The model allows a user to enter the benefit structures. Frank reported that in California, there are very low maximum benefits. The model even allows you to change the Voc Rehab and other benefit rules for a state and then these are applied to the model. Utilization patterns will change with benefit changes We report on the elasticity of duration, for example. This may mean workers will stay out longer to recover more fully and we estimate slight decline in health care costs as a result but overall both duration and frequency increase.
Replacement rates are another matter .
The model uses about 5 years of real data and compares worker earnings from the same firm and earning levels this over-estimates the benefit replacement rates Replacements are better for those with greater severity and are likely higher than they would be if taken over a longer time frame. The results show that the proposed policy changes increased benefits across all groups but actually increased the disparity of replacement rates for workers in some categories. If the policy objective is to simply increase benefits, this may be fine, but there are ways to achieve other public policy objectives. One possible objective is to make all replacement rates equal. We give the real dollars to those who lost earning capacity .