The medical component of workers' compensation programs-now costing over $24 billion annually-and the rest of the nation's medical care system are linked. They share the same patients and providers. They provide similar benefits and services. And they struggle over who should pay for what. Clearly, health care reform and restructuring will have a major impact on the operation and expenditures of the workers' compensation system. For a brief period, during the 1994 national health care reform debate, these two systems were part of the same federal policy development and legislative process. With comprehensive health care reform no longer on the horizon, states now are tackling both workers' compensation and medical system reforms on their own. This paper reviews the major issues federal and state policy makers face as they consider reforms affecting the relationship between workers' compensation and traditional health insurance. What is the relationship of the workers' compensation cost crisis to that in general health care? What strategies are being considered by states involved in reforming the medical component of workers compensation? What are the major policy implications of these strategies?