Detailed Information on the
Longshore and Harbor Workers' Compensation Program Assessment

Engaging program stakeholders to examine ways to improve and update the Longshore and Harbor Workers' Compensation Act through legislative changes.

Completing the current evaluation to improve the Longshore Claims Management System, and contract for a broader-scope evaluation of the program, including comparison of the efficiency and effectiveness of the Longshore program with other Federal and State workers' compensation programs.

Evaluating recent efforts to improve processes and controls in the program's disbursement system in response to shortcomings identified in a 2004 audit.

Rebaselining and developing targets for the dispute resolution measure to reflect the complexity and workload numbers of Defense Base Act cases.

Address 2004 reportable condition concerning the lack of sufficient controls over the access to and protection of financial data in the Special Fund disbursement system.

Measure: Average days required to resolve disputed issues in Longshore and Harbor Workers' Compensation Program contested cases.

Explanation:The Longshore and Harbor Workers' Compensation Act and its extensions provide medical benefits, compensation for lost wages, and vocational rehabilitation services to employees who are injured or contract an occupational disease during the course of employment. Survivor benefits are provided if the work-related injury causes the employee's death. The dispute resolution measure is critical as it reduces the consequences of work-related injuries by ensuring the claimant receives the correct compensation and medical care in a timely manner. The effectiveness of the initial stages of the dispute resolution process works to reduce the extended hearings and appeals processes by raising the quality of communications, medical evidence, mediation services, and clarity of decisions. Disputed issues tracked for this measure include: fact of injury, coverage under the Act, medical treatment, average weekly wage, temporary disability, nature and extent of permanent disability, attorney fees, and last responsible employer. This measure is being rebaselined in FY 2008 to take into account the increased workload of complicated disputes arising from Defense Base Act cases. The target is an annual 1% reduction in dispute resolution processing.

Measure: Claims managed per FTE.

Explanation:This measure of claims managed per full-time equivalent (FTE) captures the productivity and efficiency of the Division of Longshore and Harbor Workers' Compensation's claims processing independent of resource and workload levels. This efficiency measure provides constant metrics by which DLHWC can track improved long-term efficiencies even as resource allocations vary. The baseline was established in FY 2005 and the targets were adjusted for FY 2008 to make the measure more challenging. The targets are an annual 1% increase in the number of claims managed per FTE building from the revised FY 2008 amount.

Measure: Percentage of individuals completing rehabilitation plans who return to work within 6 months of plan completion.

Explanation:This measure gauges the Division of Longshore and Harbor Workers' Compensation's success in obtaining employment for individuals who complete approved vocational rehabilitation plans. A return to suitable work is counted as a placement for the purposes of this measure. The baseline was established in FY 2005 and the targets are an annual 1% increase in the percentage of rehabilitation plan participants who return to work.

Is the program purpose clear?

Explanation: The program provides wage-replacement, medical, and vocational rehabilitation benefits to eligible injured workers or survivors, as prescribed by the Longshore and Harbor Workers' Compensation Act (LHWCA) and its extensions. While most cases are paid directly by employers or insurance carriers, the Department of Labor's Employment Standards Administration, Division of Longshore and Harbor Workers' Compensation (DLHWC) is responsible for adjudicating disputed claims and ensuring that employers and carriers pay benefits in a timely manner. The program pays some costs (claims for second injuries, certain cost-of-living adjustments, cases where employers and insurance carriers default on their claim obligations, rehabilitation services, and impartial medical examinations) directly from the employer-financed Special Fund.

Evidence: The Longshore and Harbor Workers' Compensation Act of 1927, as amended (33 U.S.C. § 901 - 950) at www.dol.gov/esa/regs/compliance/owcp/lhwca.htm; extensions of the LHWCA including the Defense Base Act (42 U.S.C. § 1651 - 1654) at www.dol.gov/esa/owcp/dlhwc/dba.htm; the Outer Continental Shelf Lands Act (43 U.S.C. 1331(a), 1333 (b) & (c) and 1301) at www.dol.gov/esa/owcp/dlhwc/ocsla.htm; the District of Columbia Compensation Act ( 36 D.C. Code § 501 et seq. ) at www.dol.gov/esa/owcp/dlhwc/dcwca.htm; the Non-appropriated Fund Instrumentalities Act (5 U.S.C.8171 - 73) at www.dol.gov/esa/owcp/dlhwc/nfia.htm.

Does the program address a specific and existing problem, interest, or need?

Explanation: Congress enacted the LHWCA in 1927 to provide a uniform benefit scheme for specific groups of maritime workers who would otherwise be without state workers' compensation or tort remedy for on-the-job injuries or death occurring on the navigable waters of the United States. Since 1927, several extensions to the LHWCA have been enacted to provide the same benefit structure to workers in unique industries and geographic locales, such as oil exploration and extraction on the Outer Continental Shelf, defense contractors deployed overseas, non-Federal workers employed in the District of Columbia (obsoleted in 1982), and civilian employees of non-appropriated entities on military bases. In each case, the rationale for coverage was the fact that these individuals were otherwise without workers' compensation protections. In 1972, the LHWCA was extended landward beyond the shoreline of the navigable waters of the United States, covering injuries that had previously been the exclusive domain of state workers' compensation. Despite some duplication in coverage today (see question 1.3), the program remains the only source of workers' compensation coverage for large groups of covered workers. In administering the Act, DOL provides claimants with information and assistance in filing claims and receiving compensation and medical treatment and provides dispute resolution services to ensure the timely delivery of benefits (disputes arise in roughly 20% of cases). DOL is also responsible for ensuring that insurance companies and self-insured employers will be able to pay Longshore benefits. DOL authorizes over 560 insurance carriers and self-insured employers to provide benefits to covered employees, and maintains security deposits of $2.8 billion. Finally, DOL manages and makes payments from the Special Fund, primarily for payments when a pre-existing permanent disability contributes to the disability or death of the employee.

Evidence:  

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: The Longshore program was created to provide workers' compensation protections for categories of workers who were outside the jurisdiction of other state or federal workers' compensation systems. The extensions to the LHWCA were enacted to provide coverage to classes of workers who are not covered under any other statutes. Particularly since the 1972 amendments, however, there is duplication in coverage under the LHWCA. DOL estimates that about 40 states allow concurrent receipt of state and Longshore benefits. The LHWCA provides for the offset of compensation paid to individuals under any other workers' compensation law for the same disability or death. In cases where state benefits are higher, however, claimants can collect benefits from both systems. This duplication creates complications for employers, because they must purchase both Longshore and state workers' compensation insurance to cover their workers. According to DOL, though, employers do not have to pay twice for their insurance--instead, employers pay pro rata shares of the Longshore rate and the state rate, based on a calculation of the amount of time workers are covered by each system in the course of their work.

Evidence:  

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: There is no strong evidence that another approach would allow the program to achieve its objectives more efficiently or effectively. However, the Act has not been substantially updated in more than twenty years. DOL should engage program stakeholders to examine ways to improve and update the Act via legislative changes.

Evidence:  

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: DOL's Office of the Chief Financial Officer determined that the Longshore program is not susceptible to significant erroneous payments as per the requirements of the Improper Payments Information Act (IPIA) of 2002 (PL 107-300); therefore, the program's rate of erroneous payments is not tracked. The program has processes to control and minimize erroneous payments. All payments from the Special Fund and security deposits- including compensation and medical and rehabilitation vendor payments-- are made by the national office. Each initial payment of compensation from the Special Fund is reviewed by 4 persons (the claims examiner, the workers' compensation specialist, and two branch chiefs) prior to payment; and each subsequent payment is reviewed by 3 persons (the fiscal officer, the claims examiner, and the branch chief) before payment. The national office also mails to all Special Fund recipients forms annually to verify employment status and widow/student status for continuing eligibility for benefits. The district offices ensure that these forms are properly completed and returned. Benefits are suspended for failure to timely respond, and any change of status is immediately reported to the National Office. DHLWC runs a Social Security death match each week, and any Special Fund beneficiary on the list is immediately terminated from the Special Fund recurring payment rolls. Periodic reviews are also done based on specifically identified types of entitlement to ensure accuracy of payments. In addition, as part of the annual financial audit of the Special Fund the auditors randomly select and review several hundred files with the accuracy of the payments being the focus of the review. An area of concern is the fact that the LHWCA does not permit recovery of overpayment of benefits erroneously paid, except as an offset against future compensation. If the Special Fund pays benefits based on a legal compensation order that is later reversed on appeal, and the claimant is deemed ineligible for further benefits, the case is closed and the overpayment cannot be recovered. If the claimant is found to be entitled to continuing benefits at a reduced rate, any overpayment is offset against future benefits. DOL does not track how often overpayments are or are not recovered.

Evidence:  

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The program currently has one long-term performance measure: to reduce the amount of time it takes to resolve a claim dispute. In FY 2005 it begin tracking performance against a revised dispute resolution measure and a new vocational rehabilitation measure. Both measures will be implemented in FY 2006. Taken together, these measures reflect the purpose of the program and support the Employment Standards Administration's overarching goal of minimizing the human, social and financial impact of work-related injuries for workers and their families.

Evidence: For its current dispute resolution measure, the program tracks six of the most common claim disputes arising under the Longshore Act and its extensions: jurisdiction, fact of injury, average weekly wage, temporary disability, permanent disability, and medical benefit. (This captures most of the disputes handled by DLHWC--between 10/02 and 1/05, 96% of disputes referred to the Office of the Administrative Law Judge and 92% of claims resolved through informal hearings involved these issues.) Each dispute is tracked in the Longshore Case Management System from the date it starts to the date it is resolved. The total elapsed time (in number of days) from dispute start to dispute resolution for all disputes in the fiscal year is divided by the total number of disputes resolved to arrive at the average time per dispute. Claims disputes are considered resolved when the disputed benefits are paid or an Administrative Law Judge issues a binding compensation order awarding or denying benefits. The program intends to modify the dispute resolution measure methodology to include additional issues (attorney's fees and successive employer liability). This new measure would be implemented in FY 2006, using a FY 2005 baseline. The program is also adding a measure to assess the success of its vocational rehabilitation activities in returning Longshore beneficiaries to work. The measure is the ratio of participants who return to work within 6 months of completion of their rehabilitation plan, of the total number of participants who complete an OWCP-approved rehabilitation plan. A return to suitable work, even if not the specific occupation goal considered in the approved plan, would count as a placement for purposes of this measure. This new measure would be implemented in 2006, using a 2005 baseline. DOL FY 2003-2008 Strategic Plan (www.dol.gov/_sec/stratplan/main.htm; see outcome goal 2.2); Description of current dispute resolution measure can be found in the Longshore Procedure Manual at www.dol.gov/esa/owcp/dlhwc/lspm/lspm9-800.htm.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: While the program did establish a long-term (FY 2008) target for its current dispute resolution measure as part of the Department's FY 2003-2008 Strategic Plan, it surpassed the 2008 target in 2004 and did not establish a new long-term target for this measure. Instead, the program is implementing a revised dispute resolution measure (which includes additional types of disputes), for which it has recently established long-term targets. The program has also set long-term targets for its new rehabilitation measure. (In both cases, the baselines will be adjusted based on final, actual FY 2005 performance levels.)

Evidence: For the revised dispute resolution measure, the program will achieve a 3 percent reduction in the average dispute resolution time by FY 2008 (from an estimated 2005 baseline of 254 days). For the rehabilitation measure, the program will achieve a 3 percent increase in the ratio of rehabilitation plan completers who return to work by FY 2008 (from an estimated baseline of 48.74%). In the Department's FY 2003-2008 Strategic Plan, the program established a goal of reducing by 12 percent from the 2003 baseline (285 days) the average time it takes to resolve a claims dispute??i.e., achieving an average dispute resolution of 251 days. The program exceeded its FY 2008 goal in FY 2004, when it achieved an average dispute resolution time of 247 days (a 13% reduction from the baseline). (See www.dol.gov/_sec/stratplan/main.htm, outcome goal 2.2.)

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: The program's long-term and annual performance measures are the same, but the program establishes annual targets that demonstrate incremental progress toward the long-term performance target. The program currently has one performance measure: to reduce the amount of time it takes to resolve a claim dispute, and one efficiency measure: claims managed per FTE. In FY 2006 the program plans to add a second performance measure to gauge the success of the program's rehabilitation activities. (See 2.1 for a more detailed description of these measures.)

Evidence:  

Does the program have baselines and ambitious targets for its annual measures?

Explanation: The program has a target for its current dispute resolution measure, against which it will gauge progress in FY 2005. The program also recently established proxy baselines and targets for its revised dispute resolution measure (which includes additional types of disputes), against which performance will first be gauged in FY 2006. The program has also set targets for its new rehabilitation measure. (In both cases, the baselines will be adjusted based on final, actual FY 2005 performance levels.) It is questionable whether the program's original targets were challenging. In the first year of measurement under its dispute resolution measure (2003), the program achieved a 6.7 percent reduction in its dispute resolution time??more than half the long-term targeted reduction, and a better level of performance than the subsequent two years' targets. In the subsequent year, the program again surpassed its performance target by a significant margin, surpassing the long-term (2008) target. The program revised its annual target in FY 2005 and plans to modify its measure beginning in FY 2005 to include more types of disputes.

Evidence: In the FY 2003 strategic plan, DOL established for its dispute resolution measure targets of a 2 percent reductions each year over a six year span, with a cumulative reduction of 12 percent from the baseline of 285 days by FY 2008. (The specific targets were 279 days for FY 2003, 274 days for FY 2004, 268 days for FY 2005, 263 days for FY 2006, 257 days for FY 2007, and 251 days for FY 2008.) In the second of six years, the program exceeded its long-term 12% target. The FY 2005 goal has been adjusted to a 14% reduction from the baseline (a target of 245 days). To keep the measure challenging, the program is incorporating two additional disputes - attorneys' fees and successive employer liability ("last responsible employer issue"). The program will achieve an annual one percent reduction in average dispute resolution time, from an estimated 2005 baseline of 254 days. The program has also established targets for its rehabilitation measure. The program will increase by 1 percent annually the ratio of individuals completing rehabilitation plans who return to work, from an estimated baseline of 48.74 percent.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: The Benefits Review Board, Office of Administrative Law Judges, and Solicitor play key roles in processing and resolving Longshore claims. The BRB and OALJ have recently established measures with short-term targets to measure their performance with respect to Longshore cases. In addition, the Longshore program's dispute resolution measure encompasses the Administrative Law Judge's review time, thereby capturing for covered disputes the OALJ's performance in discharging its responsibilities under the program. (See 2.1 for a more detailed discussion of the dispute resolution measure. As noted in 2.1, between 10/02 and 1/05 approximately 96% of the disputes referred to OALJ involved one of the types of issues tracked by the current measure.) The Solicitor has established performance goals that cover its overall performance in providing legal representation. The quality of these goals will be evaluated in a PART assessment of the Solicitor's Office in 2006.

Evidence: The BRB will measure and track its performance according to average case processing time, and will also track new appeals, dispositions, and pending appeals (number and backlog, in months). In FY 2005, the BRB will seek to achieve an average case turnaround time of 9 months (actual performance was which was 9.5 months in 2003 and 9 months in 2004). The ALJ wll measure and track its progress according to the percentage of cases disposed within one year, and will also track dispositions, case intake, pending cases at the end of the fiscal year, and case backlog. ALJ will seek to resolve within one year 78.9% of cases in FY 2005, 79.4% of cases in FY 2006, 79.9% of cases in FY 2007, and 80.4% of cases in FY 2007, These data will be reported to the Longshore program on a quarterly basis and in the Budget on an annual basis.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: To date, there have been no broad-scope evaluations of the overall operation of the program, and none are planned at this time. In early 2005, the Longshore program contracted with SRA International to study ways to improve Longshore's claims management system, with the goal of improving information for managers, allowing for evaluation of program-wide performance, and permitting comparison of program performance against state workers' compensation systems. This will make future comparisons possible. In April of 2005 the General Accounting Office (GAO) issued two reports pertaining to specific aspects of Defense Base Act implementation: (1) a report on Vietnam-era claims for Agent Orange exposure (including those filed under the Defense Base Act); and (2) a brief report on the implementation of the Defense Base Act, including the cost of DBA insurance and the difficulties that have been faced with respect to contractor employees in Iraq. In addition, GAO reviewed DLHWC's oversight of the Special Fund in 1999. The program participated in the University of Michigan's American Customer Satisfaction Index (ACSI) Survey in 2002 and 2003. As required by Sec. 42 and 44(j) of the Act, the Department's Office of the Inspector General (OIG) conducts annual financial audits of the Special Fund and also audits the Longshore program's data systems to ensure data security and accuracy.

Evidence: GAO, "Agent Orange: Limited Information is Available on the Number of Civilians Exposed in Vietnam and Their Workers' Compensation Claims," 05-371 (April 2005); "Defense Base Act Insurance: Review Needed of Cost and Implementation Issues," 05-280R (April 29, 2005); and "Internal Controls: Oversight of Longshore Special Fund Needs Improvement," AIMD-00-15 (October 1999), available at www.gao.gov. 2002 and 2004 ACSI survey results (see www.theacsi.org/government/govt-02.html, and www.theacsi.org/government/govt-04.html for government-wide summaries). Notification of FY 2005 and FY 2004 LHWCA and DCCA Special Benefit Funds Annual Financial Statements Audits, LHWCA Special Fund Financial Statements September 30, 2004 and 2003, and U.S. Department of Labor Findings and Recommendations Identified in an Audit of the Report on Performance and Accountability September 30, 2004.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: Like the rest of DOL, OWCP does not yet have an integrated accounting and performance management system to identify the full cost of achieving this program's performance goals and support day-to-day operations. OWCP, in concert with ESA and the Department, has developed rudimentary cost accounting models for its programs that capture output costs by activity and link outputs to outcomes, and continues to work with the Agency and the Department to further refine the models. While the program's budget requests are aligned with the program's strategic and operational goals, they are not based on what is needed to attain specific levels of performance. DOL's Congressional Justifications for the FY 2006 Budget for the Longshore program identifies all Federal benefit costs and direct and indirect administrative resources for program activities.

Evidence:  

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: Recognizing that its long-term GPRA goal was met three years ahead of schedule, the program has revised its FY 2005 target from 268 days (a 6 percent reduction from the baseline) to 245 days (a 14 percent reduction from the baseline, and 1 percent below actual FY 2004 performance). The program will also change the measure to add two additional types of disputes. The baselines and targets for this measure were recently developed (the baseline will be revisited to reflect FY 2005 actual performance). The Department is working to implement a managerial cost accounting system that will tie performance to budget and provide program managers with additional tools for resource management and strategic planning. The Longshore program's rehabilitation program has operated with little modification for a number of years, and now has a number of problems: rehabiliation counselors (who are contract staff) are reimbursed based on their hourly work, rather than their success in placing injured workers; counselors are limited by prescriptive requirements; and there is lax oversight of the counselors on the part of the district offices. To address these issues, the program is planning to launch a performance-based service contract pilot for its rehabilitation counselors and in 2006 will implement a new rehabilitation performance measure that will increase accountability and ensure greater district and national office scrutiny of rehabilitation outcomes. In response to the negative ACSI claimant ratings, the program has revised its printed information, changed the timing of the dissemination of those materials, and the information available on our website. In response to GAO findings, the DLHWC has automated its insurance coverage reports, posted instructions and forms for filing claims on our website, and continued to work with the contracting agencies to ensure that contractors understand their obligations under the Defense Base Act.

Evidence:  

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Although Longshore collects some information from insurers and self-insured employers (e.g., when a claim is accepted and when disputes occur), the Longshore Claims Management System does not track services or outcomes related to claims processing done by self-insured employers and insurers. In addition, some of the data in LCMS are unreliable. The program is seeking to correct these problems through improvements to the LCMS. (See 3.7 for further information.) DHLWC does, however, have mechanisms for monitoring its own performance. Every fiscal year OWCP develops operational plans for each of its programs that establish performance standards for each district office, and throughout the year measures performance against these standards. The Quarterly Review and Assessment reports track workload measures, including the time (in days) for scheduling informal conferences when needed, issuing recommendations from those conferences, and referring claims to the OALJ when necessary. At the beginning of each year the program sets a standard for acceptable performance (e.g., 75% of conferences are held within 45 days of request, 90% of written recommendations are issued within 10 days of conference, 85% of hearing referrals are made within 10 days of request). Using the Quarterly Review and Assessment (QR&A) reports, national office managers hold quarterly meetings to evaluate district office performance and to initiate corrective actions where necessary. In addition, more detailed accountability reviews are conducted at each of the district offices once every two to three years to ensure compliance with program policies and procedures. Progress toward meeting the GPRA goal is tracked monthly and quarterly by district office and corrective action is taken where necessary. DLHWC annually reviews workloads and staffing levels, and shifts resources as needed among district offices.

Evidence: In FY2005, the DLHWC national office increased the New York district office FTE allocation by one Claims Examiner in order to cope with a large number of new Defense Base Act claims. The Jacksonville district office lost one FTE as a result of this re-allocation. Likewise, the New Orleans office gained one FTE at the expense of Norfolk, because of uptrending new cases.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: The Benefits Review Board, Office of Administrative Law Judges, and Solicitor play key roles in processing and resolving Longshore claims. The BRB and OALJ have recently established measures with short-term targets to measure their performance with respect to Longshore cases. In addition, the Longshore program's dispute resolution measure encompasses the Administrative Law Judge's review time, thereby capturing for covered disputes the OALJ's performance in discharging its responsibilities under the program. (See 2.1 for a more detailed discussion of the dispute resolution measure.) The Solicitor has established performance goals that cover its overall performance in providing legal representation. The quality of these goals will be evaluated in a PART assessment of the Solicitor's Office in 2006. DOL ties performance ratings for managers and supervisors to the achievement of Departmental and program-specific goals and outcomes.

Evidence: Revised Performance Management Plans for Senior Executives (Form DL 1-2059, Rev. 10/2001) and for Supervisors and Managers (Form DL 1-382, Rev. 10/2001); briefings by DOL staff; and DOL goals supporting the Human Capital Initiative of the President's Management Agenda.

Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: Salaries and expenses funding is obligated in a timely manner in accordance with OWCP's spending plan. Longshore has not had any Anti-Deficiency Act violations. As discussed in question 1.5, the OCFO has determined that this program is not susceptible to significant erroneous payments. The program has processes to control and minimize erroneous payments. All payments from the Special Fund and security deposits ($144 million in FY 2004) are made by the national office. Each initial payment of compensation from the Special Fund is reviewed by 4 persons (the claims examiner, the workers' compensation specialist, and two branch chiefs) prior to payment; and each subsequent payment is reviewed by 3 persons (the fiscal officer, the claims examiner, and the branch chief) before payment. The national office also mails to all Special Fund recipients forms annually to verify employment status and widow/student status for continuing eligibility for benefits. The district offices ensure that these forms are properly completed and returned. Benefits are suspended for failure to timely respond, and any change of status is immediately reported to the National Office. DHLWC runs a Social Security death match each week, and any Special Fund beneficiary on the list is immediately terminated from the rolls. Periodic reviews are also done based on specifically identified types of entitlement to ensure accuracy of payments. In addition, as part of the annual financial audit of the Special Fund the auditors randomly select and review several hundred files with the accuracy of the payments being the focus of the review.

Evidence: In FY 2004, Longshore lapsed only $9 thousand--significantly less than 1% of its $12.5 million administrative appropriation.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Longshore has proposed a efficiency measure (claims managed per FTE), has developed a baseline and targets for the measure, and will begin reporting performance against this measure in the FY 2007 Budget. DLHWC has also implemented procedures intended to assist employers and carriers in containing costs. Among these is a medical fee schedule intended to be applied to resolve disputes over fees, and review and approval of attorney fees by the district directors. The medical fee schedule improves efficiency by reducing the amount of time required to resolve a claims dispute or preventing disputes altogether. By having legal fees reviewed and approved by the District Director, DLHWC is able to reduce excessive billing, assure adequate remuneration to assure the availability of high-quality legal counsel, and reduce the likelihood of (and costs associated with) formal litigation over legal fees.

Evidence: Proposed efficiency measure baseline is 353 claims per FTE (based on 2004 actuals), and targets are as follows: 359 claims per FTE in 2005, 366 claims per FTE in FY 2006, and 373 claims per FTE in FY 2007. Copy of the medical fee schedule available at: www.dol.gov/esa/regs/feeschedule/accept.htm

Does the program collaborate and coordinate effectively with related programs?

Explanation: DLHWC reaches out to other programs and agencies to address implementation problems and improve program operation. Some recent examples follow. Insurers in the state of Florida have historically charged Longshore employers a surcharge of well over 400 percent of the state workers' compensation premiums for their Longshore coverage. Between 2001 to 2004, the DLHWC worked with the Florida Department of Insurance and a large insurance broker to secure 45 percent decrease in the premium surcharge, saving employers hundreds of thousands of dollars in insurance costs and eliminating what had been a major disincentive for employers to obtain the required insurance coverage for their workers. The DLHWC's conversations with the State of Florida also resulted in an agreement that the State would include Longshore coverage investigations in their efforts to enforce workers' compensation coverage requirements. DLHWC has also worked with the Departments of State and Defense to improve their contractors' compliance with DBA insurance requirements. Shortly after the start of Operation Iraqi Freedom, DLHWC learned that many civilian defense contractors were operating overseas without the proper DBA insurance. In the fall of 2003, DLHWC met with State Department contracting officials to convince them to alter their overseas contracts to provide DBA insurance coverage to all foreign nationals working in countries without local workers' compensation laws. In April 2004, State agreed to change the insurance requirements for its new overseas contracts, and to amend existing contracts where applicable, in line with DLHWC recommendations. These changes were captured in regulations proposed in December 2004. Similar efforts to reach out to the Department of Defense resulted in a memorandum issued by the Office of the Under Secretary of Defense to all Defense Department Agencies on December 8, 2003, emphasizing the requirement for DBA insurance on all DOD overseas service contracts.

Evidence: State Department Proposed Rules, Fed Register Vol. 69, p. 76660, at http://a257.g.akamaitech.net/7/257/2422/06jun20041800/edocket.access.gpo.gov/2004/pdf/04-27990.pdf. Department of Defense memo entitled "Inclusion of Defense Base Act Clause in DoD Overseas Contracts," dated 12/8/03.

Does the program use strong financial management practices?

Explanation: The Longshore and Harbor Workers' Compensation Act (33 U.S.C. 944(j)) requires that the Special Fund be audited annually and that the results of such audit be included in an annual report to Congress. For the past five years, the Longshore Division has received unqualified audit opinions of its Special Fund. However, on April 13, 2004, the OIG issued a management advisory comment based on a FY 2003 audit finding that the oversight, monitoring, and control of DLHWC were informal and based primarily on institutional knowledge by experienced staff. Auditors identified a lack of written instructions for staff on how to accurately adjust or write off transactions for receivables relating to monies owed for assessments and overpayments or reconcile the Fund Balance with Treasury. The OIG noted that these weaknesses create a high risk for discontinuity of major program operations in the event of staff turnover (it was noted that the majority of DLHWC staff is retirement eligible) and increased the possibility of improper or inconsistent accounting. The OIG recommended that DLHWC prepare written manuals. The Longshore program is also reviewed as part of the audit of the Department of Labor's Report on Performance and Accountability. The results of the 2004 audit revealed no material internal control weaknesses, but included one reportable condition pertinent to the Longshore program. Specifically, the FY 2004 auditor's report noted as a reportable condition the lack of sufficient controls over the access to and protection of financial data in a number of Departmental systems, including the Special Fund disbursement system. Annual audits of the Special Fund operation include LS-513 audits. In these audits, conducted by a Certified Public Accounting firm contracted by DLHWC, each of the participating insurers and self-insured employers is reviewed thoroughly for its accurate reporting of paid claims. To minimize erroneous benefit payments the program also conducts ongoing reviews of Special Fund claims against the Social Security Administration's death list and claimant self-reporting of income. The Special Fund has one in-house Auditor, who audits cases for third-party payments and reviews several categories of cases--this review is done regularly, but not frequently.

Evidence: FY 2004 Independent Auditor's report (no. 22-05-004-13-001, dated November 15, 2004), at www.oig.dol.gov/public/reports/oa/2005/22-05-004-13-001.pdf; FY 2004 DOL OIG, "Findings and Recommendations Identified in an Audit of the Report on Performance and Accountability, September 30, 2004" (No. 22-05-001-13-001, dated December 20, 2004), at www.oig.dol.gov/public/reports/oa/2005/22-05-001-13-001.pdf.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: The DLHWC has contracted with SRA International to identify options for improving the Longshore Claims Management System and the costs and benefits of doing so. Having these data will allow the program to track the performance of its regulated partners, identify the total costs and performance of the program, and compare the program's performance to state workers' compensation systems. DOL has also taken steps to protect the Special Fund. Due to the bankruptcies of several major Longshore insurance carriers in the last few years, the program proposed regulations in March of 2004 to strengthen the requirements for insurance carriers to provide security deposits. These deposits cover claims when an insurance carrier defaults or becomes insolvent--costs that would otherwise be borne by the Special Fund. The 2002 ACSI survey found that Longshore's customers perceived information disseminated by the program to be unclear. In response, DLHWC in 2003 made several improvements in form and substance of information it disseminates, including development of a pamphlet entitled "Questions and Answers about Your Benefits from the Special Fund," which is now sent to every new Special Fund beneficiary. To address the auditors' findings (see 3.6), the program has established a written manual to clarify its procedures and added age-related edit checks to its Special Fund system.

Evidence: Longshore Proposed Rules dated 3/15/04, Federal Register, Vol.69, p.12218, at a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/2004/pdf/04-5631.pdf. Pamphlet LS-560 and the Special Fund Q&A are accessible on the Longshore website at www.dol.gov/esa/owcp/dlhwc/LS-560pam.htm and www.dol.gov/esa/owcp/dlhwc/SpecialFundFAQs.htm respectively.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The program established a long-term (FY 2008) target for its current dispute resolution measure as part of the Department's FY 2003-2008 Strategic Plan and surpassed this target in 2004. To make the measure more challenging, the program recently added more types of disputes to the measure and established a new long-term target of a 3 percent reduction from the 2005 baseline by FY 2008. "Large extent" is being given based on the fact that the program exceeded its long-term goal under the old measure. The Benefits Review Board and OALJ only recently established goals to measure their efforts under the Longshore program, so their performance against annual targets cannot yet be judged. However, OALJ's performance (in terms of processing timeliness) is captured within the dispute resolution meeasure.

Evidence: In the first year of measurement under its dispute resolution measure (2003), the program resolved measured disputes in an average of 266 days--6.7 percent below the baseline and significantly better than the targeted 2 percent reduction. In 2004, the program again surpassed its performance target by a significant margin, resolving disputes in an average of 247 days--an 11.6 percent reduction below the baseline, versus the targeted 4 percent reduction and the long-term targeted 8 percent reduction.

Does the program (including program partners) achieve its annual performance goals?

Explanation: In the past two years, the program has surpassed its annual performance targets on its dispute resolution measure by a substantial margin. "Large extent" is being given based on this. The Benefits Review Board and OALJ only recently established goals to measure their efforts under the Longshore program, so their performance against annual targets cannot yet be judged. However, OALJ's performance (in terms of processing timeliness) is captured within the dispute resolution meeasure.

Evidence: In the first year of measurement under its dispute resolution measure (2003), the program resolved measured disputes in an average of 266 days--6.7 percent below the baseline and significantly better than the targeted 2 percent reduction. In 2004, the program again surpassed its performance target by a significant margin, resolving disputes in an average of 247 days--an 11.6 percent reduction below the baseline, versus the targeted 4 percent reduction.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The program has established an efficiency measure (claims managed per full-time-equivalent employee), but has not yet begun reporting on it. However, the program is able to show some efficiency improvements based on its workload and internal processing timeliness (QR&A) targets. From 2003 to 2004, the program handled a 12.36 percent increase in overall new cases with only 2 percent more staff. At the same time, the program reduced the dispute resolution time by 7 percent and either maintained or increased performance slightly (from 1 to 3 percent) in each of its QR&A areas.

Evidence: Proposed efficiency measure baseline is 353 claims per FTE (based on 2004 actuals), and targets are as follows: 359 claims per FTE in 2005, 366 claims per FTE in FY 2006, and 373 claims per FTE in FY 2007. From 2003 to 2004, the number of new cases created increased from 200 per FTE to 220 per FTE (a 10 percent increase); and the number of cases compensated per FTE increased from 146 to 149 (a 2 percent increase). While the program does not intervene in every Longshore case, cases per FTE provides some indication of workload. The program increased by 5 percent the number of rehabilitations achieved, from 220 to 233, and increased by 3 percent the ratio of rehabilitation plan completers returning to work (from 47.29% to 48.74%). Measured on a per-FTE basis, this amounts to 2.18 rehabilitations per FTE in 2003 and 2.26 rehabilitations per FTE in FY 2004--a 3.6 percent increase. In terms of its QR&A targets, the program maintained performance in the percentage of second-injury compensation applications processed within 45 days and percentage of conference recommendations issued within 10 days. The program improved in terms of the percentage of Administrative Law Judge referrals within 10 days (1 percentage points), percentage of conferences held within 45 days (3 percentage points), and the percentage of congressional inquiries answered within 14 days (1 percentage point).

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: No comprehensive evaluations have been done to compare this program's outputs, outcomes, cost-effectiveness, or efficiency with those of other similar programs. The only comparative data available are customer satisfaction surveys, which have shown mixed results. In 2002 the program participated in the University of Michigan's American Customer Satisfaction Index (ACSI), which assesses customer satisfaction with Federal programs. ACSI surveyed 260 of 2500 claimants who had claims disputes in the previous 12 months. The resulting ACSI score of 57 was 13 points lower than the aggregate federal score and slightly (1 percentage point) below the one other program (Veterans Benefits) that surveyed benefit applicants in the same year. In 2004 the program again participated in the ACSI, this time surveying 115 of the 179 employers and insurance companies who had contacted Longshore with insurance-related questions. The score of 70 was two percentage points below the government-wide ASCI score, but 2 to 3 percentage points higher than the two other regulatory programs being measured in the same year. As noted in 2.6, the program has initiated a study to improve Longshore's claims management system. If such improvements are made, they would facilitate comparative evaluations.

Evidence: 2002 and 2004 ACSI survey results, at www.theacsi.org/government/govt-02.html, www.theacsi.org/government/govt-04.html.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: No comprehensive evaluations have been done of this program's outputs, outcomes, cost-effectiveness, or efficiency. GAO has never assessed the Longshore program as a whole, but has done reviews of the Defense Base Act and DOL oversight of the Special Fund. GAO's reviews recommended specific management changes but did not assess whether the program was effective or achieving results. In a 1999 report on Special Fund oversight, GAO noted that: DOL had established internal controls to prevent inappropriate cases from being referred to the Special Fund and that data used as the basis for calculating the annual Special Fund assessment are self-reported and potentially inaccurate, and that cases where recients' former employers became insolvent were not appropriately monitored. In a 2005 report on the Defense Base Act implementation, GAO identified confusion among contractors and others about when DBA applies, and noted specific administrative difficulties with respect to handling claims from contractors working in Iraq. In a 2005 report on Agent Orange claims (which examined claims under numerous programs including the Defense Base Act), GAO noted claimant difficulties in filing claims, due largely to inability to locate the employer or insurance carrier, and the difficulty of identifying Agent Orange claims in the claims management system.

Evidence: GAO, "Agent Orange: Limited Information is Available on the Number of Civilians Exposed in Vietnam and Their Workers' Compensation Claims," 05-371 (April 2005); "Defense Base Act Insurance: Review Needed of Cost and Implementation Issues," 05-280R (April 29, 2005); and "Internal Controls: Oversight of Longshore Special Fund Needs Improvement," AIMD-00-15 (October 1999), available at www.gao.gov.