Poisoned chalice: Does compensation worsen injury?

One of the more intriguing notions about workers’ compensation is that the compensation process itself may exacerbate or be an independent source of injury. In this idea, we see a broadening of the discussion about why some injured workers have a bad outcome—a discussion presently dominated by accusations of moral hazard and malingering. In Canada, Katherine Lippel’s work in this area is particularly notable.

The Melbourne University Law Review published “Poisoned chalice? A critical analysis of the evidence linking personal injury compensation processes with adverse health outcomes”. This article examines the research into the questions of whether those receiving injury compensation recover more slowly and have worse long-term health outcomes than those not receive such benefits.

While there is significant evidence that suggests a negative correlation between health outcomes and compensation (i.e., those who are compensated do worse), the authors highlight a number of methodological weaknesses in typical approaches to this issue. These weaknesses do not necessarily refute the idea of a negative correlation but they do suggest the power of the correlation may be overstated and that important question of why this dynamic occurs is unclear.

-- Bob Barnetson