rehabilitation received same prior to reaching maximum medical improvement.

At the point that an injured worker reaches MMI, that is the point they are as well as they are going to get medically, and they are not going to get any better, if that person is not a permanent total, they may be eligible for wage-loss benefits. Under the old system, at the point of MMI, we were paying claimants some money, regardless of the lack of physical problems, and this occurred in over 68 percent of the cases, to get rid of the files; to not worry about the future medicals of the injured worker.

Under wage loss, when a person reaches maximum medical improvement, if there is no physical impairment, there is no wage-loss benefit due and you drop out of the system. However, if there is at least 1 degree of physical impairment and the person is unable to work because of the injury, the worker may be eligible to collect benefits up to 525 weeks. The burden has been shifted to the claimant to prove that he or she is unable to work because of the injury. The criticism of the wage loss comes because there is no longer a "pot of gold” after maximum medical improvement. Only those injured workers that have some degree of physical impairment and cannot work due to an injury, can collect as a permanent partial.

The ability to wash out a claim has been severely limited. If washouts were allowed under the wage-loss system, we would again. be guessing into the future what someone's real wage loss was and the system would be reduced to the "diminution of wage earning capacity" which nearly caused the old system to collapse.

Medical benefits cannot be washed out. The claim must remain open for 2 years and medical benefits used for medical treatment, and not a payment to ante up the amount to close the file.

The permanent partial area had to be changed.

We have found numerous cases of abuse in our closed claims study, some are documented in the full testimony. Some may feel that Florida legislation went too far, but based on the Florida system of paying workers' claims, the legislature took the best alternative approach it had. Dr. Arthur Larson, a well known authority on workers' compensation, testified recently before the Florida Legislature House Insurance Committee that he often must appear before a legislative committee and advise them if their actions taken were wrong. He testified to the house insurance committee that the legislature had "done good," and that anyone who thought the wage-loss concept to be a new idea did not understand the original purpose of workers' compensation. He said, "Far from being an innovation, it is a restoration of the basic mechanisms for workers' compensation."

He additionally testified that if there was ever an impetus to help stop Federal encroachment in State workers' compensation laws, it would be Florida's new law which exemplifies how States can solve their own problems.

I thank you, and I am available for any questions you might have. Mr. BEARD. Thank you very much for your testimony, it was very interesting.

What about a situation where a man or a woman works in a shop, making a couple of hundred dollars a week, and loses his or her legs?

How do you feel about that as far as compensation?

MS. STILES. Well, in Florida they would be automatically on permanent total disability, and they would not come under our wage loss approach, if they lost both legs. So, they would receive $211 for as long as the situation exists, and that could exist for the rest of their lives. Mr. BEARD. Well, Florida, I am told by counsel, has certainly improved its workman's compensation benefits. Do you recognize the fact that there are some States that have benefits that are not adequate? MS. STILES. Yes, we do. But I can assure you that hearings like this and the National Council work on workers' compensation has led many States to study what their laws and what their problems are.

I have to explain to you that as long as you increase benefits, no matter which State it is in, even if they are paying low benefits-and it may sound low in some States-when you say that Florida's benefits are $211, that is the maximum that you can collect, that sounds awfully low when you compare it to the Federal law. But that is the average weekly wages in Florida.

Now, Florida benefits were low, and we increased our benefits by 63 percent. But I think that States, if the 19 essentials were increased or adopted, States would not have the ability to compromise, to get rid of all the abuses in the system. Many States would stop right at the level where you say the benefits have to be, and they would never solve any of the problems in their States. There would be no impetus to. Mr. BEARD. Do you think that people can survive on the compensation they receive in Florida in today's inflation?

Ms. STILES. That is a very astute question. In Florida, I think they do. The problem becomes, of course, more acute to those persons making a lot of money. If they are making $500 a week and the maximum they are going to get is $211

Mr. BEARD. Assume somebody is making $500 a week, and now he gets how much?

Ms. STILES. They get $211.

Mr. BEARD. Do you think, visualizing managing a household, they can drop from $500 to $211 and make it?

Ms. STILES. No, but we do not have that many injuries that occur in those high-income levels. From what I understand, most persons who are injured have an income averaging about $130 in Florida. We have some in that income bracket, but in many instances they have labor contracts, et cetera, to protect them as far as disability insurance, or other agreements to pay their full wage.

Mr. BEARD. What about occupational diseases?

MS. STILES. In Florida we do not have a real problem yet. It is starting, but we do not know enough about it to know what to do, I do not think anyone does. I would have to refer NAM staff on the occupational disease, as far as the national problem.

Mr. BEARD. Do you have brown lung victims in Florida?

Ms. STILES. No, not to my knowledge. Is that not where you work in textile factories?

Mr. BEARD. Yes. Thank you very much.

MS. STILES. Thank you.

Mr. BEARD. Mr. Michael Callas, Callas Contractors, Inc., representing the Associated Builders and Contractors.

[The statement of Michael Callas follows:]

PREPARED STATEMENT BY MICHAEL CALLAS, PRESIDENT, CALLAS CONTRACTORS, INC., REPRESENTING THE ASSOCIATED BUILDERS AND CONTRACTORS, INC.

Mr. Chairman, members of the subcommittee I am Michael Callas, a member of the Associated Builders & Contractors, Inc. (A.B.C.), and president of Callas Contractors, Inc.-a general building construction company located in Hagerstown, Md.

On behalf of my national trade association's more than 15,000 memberscontractors, subcontractors, suppliers of construction materials and equipment, and associates, I thank the subcommittee for the opportunity to testify on H.R. 5482, a bill which would federalize State worker's compensation systems.

Mr. Chairman, I speak today wearing "two hats". As chief operating officer of a construction company, I'm a member of the largest single industry in this country. The construction industry is larger than the steel, automotive and petro chemical industries combined. Not only do we pay a larger share of W.C. premiums than any other business every year, but construction firms, by the very nature of their work, are assessed some of the highest workman's compensation rates in the system.

I also wear the hat of a small, independent businessman-one of the 14 million small business firms which provide over half of the jobs in this country—we are the Nation's largest source of private employment, making small business the most tangible local representation of the private enterprise system in America today. These lonely, embattled, creative, individual hardworking business venturers also pay the lion's share of the compensation premiums paid by American industry and business every year.

I will direct my initial remarks wearing my "constructor's hat". W.C. insurance premiums are construction's most costly direct expense associated with an employer's labor burden, which includes taxes, insurance, etc., exceeding the combined costs to the employer of his share of social security taxes, and unemployment compensation insurance-more expensive than the cost of the best hospital, accident and sickness program or pension plan.

Not only is W.C. expensive, but in the 2 years prior from 1977 to 1979, W.C. premiums for construction firms in Maryland have increased 35 percent!!

This legislation involving federalization of the State W.C. systems would serve to further increase these costs since it features provisions that will increase the cost of administering the programs. The establishment of a benefits' review board to pass judgment on appeals by a worker aggrieved by an award made by a State W.C. commission would only serve to help undermine the current system, result in extended and expensive litigation, and end up costing employers more money. The upward adjustments proposed to the minimum income benefits-the higher maximum weekly benefits suggested--benefits indexed to the rate of inflation, would all have inflationary impacts on our Nation's economy. Since these additional costs would have to be added into the construction project's estimate, such a system would increase the cost of every construction contract-for the private construction user, as well as the Federal, State, and local governments-at a time when construction costs are all but unaffordable.

The problems that construction employers thruout the Nation would face if this legislation were enacted are already being experienced by construction companies who employ workers covered by the U.S. Longshoremen and Harbor Workers' Act, including District of Columbia private employees. In neighboring Maryland, the manual rate for the W.C. classification code of "concrete construction" is $12.61/$100 wages; in the District-just across the line-for the identically same work code, the rate is over $37.28-three times as much!! For excavation, in Maryland, $8.15-for D.C., $20.15!!!

Similar differences occur in all other work classifications-the result of "Federal standards" of Federal W.C. programs. Little wonder that many small construction businesses in the District have been forced to close because of the excessive W.C. costs a serious affordability problem for employers.

This past January, I attended and participated with over 1,600 angry small businessmen in the "White House Conference on Small Business". I say "angry because that was their predominate mood-angry about excessive governmentangry about being saddled with unnecessary regulations and paperwork-voicing their strong objections to costly new government programs.

Our congresswoman from the 6th District of Maryland, mailed out a 1980 questionnaire to her constituents in January. One question. "There are many government programs which have traditionally come under the jurisdiction of the

States. Do you think these programs should continue to be addressed at the State and local level? Or do you think the Federal Government should become more involved in such programs?" 92% responded-keep the programs at the State or local level.

Federal workers' compensation programs, or federally regulated systems, would not serve the different States as effectively as a system that is administered at a local level, responding to local needs. There are many compelling arguments for keeping the system out of the Federal bureaucracy-to remain at the State level. The retention of the system at the State level was recommended by the National Commission on State Workmen's Compensation Laws in its 1972 report-a recommendation reaffirmed in the 1977 report of the interdepartmental workers' compensation task force. This latter study group, composed of high level Federal officials, concluded that, "A program so affected by local employment conditions and local services, and requiring so much interaction with claimants probably is more effectively managed at the State level."

Small businessmen strongly endorse this recommendation-we believe that the W.C. system as regulated and administered at the State level has done a good job serving employees, employers, and the public. These State systems have been improving and have affirmed their intentions to continue improving. To do its job effectively and efficiently, the W.C. system demands a flexibility of action. and a proximity to the people served-requirements which can be met only at the State level.

The Longshoreman's Compensation Act, a Federal compensation program, has been severely criticized on the basis of insensitivity to human needs, growing evidence of waste, and, in some instances, even fraud, burdensome red tape, and unnecessary delays for many who need immediate assistance.

We urge the committee to help to eliminate additional government overregulation-more costly paperwork-red tape-bungling bureaucratic decisions mandated by non-elected officials. New and expensive liberalization of our W.C. laws are not in the public interest.

Thank you. I will be happy to answer any questions that the committee might have.

STATEMENT OF MICHAEL CALLAS, PRESIDENT, CALLAS CONTRACTORS, INC., REPRESENTING THE ASSOCIATED BUILDERS AND CONTRACTORS

Mr. CALLAS. I am Michael Callas, and I am a member of the Associated Builders and Contractors; and I am also president of Callas Contractors, Inc., a general building construction firm, located in neighboring Maryland, Hagerstown.

On behalf of my national trade association, which presently is composed of 15,000 members across the country, composed of contractors, subcontractors, suppliers of construction materials and equipment, and associates, I thank the subcommittee for the opportunity to testify on H.R. 5482.

Mr. BEARD. Your statement will be accepted in total into the record. Mr. CALLAS. Thank you, sir.

Mr. Chairman, I speak today wearing two hats, as chief operating officer of a construction company I remind the committee that I am a member of the largest single industry in our country. The construction industry is larger than steel, automotive, petrochemical all put together. Not only do we pay a larger share of workman's compensation premiums than any of the other industries each year, but construction firms, by the very nature of their work, are assessed some of the highest workman's compensation rates in the system.

I also wear the hat of a small, independent businessman-one of the 14 million small business firms which provide, by the way, over

half of the jobs in our country today. We are the Nation's largest source, single source, of private employment, making small business the most tangible local representation of the free enterprise system in America today. These lonely, embattled, creative, individual hardworking entrepreneurs also pay the lion's share of the compensation premiums paid by American industry and business every year.

I will direct my initial remarks wearing my "constructors' hat." Mr. BEARD. The soldiers in the field.

Mr. CALLAS. Yes, sir. We sign the checks for the workman's compensation premiums, Mr. Chairman, as you well know.

Workman's compensation insurance premiums are construction's most costly, direct expense associated with an employer's labor burden, which includes taxes, insurance, holiday pay, vacation, and so forth. Our workman's compensation premium today exceeds the combined costs of the employer's share of social security and unemployment compensation. It is more expensive than the best hospital, accident and sickness program you can buy today; more expensive than the best and most liberal pension plan.

Not only is workman's compensation expensive, but the cost of the system has spiraled over the past 6 years. Today our Nation's annual total cost for workman's compensation has risen from about $4 billion 6 years ago to over $13 billion today. In the 2-year period from 1977 to 1979, workman's compensation premiums alone for construction firms in Maryland have increased 35 percent.

This legislation, involving federalization of State workman's compensation systems would serve to further increase these costs since it features provisions which increase the cost of administering the program. The establishment of Benefits Review Boards to pass judgments on appeals by workers aggrieved by awards made by State commissions, would only serve to help undermine the current system, result in extended, expensive litigation, and end up costing employers more money.

The upward adjustments proposed to the minimum income benefits, the higher maximum weekly benefits suggested, benefits indexed to the rate of inflation, would all have inflationary impacts on our Nation's economy. Since these additional costs would have to be added into the construction projects estimate, such a system would increase the cost of every construction contract, for private construction users as well as Federal, State, and local contracting agencies, and at a time when construction costs are all but unaffordable.

The problems that construction employers throughout the Nation would be faced with if this legislation were enacted, are already being experienced by construction companies who employ workers covered by certain Federal programs-similar to the Longshoreman's Act and the District of Columbia Workers' Act.

In neighboring Maryland-where I work-the manual rate for workman's compensation for the cost code which we call concrete construction, is $12.61 for $100 worth of wages. In the District, a workman can be working in Bethesda and working on a project in Maryland, and in a project right across the District line, doing exactly the same work, exactly the same code classification, and the rate in the District is $37.28-three times as much.