Report Reveals Problems with Four Federal Compensation Programs; Highlights Flaws in Asbestos Trust

Consulting Firm Projects $300 Billion Needed for Asbestos Trust

WASHINGTON, DC - December 23, 2005 - A recent government report studied four federal compensation programs for insight into the asbestos trust fund proposed by S. 852. The study looked at financing, costs, administration, benefits and claims for the following programs, which were designed to help individuals exposed to toxic substances:

  • Black Lung Program
  • Vaccine Injury Compensation Program (VICP)
  • Radiation Exposure Compensation Program (RECP)
  • Energy Employees Occupational Illness Compensation Program (EEOICP)

Overall, the federal role in the programs expanded over time and costs increased, according to the report's author, the Government Accountability Office (GAO). Some programs provided new benefits; others were extended longer than planned.

The number of claims and total benefits paid for the Black Lung Program and the RECP greatly exceeded the initial estimates. For example, when it was first established in 1969, the Black Lung Program was supposed to pay out $3 billion in benefits over its lifetime. By 1976, the actual benefits paid were $4.5 billion, and by fiscal year 2004, $41 billion. EEOICP benefits were fairly close to the original estimates, but these costs are expected to rise significantly in the future.

It took up to two years for some programs to be established. All four programs and the agencies responsible for processing claims have taken years to finalize some claims. Therefore, many otherwise eligible claimants did not receive compensation for a very long time.

Why the Asbestos Trust Fund Is Inadequate

The fate of the four programs casts doubt on the efficiency and effectiveness of the $140 billion asbestos trust proposed to compensate asbestos victims. As the GAO puts it: "Policymakers must carefully consider the cost and precedent-setting implications of establishing any new federal compensation programs, particularly in light of the current federal debt."

Prior studies have also suggested that the asbestos trust fund would run out of money before all those suffering from asbestos disease could be compensated:

  • An economic consulting firm, Bates-White, estimated that $300 billion would be needed to satisfy asbestos claims, resulting in a shortfall that would force the trust fund to go bankrupt within three years of its creation. See Asbestos Trust Fund Would Go Broke, New Study Says.
  • The Congressional Budget Office predicted that expenses would exceed revenues during the first decade of the trust fund's existence. The fund would need to pay interest and borrow money, increasing the probability of bankruptcy. (Congressional Budget Office Cost Estimate, August 25, 2005).

S. 852 has additional flaws. The bill's criteria for classifying asbestos disease types are unfair, inaccurate, and not in tune with modern medical standards. Asbestos victims would be forced to meet these unfair standards in order to receive compensation, losing their rights to a jury trial.

Many see the asbestos bill as little more than a bail-out for asbestos companies at the expense of asbestos victims and their families. "The issue is that the adequate compensation of victims who have been poisoned by asbestos through no fault of their own should come first," comments Carlton Carl, a spokesman for the Association of Trial Lawyers of America (Anniston Star, October 30, 2005). "This should be the guiding principle in the discussion, not, as unfortunately some members of Congress have done, putting the willingness of certain asbestos companies and their insurers first."

The Future of S. 852

S. 852 cleared the Senate Judiciary Committee last May by a narrow margin. Sens. Bill Frist (R-TN) and Arlen Specter (R-PA) have pledged to bring the bill to the Senate floor early next year. It faces opposition from Democrats, who believe it shortchanges asbestos victims, and from some Republicans, who object to the funding requirements.

Obtaining the GAO Report

See the GAO web site if you would like to read the full text of the report on the four federal compensation programs and consider its implications for the asbestos trust fund.