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January 31, 2003
CA Benefits Agency Wastes Millions
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investigation by the San Francisco Chronicle reveals that California's state-run insurance program for pregnant women and injured workers wastes tens of millions of dollars a year.

The number of paperwork and computer mistakes by the State Disability Insurance (SDI) program is skyrocketing, leaving some people cheated out of benefits and others overpaid, according to the Chronicle. A convoluted claims system invites further abuse, the newspaper says.

The news is even more troubling because it comes as SDI prepares for a demanding new job: managing California's paid family-leave law. That program, scheduled to begin July 2004, will allow employees paid time off to care for sick relatives, spouses or domestic partners, or to bond with a new baby.

Currently, SDI helps pregnant women who must take time off work, the injured, and those struggling with mental illness or drug and alcohol addictions. They can get up to $602 a week to compensate for lost wages.

The Chronicle reports the following, based on internal department audits it obtained and interviews with SDI employees:

- From 1999 to 2001, the program overpaid between $124 million and $200.7 million to "injured" people who may not have deserved the money.

- As much as $191.9 million in benefits were denied or delayed because of departmental processing errors. Employees made errors on nearly 40 percent of all claims they processed, up from 12 percent in 1997.

- The program routinely wastes money because two state-run insurance programs -- SDI and the workers' compensation system - fight over returning erroneous payments. Since 1998, more than $530 million has been returned to SDI from workers' compensation because of this problem, with an unknown amount left behind in the process.

SDI officials tell the Chronicle that they've recently instituted reforms to deal with the steep spike in errors. But they say the actual loss to taxpayers is only about 3 percent of the $2.7 billion in benefits paid in 2001 alone and contend the audits themselves wildly exaggerate the problems.

"These audits look very scary, but they're not," says Deputy Director LaVera Gaston, adding later: "I'm very concerned about the errors, and we're taking every step possible to reduce them and eliminate them."

Yet some unionized SDI employees complain that they've been overloaded with work and that management is ignoring their concerns. They blame the errors on a rushed training program and the additional workload.

"It's not a very happy place," says James Soto, a claims examiner with the department's Santa Ana field office. "The workload here in my office is way out of hand. We have far more work than we can humanly get done in an eight- hour day."

Officials acknowledge that employees are doing more work as the department balances out the workload among field offices. Gaston says some employees who "were sitting back all day with nothing much to do" must now process a dozen or more SDI applications daily, rather than the average of four or five.

"It's those people who are complaining the loudest," Gaston says. "We are saying, 'We can't tolerate this anymore. It's a new administration, and you have to start producing at a higher level.'"


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