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Correspondence to Dr Tyler J Lane, School of Public Health and Preventive Medicine, Monash University, Melbourne, VIC 3004, Australia; [email protected]
Key messages
What is already known about this subject?
A number of workers’ compensation systems around the world reduce payments to injured workers after they have been in the system for several months. In Australia, where each state, territory and Commonwealth system employs step-downs, the stated policy objective is to increase the rate of return to work through financial incentives. However, there is little empirical evidence to either support or reject this claim.
What are the new findings?
The rate at which claimants exited workers’ compensation systems increased ahead of step-downs taking effect, suggesting an anticipatory effect. However, the effect was relatively small, changing the exit rate by less than a percentage point overall, with substantial heterogeneity between systems.
How might this impact on policy or clinical practice in the foreseeable future?
While statistically significant, the findings suggest that step-downs provide workers’ compensation claimants little incentive to return to work. Policymakers may need to reconsider step-downs as a component of scheme design or justify them according to their original purpose, which was to save costs.
Introduction
Step-downs reduce the rate of income replacement paid to injured workers after they have been on benefits for a period of several months. They are found in a number of workers’ compensation systems around the world, including several in Europe (Andorra, Croatia, Slovakia and Sweden), Africa (Ethiopia, Republic of Congo, São Tomé and Príncipe and Zimbabwe), Asia (Indonesia, Laos, Singapore and Taiwan), Central America (Belize and Panama), the Middle East (Kuwait, Oman and Qatar), South America (Ecuador)1 and one American state (Ohio).2 Unique among these is Australia, where each of its nine major workers’ compensation systems implements step-downs.3
Step-downs are promoted as an incentive for claimants to return to work.4–6 However, there is little direct empirical evidence to support this claim7 8 and that which exists is generally inconclusive.6 9 It also contrasts with the original purpose of step-downs when introduced across Australia in the 1980s and 1990s, which was to reign in the rising cost of employers’ insurance premiums.7 Nevertheless, evidence that more generous benefits increase time off work indicates...