains to be seen what preemption structure would accompany Medicare for All, but it would obviously change the state tort law dynamic. Tort law damages for medical expense might become completely unavailable if an injured plaintiff received free or very low cost medical care as a matter of right. And this has workers’ compensation theoretical implications. Just as the dynamic of the quid pro quo is (or should be) impacted by the replacement in modern negligence law of contributory negligence and assumption of the risk defenses by comparative negligence (theoretically raising the “tort value” of a claimant’s workers’ compensation claim), the severe reduction of employee injury-related medical expense might similarly change the current conception of the quid pro quo. The reduced contours of theoretical employer tort liability would diminish theoretical tort damages for employees. Within the next few years, in other words, the quid pro quo might effectively be stood on its head.  

Which brings me back to another discussion featured in the Rabb article—the question of monopolistic systems, where a state itself is the exclusive insurer of workers’ compensation benefits (as in my home state of Wyoming). It strikes me as very plausible that monopolistic systems would be the result of workers’ compensation no longer being profitable for private insurers. Employers’ liability (perhaps solely for indemnity benefits in some brave new world) does not disappear simply because carriers will not insure it. Either states will become insurers of last resort or the policy justifications for exclusivity will vanish. 

I suspect that deliberations of this type will intensify in coming months, as they should in my estimation.

Michael C. Duff