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Now that the oldest baby boomers are in their 50s, employers should brace for an explosion in non-occupational disability costs.

Non-occupational disabilities usually are treated more conservatively than those filed under the workers compensation system. If that conservative treatment delays recovery, the result is higher medical costs for employers and longer lost work time, experts point out.

While so-called integrated disability management has been touted as the panacea for escalating disability costs, such programs will be worthless unless they apply an aggressive return-to-work strategy to all types of disability, disability experts say.

"As this huge generation starts rolling into old age, we're not going to be able to retire," observed Richard K. Pimentel, senior partner of Milt Wright & Associates Inc., a Chatsworth, Calif.-based organizational design, training and development company.

Regular retirement at age 65 won't be possible for many baby boomers, he says, because they are part of the "sandwich generation," supporting their parents at the same time they are paying expenses for the children they postponed.

"Medical retirement," whether in short stints or for the years remaining in a career, "will start looking real good to them," he predicts. "And they won't be faking it; they're going to get something."

Because a 60-year-old has lost much of his or her "physiological reserve," it takes longer to recover from an illness or injury than it does for a 30-year-old, Mr. Pimentel pointed out.

According to the National Assn. of Life Underwriters, three out of 10 working people will become disabled for 90 days or longer between ages 35 and 65, and nearly one in five people will become disabled for five years or more prior to age 65.

Furthermore, the causes of disability have expanded since 1990, according to the UNUM Disability Database published by UNUM Life Insurance Co. of America in Portland, Maine. They now include:

*Epstein-Barr Syndrome, for which claims are up 800% between 1990 and 1997.

*Carpal tunnel syndrome, up 250%.

*AIDS, up 169%.

*Back disorders, up 120%.

*Psychiatric disorders, up 85%.

The database includes information on disability claims from 25 employers with an aggregate payroll of $9.3 billion and 250,000 workers.

According to the UNUM Disability Database, employers now spend an average of 8.3% of total payroll, or $2,717 per employee, on disability-related costs.

Breaking down that 8.3%, 4.03% of this amount is for "direct" costs, such as paid sick leave, short-term disability benefits, LTD benefits and workers compensation disability benefits, and 3.08% represents "hidden costs," such as those associated with replacing injured workers. A scant 1.2% of total disability-related costs goes toward disability management.

But experts warn that more resources should be directed toward management, because these non-occupational disability costs are going to rise significantly due to changing demographics and other reasons.

With the number of working women increasing -- women now make up nearly half of the labor force -- and their tendency to bear children later in life, pregnancy-related disability costs also are likely to rise, predicts Jack Bredehorn, president and chief executive officer of Voluntary Plans of America Inc., a disability claims administrator based in Calabasas, Calif.

He also predicts that government will shift even more disability-related costs to employers to pay for legislation aimed at protecting people with disabilities.

For example, even though leave under the Family and Medical Leave Act is unpaid, Mr. Bredehorn thinks Congress eventually will amend the law to require some employer-provided compensation, because "people can't afford to take it."

The U.S. health system will have to change to control these demographically triggered disability costs, experts say.

"What we're talking about is revamping the whole health care delivery system. It's basically taking the techniques we've used for many years in workers compensation and applying them to non-occupational injuries," said Debby Kweller, division president of Keenan Associates/Innovative Care Systems Inc. in Torrance, Calif. Keenan/ICS, a third-party claims administrator, is partnering with Milt Wright & Associates to develop and implement integrated disability management programs for employers.

"What managed care is focused on is conservative care," said Mr. Bredehorn. "It doesn't encourage them to get well fast."

He used as an example his own experience in seeking treatment for a knee injury.

"I went to the doctor and told him I hurt my knee, and he prescribed some anti-inflammatories," Mr. Bredehorn recounted. "He told me to take them and stay off my leg for a week."

But when he returned for a follow-up visit with no improvement, the doctor was hesitant to order further tests or to recommend a more aggressive treatment strategy.

"I asked for an MRI, and it showed the cartilage had been torn. I had arthroscopic surgery, and I was back on my leg in about two days," Mr. Bredehorn recalled.

But he contends if he hadn't insisted on the MRI, "I would have been out for months."

Mr. Bredehorn said if his injury had occurred within the workers comp system, which also pays lost wages, he would have likely had the MRI immediately.

"The speed of recovery is very important in the workers compensation system, but not in health care," Ms. Kweller noted. "But why should the source of ailment dictate the type of care?"

The focus of medical treatment should be on getting people back to a healthy, productive state, regardless of the origin of injury, she said.

Because employers will begin to realize this and force managed care providers to be more aggressive, Mr. Pimentel said managed care as we know it today "will be a memory 10 years from now."

Managed care plans disagree.

"Our evidence says just the opposite," said David Olsen, vp-investor relations for Foundation Health Systems Inc.

"It was the advent of managed care techniques in California that led to the reduction in workers compensation medical expenses that led to the state's going to open rating," he said, referring to the 1996 repeal of the state's minimum rate law.

He estimates the application of managed care techniques has dropped the cost of workers compensation medical care between 20% and 40%.

Through integrated disability management, employers are already forcing managed care providers to develop return-to-work programs similar to those in place in workers compensation, Ms. Kweller points out.

Richard Lord, director of benefits for Community Health System in Fresno, Calif., is looking into expanding its work comp early intervention program to include non-occupational disability claims. "We implemented a very successful early intervention program in 1991 on the occupational side, and it has substantially reduced our costs. And now that we've gotten control on the work comp side, we see that the cost of providing care.*.*.on the non-occ side.*.*.is far greater than on the occupational side," he said.

"Our goal is not to have people off work at all."

"There just doesn't seem to be the oversight and the interaction with the actual employee that's out" for a non-workers compensation injury, agreed Nancy Pelissier, manager of workers comp/disability programs at the University of Southern California in Los Angeles.

USC is implementing an integrated disability management program with an emphasis on early return to work.

Ms. Kweller noted that "discounts on treatment are worthless if it takes longer to get well," he said. "It's not medical cost that's the issue, it's disability value."

For example, an MRI that costs $400 less under managed care will cost more if it takes three weeks to schedule the test, he said.

"How much are your disability costs over three weeks? More than $400?" he asked.

"If you focus on the right things and take speed of recovery into consideration, then costs will go down," Ms. Kweller said.

But if employers continue to focus more on medical cost-cutting than on speed of recovery, "five years from now your LTD costs will equal your work comp expenses," Mr. Pimentel predicts.

And, "10 years from now LTD will outpace work comp expenses," especially when the costs of psychological-related disabilities are added in, he said.

Today, psychiatric disorders cause nearly half of all long-term disability claims, according to the NALU.

Mr. Pimentel predicts these types of claims are certain to rise as a result of litigation over the Americans with Disabilities Act, which requires that employers treat physical and mental disabilities equally.

Employers already have a major absenteeism and health problem related to depression, he pointed out. The most prescribed drug covered by group health plans in America is Prozac, an antidepressant, according to Mr. Pimentel.