Step-downs reduce workers compensation payments to encourage return to work. Are they effective?

ObjectiveTo determine whether step-downs, which cut the rate of compensation paid to injured workers after they have been on benefits for several months, are effective as a return to work incentive. MethodsWe aggregated administrative claims data from seven Australian workers compensation systems to calculate weekly scheme exit rates, a proxy for return to work. Jurisdictions were further subdivided into four injury subgroups: fractures, musculoskeletal, mental health, and other trauma. The effect of step-downs on scheme exit was tested using a regression discontinuity design. Results were pooled into meta-analyses to calculate combined effects and the proportion of variance attributable to heterogeneity. ResultsThe combined effect of step-downs was a 0.86 percentage point (95% CI -1.45 to -0.27) reduction in the exit rate, with significant heterogeneity between jurisdictions (I2 = 68%, p = .003). Neither timing nor magnitude of step-downs was a significant moderator of effects. Within injury subgroups, only fractures had a significant combined effect (-0.84, 95% CI -1.61 to -0.07). Sensitivity analysis indicated potential effects within mental health and musculoskeletal conditions as well. ConclusionsThe results suggest some workers compensation recipients anticipate step-downs and exit the system early to avoid the reduction in income. However, the effects were small and suggest step-downs have marginal practical significance. We conclude that step-downs are generally ineffective as a return to work policy initiative. Key messages1. 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. 2. 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. 3. 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.