Using conservative measures, such as physical therapy, is best for work-related injuries, says Aviles, and even short-term use of narcotic painkillers should be avoided, if possible.

The misperception of what's draining workers' compensation may not be easy to change."> Readers polled by Claims Journal, an insurance industry publication, ranked employee fraud "the costliest fraud in workers' compensation." By all other accounts, employer fraud costs more by skewing bid competition and driving up rates. To combat employer fraud, states have tailored legislation to discourage companies from misclassifying workers, going without required compensation insurance or engaging in check-cashing schemes that defraud insurance carriers.

Direct employer fraud is common, say insurers and law enforcement agencies. Employers even cheat in Texas, which allows them to opt out of the state workers' compensation system. Under one possible scheme, says Grace Nicholas, Texas Mutual Insurance premium and health-care fraud supervisor, a contractor with the appropriate coverage to bid successfully will subcontract the labor to its own captive, uninsured subsidiary.

"We've found when we go out and talk to these policyholders [that] they know how to answer these questions" to avoid suspicion, she says. "And then, when we look at the financials or when we get a claim filed, we get to the truth. So we've learned over the years to not necessarily take the insured's word for whether or not these subcontractors meet the test. ... It's a difficult balance because you're investigating your customers," she adds.

Last year, Texas Mutual confirmed 196 employee fraud cases among its claimants, with an estimated $523,451 total value. The company discovered $2.7 million in premium fraud last year, a major decrease from the $3.7 million discovered in 2010 but still five times as much as the value of the worker fraud.

Florida is another front in the employer fraud contest. ">In July 2012, Florida apprehended eight individuals and shut down 12 shell companies allegedly involved in a scheme in which the shell companies would acquire workers' compensation coverage and then rent the certificates to subcontractors, sometimes through check-cashing stores. According to state press releases, the alleged ringleader is accused of running a construction business without paying any workers' compensation premiums. In the release, Florida Chief Financial Officer Jeff Atwater says these schemes divert "nearly $1 billion from Florida's economy annually." Capt. Vance Akins, a member of Florida's Bureau of Workers' Compensation Fraud, says, "I've had contractors say 'I just can't do it anymore—I have to cheat to compete.' "

Painkillers and Drugs

A decade ago, physicians lobbied for a freer hand in prescribing narcotics. Very quickly, addictions led to overdoses and fatalities. Washington state's Franklin recalls, "It had been only two or three years since doctors—who had worked hard to liberalize the policies—finally got everybody to start using way more narcotics. So they were shocked to see that, all of a sudden, people might be dying. They didn't want to hear it."

Since 1990, medical use of opioids has increased tenfold. A 2010 study in the Annals of Internal Science states that, at the time, more than 3% of adults in the U.S. were receiving long-term opioid therapy for chronic, non-cancer-related pain. According to the Centers for Disease Control and Prevention, opioids were involved in more deaths by overdose in 2007 than heroin and cocaine combined.

Narcotic prescriptions also are associated with enormous cost increases in medical benefits and indemnity payments to workers' compensation systems that cover them.

A 2012 study by the National Council of Compensation Insurers indicates that narcotic costs per claim have risen more than 50% from 2001 to 2009. Research by CorVel says workers' compensation payers spent an estimated $1.4 billion on narcotics in 2012. Benefits paid through 2012 also show that claims with one narcotic prescription result in 41.8% higher medical payments and 25% higher indemnity payments than claims without a narcotic prescription. The Workers' Compensation Research Institute's study of 17 states showing that New York state leads in the number of pills prescribed also reveals that a worker in the Empire State received, on average, the equivalent of 4,000 milligrams of morphine per claim, while the other 16 states studied received 1,792 milligrams.

According to the same study, safeguards to prevent abuse of narcotics and opioids were rarely implemented among the 17 states, which represent 60% of all workers' compensation benefits paid in the country. Louisiana had the highest frequency of urine drug screenings to ensure safe use of the narcotics, occurring in only 21% of cases.

Most research indicates that opioid prescriptions lengthen the period of time that workers' compensation claimants spend away from work. Research from the Texas Dept. of Insurance found that workers who received an opioid prescription during their claim spent an average of 43 days away from work, as opposed to 28 days away for other claimants.

"If you have an injured worker who is taking high dosages of opioid pain medications, you can't bring them back to work operating heavy machinery or working on elevations," says Marsh's Wall.

Washington has done more than any other state to control and limit opioid prescription painkillers, ending direct dispensing by physicians in 2008. The state now requires doctors to do a medical history review and write a thorough treatment plan before prescribing narcotics. Franklin says that opioids shouldn't be used for routine sprains and strains, and patients should "have very clear instructions as to when they should and shouldn't use them."

To keep people from doctor-shopping for more pills, many states collect prescription-drug data on who has been given drugs. Missouri, notably, is the only state without legislation establishing a prescription-drug monitoring program. Sooner or later, all states will learn that widespread use of prescription painkillers is too costly in too many ways to ignore.