Why federal agencies should estimate their long-term occupational injury and illness costs

Problem: The U.S. government's annual workers' compensation tab for work-related injuries and illnesses incurred by its civilian labor force has been substantial, totaling US$2 billion in 2000. To control these costs, federal agencies rely primarily on annual or prevalence-based cost accounting to evaluate the effectiveness of injury prevention efforts. Since most of the annual bill is for the older, persistent and costlier cases, this approach may obscure recent safety trends and can lead to faulty assumptions. Solution: Researchers analyzed Department of the Navy workers' compensation costs using an incidence-based approach. This method considers only new injuries and illnesses occurring in a given year and projects their likely course, duration, and long-term associated costs, providing the truest measure of the costs of that year's operation. Discussion: We trace the history of workers' compensation cost estimation in the federal government, discuss the drawbacks of using annual instead of projected long-term costs to evaluate work site prevention and control efforts, present health economics and insurance industry alternatives, and make a case for adopting an incidence approach. Impact on Government and Industry: The incidence approach promotes fiscal accountability and cost containment in both public and private sectors, allowing managers to accurately evaluate the impact of prevention and return-to-work programs. By identifying the actual costs of new mishaps, this technique allows organizations to hold managers accountable for the costs incurred specifically during their tenure and is the most suitable technique for assessing performance.