Medical Care Spending and Labor Market Outcomes Evidence from Workers' Compensation Reforms

David Powell and Seth Seabury

No WR-1028-1, Working Papers from RAND Corporation

Abstract: Injuries sustained at work represent large income and welfare losses to households and there is a significant policy interest in reducing these burdens. Workers' compensation program is a large government program which provides monetary and medical benefits to injured workers. Despite the potential importance of medical care in improving the health and labor productivity of injured workers, little research has addressed the relationship between medical care provided through workers' compensation and post-injury labor outcomes. This paper exploits the 2003-2004 California workers' compensation reforms which reduced medical care spending for injured workers with a disproportionate effect on workers suffering low back injuries. We study the differential impact of this reduction in medical care generosity on post-injury outcomes, using administrative data which includes claim-level medical costs, pre- and post-injury labor earnings, and earnings information for matched (uninjured) workers at the same preinjury firm. Our focus on labor outcomes is motivated by the importance of understanding the relationship between health and labor productivity more broadly and by the policy interest in mechanisms to improve the labor outcomes of injured workers. Adjusting for injury severity and selection into workers' compensation, we find that workers with lower back injuries experienced a 7.3% greater decline in medical care after the reforms, and that this led to an 8.3% reduction in post-injury earnings relative to other injured workers. We estimate that this earnings decline is due both to an increase in injury duration and to lower earnings conditional on working.

Keywords: effectiveness of medical care; health; labor productivity; workers' compensation (search for similar items in EconPapers)
JEL-codes: I12 I13 J24 J28 J38 (search for similar items in EconPapers)
Pages: 56
Date: 2014-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.rand.org (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: Medical Care Spending and Labor Market Outcomes: Evidence from Workers' Compensation Reforms (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ran:wpaper:wr-1028-1

Access Statistics for this paper

More papers in Working Papers from RAND Corporation Contact information at EDIRC.
Bibliographic data for series maintained by Benson Wong ().