dynamic system of social industrial insurance. Each jurisdiction must modify its laws in conformity with the balanced interests of the employee, the employer and the public. These are matters of regional concern that can best be dealt with on a State by State basis, commensurate with the differences between the States, labor, employers, and public concerns vary widely from one jurisdiction to another. To move the State administration to a Federal bureaucratic office in Washington would eradicate the contribution to effective reform that interested parties can provide at the State level. As is evident from the changes made in State laws since the issuance of the National Commission's report, meaningful changes are being made in all jurisdictions. Thus any headlong rush to establish an expensive, cumbersome and inefficient Federal system under the banner of reform is clearly not reasonable. This was the unequivocal conclusion of the two federally appointed bodies charged with the responsibility of studying this question-the National Commission and the interagency task force. Yet, despite these recommendations, we see again and again renewed efforts to federalize the system. That the Federal Government is not qualified to administer workman's compensation is, in our opinion, made abundantly clear by its track record in the administration of the Longshoreman and Harbor Workers' Act, the Federal Employer's Compensation Act, the social security disablity program, and the black lung program. That these federally administered programs are plagued with the same and, in some instances, with more problems and abuses that plague the State program is clear. That the Federal Government has not been able to cope with the problems or correct these abuses is equally clear. It seems obvious to us that it is contrary to the public interest to pursue a vast and expensive liberalization of workman's compensation laws before the abuses in the present systems are addressed. Our experience in Illinois-Mr. Erlenborn, I am sure you will support me on this-should convince even the most skeptical. In 1975, our legislature substantially liberalized our act under the guise of compliance with the National Commission's recommendations. The rates were increased. However, none of the abuses prevalent in the system were addressed. Other aspects of the law were liberalized with no protection against new abuses. The results were cost increases of 400, 800, to 1,000 percent with a stable or declining accident and severity rate. Large employers were stunned; many small employers were almost destroyed. Since then there has been a growing demand for responsible controls and the elimination of these abuses. We believe that our administration and our legislature are now convinced that meaningful steps must be taken to eliminate the abuses and reduce the cost. We are looking for some meaningful changes this year. I think that it is fair to say that if what happened in Illinois in the last 4 years had happened nationally, it would have materially aggravated our already bad national economic picture. The disincentive to return to work arising out of escalated rates complicated by uncontrolled and unlimited free choice of medical, coupled with the attendant effect of permanent, partial disability, has driven costs out of sight while diminishing productivity. Although the response of our public officials in Illinois may not have come as quickly as we would have liked, the fact is that they are responding. We are working closely with the chairman of our industrial commission in a mutual effort to improve the administration of our law and to eliminate abuses wherever we find them. We are working with the Governor's staff and the legislators for necessary and meaningful legislative change. Progress has been made. More is on the way. We are confident that we can, and will, solve our problems in Illinois without Federal intervention and we are equally confident that we can do it more expeditiously, more effectively, more efficiently, than a Federal agency could if, for no other reason than that we are closer to the problems and we are more familiar with the means available to correct them. In our opinion, Federal resources should be utilized in those areas where the Federal Government is uniquely qualified to act. Do not squander them in areas best left to the States. This gentlemen, we suggest, is clearly one of those areas and should be left to the States. May we suggest that the Federal Government address itelf more to control the inflation rather than to attempt to increase worker's compensation rates to meet it? This, we suggest, would be proper. This, we suggest, would do away with the constant need for ever-increasing compensation rates. I think that that fairly summarizes what we would like to say at this time and I thank you for this opportunity to appear to present these points of view. Mr. BEARD. Well, I will tell you. If you had made any other statement, I probably would have had a heart attack. I respect your right to say what you said-and that is the greatness of this country-but I totally disagree. Mr. Erlenborn? Mr. ERLENBORN. Thank you, Mr. Chairman. Mr. Nyhan, let me first ask you: Where is your residence? Are you from Illinois? Mr. NYHAN. I am right out of Lysle. Mr. ERLENBORN. My constituent. I sure am happy to have you here today. I sure did like your statement. Mr. Nyhan, you mentioned that you are part of the process in Illinois. I am familiar with that. You said you have been involved in that for 16 years, which means, I guess, you took over just about the time I left. Mr. NYHAN. I think that is right. Mr. ERLENBORN. I was one of the legislative participants in that process when I was in the Illinois legislature. I think you will agree with me, although you did not mention it when you referred to the very poor experience that Illinois had back, I think you said in 1975, that that represented a breakdown in the agreed bill process. That was a year we had a legislature that was the captive of organized labor, a Governor a friend of organized labor. What happened was the legislature wrote a bill to please only organized labor without taking into account the costs attendant with that legislation. Mr. NYHAN. That is precisely what happened in Illinois, sir. Mr. ERLENBORN. I submit that experience should make everyone quite shy of following the recommendations of organized labor-no balance, no worry about costs. We had the same sort of thing happen here back in 1972 in the Longshoremen and Harbor Workers' Act. At an infamous midnight meeting between representatives of organized labor and Democratic staff members, the final version of the Longshoreman Amendments of 1972 was drafted, and the results of that have been equally disastrous to the experience we had in Illinois. So I want to thank you for your statement. I think that you are perfectly right. I think that we should work for a balanced and fair system and I think the States are quite capable of doing that. The Federal Government has adequately demonstrated that we are not capable of doing that. Mr. NYHAN. Congressman Erlenborn, having been a part of the aggrieved bill process in Illinois, I am sure you recognize that one of the things that mosts affects progress in workman's compensation over the years-and sometimes affects rate changes-is the very stubborn resistance to permit correction of abuses. And I feel certain that if you looked into many of these States where you feel the progress has not been as rapid as it has in others, you may find much of that to be the source of the problem. Mr. ERLENBORN. I think that is true and I know where the resistance to solving those problems of abuses comes from. Let me relate a recent experience here in the District of Columbia. With all of the best of motives, a local councilman is trying to have the District pass its own workman's compensation law and get out from under the burden of the Longshoremen Harbor Workers' Act. There was near riot at the council meeting with members of organized labor down there fighting any change. They want to stay under the Longshoremen and Harbor Workers' Act where once people are injured there is no incentive to become rehabilitated or go back to work because the compensation is such that they are much better off not to work and receive compensation rather than go back into some sort of productive activity. I said earlier I would not repeat all my litany of the horrors of the Longshoremen and Harbor Workers' Act, but maybe you have not heard them. Here in the District of Columbia, if you buy a house in the range of $80,000 it costs $4,000 or $5,000 more than it would in suburban Virginia or Maryland, merely because of workers' compensation and longshoremen and harbor workers' insurance premiums. When they put the subway in the District it cost $1.7 million per mile in comp claims-$1.7 million per mile. I do not think that the material that went into the subway cost any more than that. The cost here is just fantastic. It is so bad the incentives to file a claim are such that, out of 6,000 transit workers, we have 3,000 claims pending. It got so bad that the management of Metro proposed giving those who did not file claims for 3 months an opportunity to have their name put in the hat for a drawing for a color television set and if they withheld filing claims for a whole 6 months they went into the hat for a drawing for a new automobile. That was their way of creating some counterincentives. Of course, the Labor Department has advised them that they cannot do it. Thank you, Mr. Chairman. Mr. BEARD. Thank you very much for your testimony. Mr. NYHAN. Thank you, Mr. Chairman. Mr. BEARD. The next witness is Mr. Nolan Hancock, director, Citizenship Legislative Department, Oil, Chemical and Atomic Workers Union. Mr. Hancock, do you have a prepared statement? Mr. HANCOCK. Yes, sir. I do. Mr. BEARD. That statement will be accepted totally in the record and you may proceed. Mr. HANCOCK. Thank you. STATEMENT OF NOLAN HANCOCK, DIRECTOR, CITIZENSHIP LEG- OIL, Mr. HANCOCK. Mr. Chairman and members of the committee, my name is Nolan W. Hancock. I am appearing on behalf of the Oil, Chemical and Atomic Workers International Union to testify in support of H.R. 5482. We wish to applaud Chairman Beard for seeking to deal with the disparities and inadequacies of the present workers' compensation system in H.R. 5482, a bill which seeks to establish Federal minimum standards for State workers' compensation programs. This legislation is urgently needed in order to address the task of compensating workers on a broad and equitable basis. We strongly agree that "American workers and the national interest are best served by an adequate, prompt, and equitable system of compensation." The original purpose of workers' compensation-to provide a simple method of obtaining immediate relief from the physical and economic effects of injury and disability-has been grossly ineffective in serving the needs of workers because of totally inadequate, inequitable and complex State workers' compensation systems. The present system lacking minimum standards has failed to insure fair and just compensation to disabled workers, and their families. Since each State has its own workers' compensation laws, large variations exist from State to State. According to a Department of Labor study, if you receive an on-thejob injury in Alaska, you can receive as much as $654.30 a week for life. But if you receive the same injury in Mississippi, you can receive only $91 a week and total payments cannot exceed $40,950. The present patchwork system fails to provide uniformity in coverage of workers, benefits provided, safety regulations, rehabilitation efforts, and the appeals process. The problem with workers' compensation systems in the past and at the present time is the inadequacy and ineffectiveness of State pro grams. These State laws reflect the reluctance of the business community to provide healthful and safe workplaces and to provide fair compensation for occupational disease, injury and death. Existing State workers' compensation laws do not meet the minimum standards of adequacy and fairness set by the National Commission on State Workers' Compensation Laws in 1972. These programs fall short of the standards in the following areas: incomplete coverage, low benefit levels, high litigation rates, long delays before initial payments are received by injured workers, lack of provision of appropriate rehabilitation services to disabled workers, and failure to stress health and safety programs. Obviously the State systems are not uniformly and adequately protecting workers who receive job-incurred injuries and diseases. H.R. 5482 will alleviate many of these problems and disparities. Section 5 of H.R. 5482 is a vast improvement over previous bills on workers' compensation in the area of occupational diseases. There has been a widespread failure to recognize the victims of occupational diseases. The National Institute for Occupational Health and Safety (NIOSH) last year estimated that 100,000 deaths-including 60,000 from cancer-and 400,000 illnesses are caused each year by exposure to toxic substances at the workplace. However, the Labor Department estimates that only 30,000 occupational disease claims are paid each year by state agencies. Our concern in the area of occupational disease arises from the deaths and disabilities of thousands of workers who have been exposed to hazardous substances such as asbestos, cotton dust, beryllium, lead, and other carcinogenic agents. Victims of occupational disease should have just as much right to compensation as those who suffer from traumatic injuries, but due to existing laws and long latency periods, the victims of occupational disease suffer unwarranted hardships. The fact that workers are as much disabled by toxic substances and cancer-causing agents as they are by injuries is no longer in question as it has been proven by recent studies. Joseph A. Califano, former Secretary of the Department of Health, Education, and Welfare has repeatedly stressed this fact before the American people. This failure of the present workers' compensation system with respect to occupational diseases is due to many factors, the most important being: one, that many workers are unaware of the cause of their disease or that workers' compensation is available, and two, the difficulty of proving that a disease is actually work related. These factors discourage workers from filing claims and attorneys from accepting their cases. Section 5 of the bill is a positive step forward in addressing the problems of victims of occupational diseases. Another problem resulting from the defects in the present workers' compensation system, is that other Federal and State social programs are forced to carry much of the compensation load for workplace injuries and diseases. These already overburdened programs have had to take on this responsibility because of the failure of workers' compensation systems to assume the costs of workers' claims. Secretary of Labor Ray Marshall testified before the Senate Labor Committee last April that "the number of disabled persons receiving workers' compensation * * * very strongly suggests that the workers |