Federal Compensation Programs: Perspectives on Four Programs for Individuals Injured by Exposure to Harmful Substances
Published: 2008-04-01T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The U.S. federal government has played an ever-increasing role in providing benefits to individuals injured as a result of exposure to harmful substances. Over the years, it has established several key compensation programs, including the Black Lung Program, the Vaccine Injury Compensation Program (VICP), the Radiation Exposure Compensation Program (RECP), and the Energy Employees Occupational Illness Compensation Program (EEOICP), which GAO has reviewed in prior work. Most recently, the Congress introduced legislation to expand the benefits provided by the September 11th Victim Compensation Fund of 2001. As these changes are considered, observations about other federal compensation programs may be useful. In that context, GAO's testimony today will focus on four federal compensation programs, including (1) the structure of the programs; (2) the cost of the programs through fiscal year 2004, including initial cost estimates and the actual costs of benefits paid, and administrative costs; and (3) the number of claims filed and factors that affect the length of time it takes to finalize claims and compensate eligible claimants. To address these issues, GAO relied on its 2005 report on four federal compensation programs. As part of that work, GAO did not review the September 11th Victim Compensation Fund of 2001.
section_title: What GAO Found
paragraphs: The four federal compensation programs GAO reviewed in 2005 were designed to compensate individuals injured by exposure to harmful substances. However, the structure of these programs differs significantly in key areas such as the agencies that administer them, their funding, benefits paid, and eligibility. For example, although initially funded through annual appropriations, the Black Lung Program is now funded by a trust fund established in 1978 financed by an excise tax on coal and supplemented with additional funds. In contrast, EEOICP and RECP are completely federally funded. Since the inception of the programs, the federal government's role has increased and all four programs have been expanded to provide eligibility to additional categories of claimants, cover more medical conditions, or provide additional benefits. As the federal role for these four programs has grown and eligibility has expanded, so have the costs. Total benefits paid through fiscal year 2004 for two of the programs--the Black Lung Program and RECP--significantly exceeded their initial estimates for various reasons. The initial estimate of benefits for the Black Lung Program developed in 1969 was about $3 billion. Actual benefits paid through 1976--the date when the program was initially to have ended--totaled over $4.5 billion and, benefits paid through fiscal year 2004 totaled over $41 billion. Actual costs for the Black Lung Program significantly exceeded the initial estimate for several reasons, including (1) the program was initially set up to end in 1976 when state workers' compensation programs were to have provided these benefits to coal miners and their dependents, and (2) the program has been expanded several times to increase benefits and add categories of claimants. For RECP, the costs of benefits paid through fiscal year 2004 exceeded the initial estimate by about $247 million, in part because the original program was expanded to include additional categories of claimants. In addition, the annual administrative costs for the programs varied, from approximately $3.0 million for RECP to about $89.5 million for EEOICP for fiscal year 2004. Finally, the number of claims filed for three of the programs significantly exceeded the initial estimates, and the structure of the programs affected the length of time it took to finalize claims and compensate eligible claimants. For the three programs for which initial estimates were available, the number of claims filed significantly exceeded the initial estimates. In addition, the way the programs were structured, including the approval process and the extent to which the programs allow claimants and payers to appeal claims decisions in the courts, affected how long it took to finalize the claims. Some of the claims have taken years to finalize. For example, it can take years to approve some EEOICP claims because of the lengthy process required for one of the agencies involved in the approval process to determine the levels of radiation to which claimants were exposed. In addition, claims for benefits provided by programs in which the claims can be appealed can take a long time to finalize.

section_title: Letter
paragraphs: I am pleased to be here as you discuss important issues related to  compensation for individuals injured as a result of the terrorist attack on  the World Trade Center in 2001. After the collapse of the WTC buildings,  nearly 3,000 people died, and an estimated 250,000 to 400,000 people who  lived, worked, or attended school in the vicinity were affected. An  estimated 40,000 people responded to the attack, including New York City  Fire Department personnel and other government and private-sector  workers and volunteers from New York and other locations across the  nation. These responders, as they took part in various rescue, recovery,  and cleanup activities in the days, weeks, and months following the attack,  were exposed to numerous physical hazards and environmental toxins.
The federal government has played an increasing role in providing benefits  to individuals injured as result of exposure to harmful substances since  1969 when the Congress established the Black Lung Program as a  temporary federal program to provide benefits for coal miners disabled by  pneumoconiosis (black lung disease). Although the Black Lung Program  was initially designed to end in 1976 when state workers’ compensation  programs were to provide these benefits, it was amended to make it an  ongoing federal program. Since that time, the Congress has established  several compensation programs to provide benefits to individuals injured  by exposure to hazardous substances such as radiation, and the role of the  federal government in many of these programs has expanded over time.  Most recently, legislative proposals have been introduced in the House  that would expand the benefits provided by the September 11th Victim  Compensation Fund of 2001.
My testimony is based on work GAO reported in November 2005 on four  federal compensation programs: the Black Lung Program, the Vaccine  Injury Compensation Program (VICP), the Radiation Exposure  Compensation Program (RECP), and the Energy Employees Occupational  Illness Compensation Program (EEOICP). My remarks will focus on (1)  the structure of these programs; (2) the cost of the programs through  fiscal year 2004, including initial cost estimates and the actual costs of  benefits paid, and administration costs; and (3) claims, including the  number of claims filed and factors that affect the length of time it takes the  agencies to finalize claims and compensate eligible claimants. We did not  review the September 11th Victim Compensation Fund of 2001 as part of  this testimony.
We examined information on the four programs from their inception  through the end of fiscal year 2004. We obtained initial estimates of the  anticipated costs of benefits, as available, and the actual costs of benefits  paid from the date the programs were established through the end of fiscal  year 2004. In addition, we obtained information on the total number of  claims completed as of the end of fiscal year 2004 and reviewed  information on the time it took the agencies to finalize claims and  compensate eligible claimants. That work was completed in accordance  with generally accepted government auditing standards.
In summary, in 2005 we reported that    All four federal programs we reviewed were designed to compensate  individuals injured by exposure to harmful substances. However, the  structure of these programs differs significantly in key areas such as the  agencies that administer them, their funding, benefits paid, and eligibility  criteria. Since their inception, the federal role has increased and all four  programs have expanded to provide eligibility to additional categories of  claimants, cover more medical conditions, or provide additional benefits.
As the federal role for these four programs has grown and eligibility has  expanded, so have the costs. Actual costs for benefits paid through fiscal  year 2004 significantly exceeded the initial estimates for two of the  programs: the Black Lung Program and RECP. In addition, the annual  administrative costs for the four programs for fiscal year 2004 ranged from  approximately $3.0 million for RECP to about $89.5 million for EEOICP.
Finally, the number of claims filed through 2004 for the three programs for  which initial estimates were available significantly exceeded the initial  estimates. In addition, the structure of the programs, including the  approval process and the extent to which the programs allow claimants  and payers to appeal claims decisions in the courts, affected how long it  took to finalize claims and compensate eligible claimants. In some cases, it  took years for some of the agencies responsible for processing them to  finalize the claims.
subsections: section_title: Background
paragraphs: The four federal programs we examined were established from 1969  through 2000 for various purposes.
The Black Lung Program was established in 1969 as a temporary federal  program to provide benefits to coal miners disabled because of  pneumoconiosis (black lung disease), and their dependents, until adequate  state programs could be established. It has been amended several times,  effectively restructuring all major aspects of the program and making it an  ongoing federal program.
VICP was authorized in 1986 to provide compensation to individuals for  vaccine-related injury or death. According to the Department of Health  and Human Services (HHS), the agency that administers the program, it  was established to help stabilize manufacturers’ costs and ensure an  adequate supply of vaccines. Concerns expressed by various groups  contributed to the program’s establishment, including concerns from  parents about harmful side effects of certain vaccines, from vaccine  producers and health care providers about liability, and from the public  about shortages of vaccines.
RECP was established in 1990 to make partial restitution to on-site  participants, uranium miners, and nearby populations who (1) were  exposed to radiation from atmospheric nuclear testing or as a result of  their employment in the uranium mining industry and (2) developed  certain related illnesses.
EEOICP was established in 2000 to provide payments to nuclear weapons  plant workers injured from exposure to radiation or toxic substances, or  their survivors. Initially, some qualifying workers were paid federal  benefits and others were provided assistance in obtaining benefits from  state workers’ compensation programs. In 2004, the federal government  assumed total responsibility for benefits paid under the program.
section_title: The Structure of the Programs Varies Significantly
paragraphs: The purpose of the four federal compensation programs we examined is  similar in that they all were designed to compensate individuals injured by  exposure to harmful substances. However, how the programs are  structured varies significantly, including who administers the program,  how they are funded, the benefits provided, and who is eligible for  benefits. For example:  Several federal agencies are responsible for the administration of the  programs: the Department of Labor (DOL) administers the Black Lung  Program and EEOICP; the Department of Justice (DOJ) administers RECP  and shares administration of VICP with HHS and the Court of Federal  Claims. In addition, the National Institute for Occupational Safety and  Health and DOJ provide support to DOL in administering EEOICP.
Responsibility for administering two of the programs has changed since  their inception. Specifically, claims for the Black Lung Program were  initially processed and paid by the Social Security Administration but, as  designed, DOL began processing claims in 1973 and took over all Black  Lung Program claims processing in 1997. In 2002, the Congress officially  transferred all legal responsibility and funding for the program to DOL. In  addition, administration of EEOICP was initially shared between the  Departments of Energy and DOL but, in 2004, DOL was given full  responsibility for administering the program and paying benefits.
Funding of the four programs varies. Although initially funded through  annual appropriations, the Black Lung Program is now funded by a trust  fund established in 1978 that is financed by an excise tax on coal and  supplemented with additional funds. The tax, however, has not been  adequate to fund the program; at the time of our review, the fund had  borrowed over $8.7 billion from the federal treasury. For the VICP, claims  involving vaccines administered before October 1, 1988, were paid with  funds appropriated annually through fiscal year 1999. Claims involving  vaccines administered on or after October 1, 1988, are paid from a trust  fund financed by a per dose excise tax on each vaccine. For example, the  excise tax on the measles, mumps, and rubella vaccine at the time of our  review was $2.25. EEOICP and RECP are completely federally funded.  Although RECP was initially funded through an annual appropriation, in  2002 the Congress made funding for RECP mandatory and provided $655  million for fiscal years 2002 through 2011. EEOICP is funded through  annual appropriations.
Benefits also vary among the four programs. Some of the benefits they  provide include lump sum compensation payments and payments for lost  wages, medical and rehabilitation costs, and attorney’s fees. For example,  at the time of our review, when claims were approved, VICP paid medical  and related costs, lost earnings, legal expenses, and up to $250,000 for pain  and suffering for claims involving injuries, and up to $250,000 for the  deceased’s estate, plus legal expenses, for claims involving death. The  Black Lung Program, in contrast, provided diagnostic testing for miners;  monthly payments based on the federal salary scale for eligible miners or  their survivors; medical treatment for eligible miners; and, in some cases,  payment of claimants’ attorney fees.
The groups who are eligible for benefits under the four federal programs  and the proof of eligibility required for each program vary widely. The  Black Lung Program covers coal miners who show that they developed  black lung disease and are totally disabled as a result of their employment  in coal mines, and their survivors. Claimants must show that the miner has  or had black lung disease, the disease arose out of coal mine employment,  and the disease is totally disabling or caused the miner’s death. VICP  covers individuals who show that they were injured by certain vaccines  and claimants must show, among other things, that they received a  qualifying vaccine. RECP covers some workers in the uranium mining  industry and others exposed to radiation during the government’s  atmospheric nuclear testing who developed certain diseases. Claimants  must show that they were physically present in certain geographic  locations during specified time periods or that they participated on-site  during an atmospheric nuclear detonation and developed certain medical  conditions. Finally, EEOICP covers workers in nuclear weapons facilities  during specified time periods who developed specific diseases.
section_title: Actual Costs of Benefits Paid Exceeded Initial Cost Estimates for Two Programs and Annual Administrative Costs Varied
paragraphs: At the time of our review, total benefits paid for two of the programs—the  Black Lung Program and RECP—significantly exceeded their initial  estimates. An initial cost estimate was not available for VICP. The initial  estimate of benefits for the Black Lung Program developed in 1969 was  about $3 billion. Actual benefits paid through 1976—the date when the  program was initially to have ended—totaled over $4.5 billion and benefits  paid through fiscal year 2004 totaled over $41 billion. For RECP, the costs  of benefits paid through fiscal year 2004 exceeded the initial estimate by  about $247 million.
Table 1 shows the initial program estimates and actual costs of benefits  paid through fiscal year 2004 for the four programs.
Actual costs for the Black Lung Program have significantly exceeded the  initial estimate for several reasons, including (1) the program was initially  set up to end in 1976 when state workers’ compensation programs were to  have provided these benefits to coal miners and their dependents, and (2)  the program has been expanded several times to increase benefits and add  categories of claimants. The reasons the actual costs of RECP have  exceeded the initial estimate include the fact that the original program was  expanded to provide benefits to additional categories of claimants,  including uranium miners who worked above ground, ore transporters,  and mill workers.
Although the costs of EEOICP benefits paid through fiscal year 2004 were  close to the initial estimate, these costs were expected to rise substantially  because of changes that were not anticipated at the time the estimate was  developed. For example, payments that were originally supposed to have  been made by state workers’ compensation programs are now paid by the  federal government. In addition, at the time of our review, a large  proportion of the claims filed (45 percent) had not been finalized.
At the time of our review, the annual administrative costs of the four  programs varied. For fiscal year 2004, they ranged from approximately  $3.0 million for RECP to about $89.5 million for EEOICP (see table 2).
section_title: The Number of Claims Filed Generally Exceeded Initial Estimates and Program Structure Affected the Time It Took to Finalize Claims
paragraphs: The number of claims filed for the three programs for which initial  estimates were available significantly exceeded the initial estimates and  the structure of the programs, including the approval process and the  extent to which the programs allow claimants and payers to appeal claims  decisions in the courts, affected the amount of time it took to finalize  claims and compensate eligible claimants. The number of claims filed  through fiscal year 2004 ranged from about 10,900 for VICP to about  960,800 for the Black Lung Program. The agencies responsible for  processing claims have, at various times, taken years to finalize some  claims, resulting in some claimants waiting a long time to obtain  compensation.
Table 3 shows the initial estimates of the number of claims anticipated and  the actual number of claims filed for each program through fiscal year  2004.
Factors that affected the amount of time it took the agencies to finalize  claims include statutory and regulatory requirements for determining  eligibility, changes in eligibility criteria that increase the volume of claims,  the agency’s level of experience in handling compensation claims, and the  availability of funding. For example, in fiscal year 2000, when funds  appropriated for RECP were not sufficient to pay all approved claims, DOJ  ceased making payments until the following fiscal year when funds  became available.
The approval process and the extent to which programs allow claimants  and payers to appeal claims decisions also affected the time it took to  process claims. For example, it can take years to approve some EEOICP  claims because of the lengthy process required for one of the agencies  involved in the approval process to determine the levels of radiation to  which claimants were exposed. In addition, claims for benefits provided  by programs in which the claims can be appealed can take a long time to  finalize. For example, claimants whose Black Lung Program claims are  denied may appeal their claims in the courts. At the time of our review, a  Department of Labor official told us that it took about 9 months to make  an initial decision on a claim and at least 3 years to finalize claims that  were appealed.
section_title: Conclusions
paragraphs: The federal government has played an important and growing role in  providing benefits to individuals injured by exposure to harmful  substances. All four programs we reviewed have been expanded to  provide eligibility to additional categories of claimants, cover more  medical conditions, or provide additional benefits. As the programs  changed and grew, so did their costs. Initial estimates for these programs  were difficult to make for various reasons, including the difficulty of  anticipating how they would change over time and likely increases in costs  such as medical expenses. Decisions about how to structure compensation  programs are critical because they ultimately affect the costs of the  programs and how quickly and fairly claims are processed and paid.
This concludes my prepared statement. I would be pleased to respond to  any questions that you or the Members of the Subcommittees may have.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For further information, please contact Anne-Marie Lasowski at (202) 512- 7215. Individuals making key contributions to this testimony include  Revae Moran, Cady Panetta, Lise Levie, and Roger Thomas.
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