CA AB 1168 - Creating Complexity Unnecessarily

Reported in WorkCompCentral News this morning was the forward legislative movement of California bill AB 1168 that seeks to add a new section to the California Labor Code, 5307.7, requiring the Division of Workers' Compensation to adopt by Jan. 1, 2013, a fee schedule that establishes the maximum fees paid for services provided by voc-rehab experts.

The need for this new regulatory environment, proponents say, is due to increasing costs necessitated by the Workers' Compensation Appeals Board's 2009 decision in Ogilvie v. City and County of San Francisco, that held parties can rebut the diminished future earnings capacity portion of the 2005 Permanent Disability Rating Schedule (PDRS) and provided a formula to do so. This requires expert testimony on both sides to either rebut the PDRS or rebut opposing expert testimony.

Testimony at Wednesday's hearing at the Senate Labor and Industrial Relations Committee was that there is an increasing number of bills from vocational experts after the Ogilvie decision and the bills have no limits on the hours worked or rates charged and that almost every other service in the workers' compensation system has a fee schedule, consequently a similar one is needed for voc-rehab.

Obviously vocational rehabilitation vendors object to this regulatory environment because no one likes what they can charge for service to be the subject of an artificial environment, and because vocational experts would then need to file liens to protect their reimbursement, then need to litigate to justify reimbursement, adding delay and costs to claims.

This situation is an example of how the simple concept of workers' compensation escalates to a mind-numbingly complex system and why I oppose AB 1168.

The interests in the contest have at their disposal powerful tools to control the costs in an Ogilvie dispute - market forces. In workers' compensation we seem to have lost the ability to utilize the price of services against competitors in order to control costs.

In particular, this is disturbing because those with the greatest ability to exert market control over costs - the insurance industry with its significant financial clout - do not seem willing to take responsibility for their part of the problem.

And vocational rehabilitation experts likewise have blame in the game for getting out of control with the amount of services allegedly provided, or the billing rate for those services, to prove or disprove an Ogilvie situation.

When I was a defense attorney the insurance industry was adept at controlling defense costs by simply using the competitive environment of shifting case loads to professionals who were more efficient with their time and billing practices. I assume that is still the case today, though most payers also utilize bill review services to determine appropriate pay rates.

So it is with Ogilvie experts - adding another layer of complexity to the system will not control costs and in fact likely will escalate costs. This concept has already been demonstrated with medical treatment utilization review - the abdication of responsibility for controlling costs away from the claims adjuster and onto either a third party vendor or a non-thinking schedule creates another layer of friction and removes control for getting a case closed away from the adjuster.

The biggest cost to employers is NOT the final cost of the claim, but how long that claim remains open! The need to finalize vendor billings by artificial means will provoke the duration of claims, which means the employer loses in the long run.

And, I might note, this bill may not even be necessary. Traditional vocational rehabilitation services were eliminated from the California workers' compensation system in 2004 and the 1st District Court of Appeal, which granted a writ of review in Ogilvie in August 2010 and has oral arguments June 22, may reverse the Workers' Compensation Appeals Board.

AB 1168 is unnecessary and will exacerbate costs.

Electronic Records - Convenience and Risk

Electronic records have a unique quality that is both positive and negative simultaneously.

In exchange for the convenience of electronic record portability we have accepted some risk that information is now also more easily accessed by those not authorized to have such information.

Two recent stories in the WorkCompCentral news demonstrate that while the move to electronic records can provide new efficiencies in the access of vital information, it is also easier for sensitive information to be obtained by others, sometimes negligently, sometimes maliciously.

But the issue is not that other people can access the information - your sensitive medical or workers' compensation case information has always been accessible to people you have no idea are viewing it or desire to have view it.

Paper records are notoriously insecure. Paper files need to be moved, need to be copied, mailed, opened on the recipient side, refiled, etc. In that process a dozen people have access to your information and may view it. And may use that information maliciously.

The real issue is the ease by which sensitive information may be obtained in large quantities, then analyzed and/or utilized for malicious purposes.

While media reports focus attention on companies and agencies that experience security breaches by "hackers" the single biggest risk of any enterprise dealing with sensitive data are its own employees - people whose job it is to handle that sensitive data and may inadvertently leave a computer open to access when away from the desk, losing a lap top, copying files, publishing by accident login information, etc.

This problem will only become more acute as more and more of our lives are communicated by ones and zeroes.

For every convenience modern man invents, there are always tradeoffs of inconvenience. This is a long standing common law principle - all risk is weighed against the benefit to society: motor vehicle operations, mining, construction, publishing, free speech, etc.

And so it is with electronic records - the great benefit to society of ease of access to information - is to be weighed against the risk of such ease of access.

So it is becoming less and less alarming with each media report of an electronics record security breach ... until such an event affects you personally.

The lesson? First, disavow the notion that there is privacy. There isn't. The best one can do is to limit the amount of private information that is made available.

Second, with the Federal Government push towards Electronic Health Records for each and every person in the United States by 2014, it is incumbent upon each person to do the best they can to protect their own personal information, but don't be surprised when someone else has that information.

And when someone maliciously uses that information be prepared to endure the long, arduous process of taking the necessary steps to prevent the abuse from spreading.

TX Case Demonstrates Risk of AOE/COE Denial

Because workers' compensation is a product of legislative enactment, as opposed to being tied to common law, its provisions tend to be very specific, and when the work comp statutes don't apply then the theories of common law negligence may be applicable to the detriment of the employer.

So it is in Texas, as reported this morning in WorkCompCentral News (Comp Denial Did Not Preclude Widow from Filing Negligence Suit: Top [2011-06-28]).

In Barnes v. UPS, the 1st District Court of Appeals ruled that a workers' compensation hearing officer's denial of Barnes' workers' compensation claim did not preclude Barnes' widow from filing a wrongful death suit for gross negligence.

Barnes had a heart condition that his employer was aware of. After a coronary event Barnes was placed on light duty in a warehouse that, Barnes' widow alleged, was inadequately ventilated or cooled, thereby causing or contributing to Barnes' heart attack.

The workers' compensation death claim filed by Barnes' widow was denied because Barnes' death did not meet the statutory heart attack requirements for AOE/COE.

In upholding the wrongful death civil case against the employer's summary judgment on res judicata and collateral estoppel grounds, the 1st DCA noted that there are different legal and factual standards in the workers' compensation forum versus the civil forum.

While the facts of this case are unique, the important lesson to learn is that, in business as in life, there is balance. 

Many current attacks on state workers' compensation systems seek to limit liability or restrict access to benefits by narrowly defining the grounds for compensability.

The risk in doing so is to create civil liability.

Workers' compensation is nothing more than a risk management tool - the employer's risk of civil liability is managed by providing coverage regardless of fault, and the employee's risk of financial destitution is managed by receipt of some financial assistance and medical coverage.

Risk management fails when neither goal is achieved.

So I ask those who pay the premium and seek "reform" to trim their bills, is it better to deny and risk civil liability, or provide coverage and spread the risk of civil expense and judgment to a defined benefit plan (i.e. workers' compensation)?

In the ongoing debate of state workers' compensation reforms, these questions should always be in the foreground through out the legislative debate process.

Debate on Access to Care Lacks Validation

Access to medical care (or impairment thereof) is often cited when a state imposes either regulations (California change to RBRVS) or statutes (Illinois' most recent "reform") that either restrict or cut medical fees.

But does this really happen?

I ask this because this morning in our WorkCompCentral News correspondent Peter Mantius asked participants affected by the recent Illinois "reform" whether this effort went far enough. The medical community proclaimed that there would be a mass exodus of physicians from workers' compensation because of new fee schedule and treatment restrictions. The business community said there wasn't enough "reform".

But the drum beat of the medical community in response to restrictions put on either the practice of medicine (e.g. guidelines) or billing that physicians are going to go elsewhere for their business lacks scientific validation.

In other words, I have not seen one study in any state following the restriction of fees or procedures that documents that there is a corresponding failure in the delivery of treatment to injured workers (and if there are studies please send them to me!).

This drum beating is no different than employer drum beating that failure to control workers' compensation costs will ship business to other states. The truth is that this statement has never been validated and in fact the evidence is contrary.

For example, though California business proclaimed that business, and ergo jobs, were fleeing the state like  a forest of animals running from a fire, the statistics reflect just the opposite - prior to the workers' compensation "crisis" business in California continued to expand at an accelerated rate. It wasn't until after workers' compensation reform in 2004 that there was a decline in business expansion.

The above graph was generated when typing "business expansion california history" into Google - and the data is supported by reference to various historical documents and periodicals. If you were to believe the logic of the drum beating pundits, workers' compensation reform in California in fact was responsible for an exodus of business, not the opposite!

We know that in reality it's the old Bill Clinton cliche - "It's the economy, stupid!"

It's NOT workers' compensation that affects whether a business stays or goes - especially when one considers the reality that overall, nationally, workers' compensation represents only 1.4% of total payroll costs. What causes business exodus are economic factors well beyond the impact of work comp.

And just the same with the medical equation. There is nothing statistically that I have seen, or argued, that would suggest that access to medical care would be restricted when fee schedules are in place or when treatment guidelines are enforced.

What DOES happen is that surgical specialists see a decline in business while general practitioners, those first line of care physicians, see an increase. And frankly this is good, because there is too much surgery going on out there that is not medically warranted - reference all of the various studies throughout the years that cite the devastating effects of unnecessary back surgery (Melhorn, Talmadge, Barth, amongst may others etc.).

In the meantime Illinois continues to debate the efficacy of its "reform" with the business community stating it did not go far enough and the medical community stating it went too far. I was taught in law school that if both sides are unhappy with a bargain it's probably a good deal. Ergo Illinois - business and medicine, stop complaining and get back to work just like you want your injured workers to do!

AB 228 is Good for California Small Business

One of the big debates ongoing during this California legislative season is whether to grant The State Fund (aka SCIF) an exemption to partner with other carriers to provide coverage to out of state workers whose employer is primarily California based.

The bill being debated is AB 228.

The business logic behind AB 228 is that SCIF would not see licensure in other states, but would partner with other carriers to provide coverage. SCIF would "front" the policy - meaning the employer would pay only one bill. Presumably SCIF would find the best financial alternative for the employer to cover the out of state employees.

Many in the insurance industry are opposed to this bill believing that SCIF's tax-exempt status gives it an unfair competitive advantage and that SCIF would thus take business away from the private market.

This is a ludicrous analysis, and one that has not stood the test of history.

In fact, recent history suggests just the opposite - if it were not for SCIF the California workers' compensation market would be in complete disarray.

Presently SCIF writes under 20% of the market. This is the segment of the market that the private carriers don't want to touch - generally small businesses, with very little payroll, ergo premium generation.

During the tough early 2000's, SCIF had to cover over half of the market. Why? Because private carriers bailed as insolvencies rose and those that were left were too scared to handle the risk. Insurance lobbyists were successful in bringing about the 2004 historic "reform" and as a consequence the private carriers saw good business opportunity and relieved SCIF of the burden of covering the market.

There is nothing in this history that suggests that SCIF would engage in predatory practices to expand its reach. In fact just the opposite - SCIF has routinely demonstrated that it has no appetite for taking market share on a competitive basis.

If we use WorkCompCentral as an example, we have employees in both California and Texas. We used to be covered by SCIF in California, and had to obtain a separate policy from Travelers for our Texas employees.

Farmers came in and gave us a more competitive quote for the California employees so we switched. SCIF did not put up a fight - there was no competitive bidding. We still have Travelers for Texas.

Yes, its a pain to pay two different carriers for the separate policies, and its a pain when they confuse our payroll reporting, but its workable.

However, I can not imagine having more than one other state to worry about as a small business. Dealing with more than two carriers because I happen to have an employee in Arizona, an employee in Nevada, one in New York, and a couple in Texas, would be unworkable. We're just too small for that kind of silliness.

If I had a single source for dealing with our workers' compensation obligations that benefits me, a California business. If it benefits the California business, then its good for California - the private market be damned!

George Miller, State Fund's lobbyist, told the Assembly Insurance Committee yesterday that, "On a competitive advantage that our tax status confers upon us, it's conferred such a great competitive advantage that we've gone from 56% of market to 16% of market. It hasn't really worked to our advantage there, that I can see."

Indeed - the private carrier lobby should be more concerned with providing quality service than worrying whether SCIF will compete with them out of state. That's where the competitive advantage is.

Illinois' Flirtation with ADR a Positive Step

The Illinois reform bill pending signature before Governor Quinn provides for a pilot program of "carve out" alternative dispute resolution (ADR) for workers' compensation claims involving collective bargaining agreements.

As noted in the WorkCompCentral story this morning (Illinois Explores Pilot Carve-Out Program in New Bill: Top [2011-06-23]), presently there are 12 other states that provide for ADR in collective bargaining situations.

Here's the argument against Illinois carve outs, expressed by Robert Maciorowski of the Chicago law firm Maciorowski, Sackmann & Ulrich:

“Plaintiff attorneys are concerned about turning over responsibility for pursuing a claim to the employee’s union rep,” he said in the WorkCompCentral story. “On the defense side, construction companies were required to be represented by attorneys, and now it could be handled by non-attorneys, usually HR (human resources) people.”

Do I detect a position being taken to protect a special interest?

Indeed, the states that do have ADR systems in place have experienced significant success in controlling litigation costs and improved system performance overall with respect to medical treatment and return to work.

Some of the most powerful labor unions in the country prefer ADR systems because, frankly, it is better for workers with better treatment, less acrimony, and most importantly better return-to-work statistics.

Why? Maciorowski hits the nail on the head with his quote above - because in a traditional workers' compensation system decisions are taken out of the hands of both the injured worker and the employer and are made by third parties with entrenched financial interests that conflict with prompt case resolution.

Workers' compensation has only three real stakeholders: the injured worker, the employer and the State. All others are just vendors.

ADR returns the management of a claim back to the stake holders, where it belongs.

New York A Tale of Two Treatment Standards

New Yorkers may soon have two separate workers' compensation systems, at least so far as medical treatment is concerned.

A bill to restrict the application of treatment guidelines only to injuries or disabilities that occurred after regulatory implementation, which occurred last December 1, has cleared the Assembly and is pending before the Senate Rules Committee.

The bill is being promoted by the AFL-CIO and the New York Workers' Compensation Alliance. A 6294, filed by Assembly Labor Committee Chairman Keith L.T. Wright, D-New York City, provides that, "No guidelines providing for medical treatment, or rules or regulations pertaining thereto, shall be applied retroactively to cases with a date of accident or date of disablement that is prior to the date of any such guideline, rule or regulation."

The argument for the bill is that application of treatment guidelines to older injuries or disabilities would abruptly terminate treatment that had been ongoing for workers affected by the sudden implementation of the guides.

What the proponents of A 6294 are really saying is that the perpetuation of bad medicine is more important than getting injured workers to face reality - i.e. that their lives are changed, treatment has limitations, and ensuring provider security is more important than dealing with the new reality.

The bill is expected to clear the Senate and will likely become law.

A 6294 is a prime example of how simple issues in workers' compensation become exceedingly complex, and why incremental "reform" to control system costs never works in the long term.

How to Save Big ... A Book Review

"How to Save Big on Workers' Compensation" by Adam Friedlander is a quick read at 143 pages inclusive of supplemental material.

And while the book is primarily about the New York workers' compensation market, the overall theme of establishing a "Culture of Caring" is applicable to any employer in any state.

The "Culture of Caring" is a conscious top management decision to communicate both through words and, more importantly, actions that employees are valued and cared about because healthy employees are productive employees.

Rather than proscribing what a "Culture of Caring" should entail, Friedlander first goes through the steps that build the concept, and then lets others do the talking by interviews with an investigator, a claims director, a claimant attorney, and safety specialists.

The basic message is not complicated: treat workers as you wish to be treated and claims, and costs, go down.

How a company implements that message is more important than the message itself, the interviewees say, and is an important step in risk management.

The book ends with a chapter that is more advertisement than substantive advice, but otherwise the book offers some practical insight regardless of its focus on New York - the principles are the same.

The book is available at Amazon.com.

SCIF Restrictions on Drugs is Entitlement Reform

The California State Fund (SCIF) has issued a letter to its medical provider network (MPN) participants that they will be required to refrain from prescribing opioids for a period longer than two months and not prescribe compounded medications without prior approval if they wish to continue to participate as a provider (see WorkCompCentral News, "State Fund Targets Opioids, Compounds with MPN Rules: Top [2011-06-21]").

The California Society of Industrial Medicine and Surgery (CSIMS) argues that this restriction imposes on a physician's professional practice and may cause a violation of California Business & Professions Code Section 2241.5(a), that states notwithstanding any other provision of law, physicians and surgeons can prescribe controlled substances to a person in the course of treatment for a condition causing intractable pain.

Some are saying that this restriction will cause doctors to leave SCIF's MPN and consequently injured workers will be without adequate access to care.

SCIF argues that its restrictions are well defined in evidence based medicine and that any physician practicing in accordance with the guidelines should not have an issue.

Regardless of who's right and who's wrong, what is most interesting to me is how these market forces will play out - who's the dog in this fight, and who's the tail? Will physicians abandone the single biggest player in the California workers' compensation system? Or will SCIF run out of doctors to provide treatment to injured workers? Indeed, will other carriers follow suit? Will this cause a doctor shortage, or a core, fundamental change to the system?

The way I see it, SCIF's experiment is causing a flap not because it is an imposition on physicians' professional standing, but because it is entitlement reform.
SCIF's imposition of its market rules on providers that want to be part of its economic microcosm is a strong armed attempt to change the culture of work comp - maybe that's whats needed. The legislature can impose all the laws, rules, and restrictions it wants, but to get fast, effective change in the culture of workers' compensation one needs to go where the dollars flow.

Workers' Compensation and International Finance

Workers' compensation is a money game, and ultimately involves banking interests - a fact that those on the front lines, be they providers, brokers, actuaries, etc. tend to forget.

This morning WorkCompCentral reported that the state treasurer of Ohio has asked the state’s attorney general to investigate whether beneficiaries of the state’s pension funds and the Bureau of Workers’ Compensation have been “exploited by custodial banks” when conducting foreign currency exchanges.

At least three other states have instituted investigations and lawsuits: Virginia, Florida and California.

Foreign exchange (or “forex”) can provide a rich source of revenue for American banks, particularly custodial banks, which can profit not only from buying international stocks and bonds for pension funds and other investors, but also on trading dollars into other currencies. Overall, foreign exchange generates an average daily volume of $4 trillion.

At issue is the alleged practice of banks charging close to the highest or lowest prices of the day, depending on what was advantageous to them, not their client, rather than charging the market rate at the time of the order. This practice may be in violation of either the law or contract, or both.

Ohio and other state treasurers allege that this has resulted in tens of millions of dollars of untoward profits for the banks at the expense of the Ohio Bureau of Workers' Compensation Fund, and other state pension funds. The result would be an inflation of rates and premiums for Ohio employers.

The banks being investigated have denied wrong doing.

I have opined in the past about the complexity of workers' compensation, but my editorials have always focused on the claims process. 

The financial underpinnings of the workers' compensation industry are just as complex, if not more so, than the claims process and these investigations demonstrate how an international web of financing not only allows these systems to exist, but also perhaps be open to exploitation.

Denial in Almaraz Means Medical Evidence is Key

Readers I'm sure are getting tired of my California-centric posts of late, but the Golden State continues to produce controversy in the workers' compensation industry feeding me much fodder for my musings.

And so it was again late yesterday afternoon as news spread throughout the California community that the 5th District Court of Appeals (DCA) denied State Fund's Petition for Review in the Almaraz case.

For those of you unfamiliar with this controversy, here's a quick, simplified overview:

Almaraz is part of the consolidated cases of Almaraz/Guzman in which the CA Workers' Compensation Appeals Board (WCAB) issued a couple of binding precedents, the latest of which is know generically in the community as Almaraz/Guzman II that held essentially that while PD ratings must be based on the AMA Guides 5th ed., physicians have the latitude to use any impairment found within the Guides so long as an impairment that is not directly applicable to the injury in question is adequately explained.

The defendant in the Guzman part of the case, Milpitas School District, appealed, and since they were in a different jurisdiction the 6th DCA took up the case and eventually ruled against the defendant upholding the WCAB's interpretation of the law. The CA Supreme Court refused to grant review.

The State Fund was the defendant in the Almaraz part of the case and since they are in a different venue had to go to a different appellate court, the 5th DCA.

The industry had been waiting for a decision from the 5th DCA for quite some time and I'm sure many were surprised that the court refused to grant review.

Sentiment is that the State Fund will seek review before the Supreme Court and of course no one really know whether the court will take a look, but my guess is that the Supreme Court has more important issues on its docket and since there is now no conflict in law the 6th DCA's opinion will stand as the basis for permanent disability ratings in California.

There are still ancillary issues surrounding ratings that were not addressed in the Almaraz/Guzman cases, such as what do doctors do if there is absolutely nothing in the Guides to describe an impairment whatsoever - derive impairments from other jurisdictions, or just make them up?

Regardless, in all likelihood the state of the law on this issue is resolved. This can be good for the industry - while the carrier/employer block may not like the result, at least the issue is settled which gives the industry some semblance of reliability and predictability. 

It may not be as definitive as having an absolute limitation on what impairment can be used for any given injury, but at least we know that physicians have a choice in how they describe impairment and this can be of benefit to both sides of a controversy. 

It all comes down to substantial evidence and as with so many things in work comp litigation, it is the quality of the medical reporting that is going to rule the day. You want a favorable result? Make sure your medical-legal reporting is impeccable.

Budget Nonsense and How Californian's Are Cheated

This morning's WorkCompCentral News (stories on budgetary issues, fraud, funding) hit several of my nerves on a repeating theme that has raised my ire now for several years - constrictions or attacks on agencies that are not connected to the General Fund for state budgetary purposes.

I speak specifically of California's Division of Workers' Compensation (DWC) and its "user fee" or "100% funding".

SB 228 (Alarcon) was signed in to law on Sept. 28, 2003, by Gov. Gray Davis and became effective Jan. 1, 2004. The key statute is Labor Code section 62.5, which is the section that established the Workers' Compensation Administration Revolving Fund. It is a "special account" in the state Treasury and is completely separate and apart from the General Fund. 

Prior to 2004 the DWC was funded 70% through the General Fund and 30% through employer policy assessments. SB 228 changed that to 100% funding through policy assessments.

In other words, DWC is not, has not, and should not, be a part of any budgetary discussion involving the General Fund. It is a special animal and regulations (read budget) concerning the fund don't even have to go through the Office of Administrative Law before being foisted upon employers.

The reason for the change, it was argued back in 2003, was because employers of the state deserved to have consistency, reliability and dependability on a state agency so critical to employment operations - and realistically the extra 70% on employer policies did not impose that much of a burden on any single employer. 

The employer community was mad at the time, but accepted the tax increase on the basis that they would get value in return - dedicated operations to make workers' compensation go smoothly so that injured workers' disputes could be resolved more quickly, return to work faster and thereby reduce negative X-mod consequences.

Yet, now in budgetary tough times DWC is being subject to restrictions the same as the rest of the state.

Employers don't seem to care, or are just apathetic that their special purpose money is being squandered in the name of politics. Has anyone seen any editorial in a major newspaper or business publication decrying the fraud being perpetrated upon California business by their own lawmakers? No. Has any politician been taken to task for cheating the business community (employers and workers) out of their money? No.

But we sure hear a lot about employee fraud, provider fraud, and yes, employer fraud - though politicians continue to defraud employers with impunity, continue to destroy the economy of the state by ensuring that state operations that have no bearing on the state's budget are hamstrung so that workers claims are delayed beyond reason and business' expenses expand without accountability.

I think about all of the issues we debate in the workers' compensation community, but honestly, the arguments about medical, indemnity, return-to-work , etc. are infantile. These issues are meaningless compared to the big picture: workers' compensation is the bastard step child of politics. We let politicians manipulate us, twist us, steal from us, with no consequences. 

Write your legislator and tell them to leave DWC funding alone - it's not part of the General Fund budget and should not be part of the debate. 

Don't blame "fraud" on your increased premiums unless you're going to blame the State.

Apportionment Fight in CA - What Did You Expect?

The California Senate Judiciary Committee on Tuesday passed AB 1155 by Assemblyman Luis Alejo, D-Salinas, on a 3-2 vote, with Democrats supporting it and Republicans opposed.

The bill would amend California Labor Code Section 4663 by adding language to provide that certain characteristics, including race, age, and gender, shall not be considered a cause or factor of a disability with regard to apportionment determinations. Similar bills were presented to Governor Schwarzenegger twice previously and vetoed both times.

The argument for the bill is that injured workers within a "protected class", such as gender, are having adverse disability rulings because doctors are apportioning to immutable characteristics of that class - e.g. apportioning to osteoporosis in a woman even though there was no evidence that disability from such condition preexisted the industrial injury.

Opponents of the bill say that it would increase costs because there would be more litigation over apportionment, and would increase permanent disability indemnity costs as more cases would have less apportionment found.

Both of these arguments have some merit, but the real cause of the apportionment debate stems not from the law, but from the medicine.

Labor Code section 4663 states that apportionment must be based on causation. 

Subsection (c) states in relevant part; "A physician shall make an apportionment determination by finding what approximate percentage of the permanent disability was caused by the direct result of injury arising out of and occurring in the course of employment and what approximate percentage of the permanent disability was caused by other factors both before and subsequent to the industrial injury, including prior industrial injuries." (Italics & bold added for emphasis).

The problem stems from physicians writing reports allowing pathology to substitute for causation, regardless of the lack of any pre-existing disability. I have read many, many medical reports that will apportion, for example, a woman's orthopedic disability to osteoporosis where prior to the injury there was no evidence that such condition was disabling.

Since the standard for evidence in California workers' compensation is a low threshold, "substantial evidence," then such a medical opinion can control the case.

The issue isn't what the law says or doesn't say, the issue is the quality of the evidence. 

In our WorkCompCentral Education department we teach a course on medical report preparation. I get the inglorious job of grading medical reports. Let me just say this simply - the quality of reporting is abysmal, with complete disregard for facts and utter misunderstanding of the legal requirements.

Physicians need education and guidance regarding the interpretation of the law as it applies to the preparation of evidence. The standard of apportionment in Labor Code section 4663 is easy enough to comprehend - "caused" is past tense looking retrospectively at "direct result" - if a disability did not exist prior to the injury, then the injury caused the disability. There should be no argument after that analysis and anything else is speculation.

States Rights Subject to Contract - A Dangerous Precedent

While the National Football League and its players appear to be headed towards a stand off for the 2011-12 season, one thing that I find interesting is the issue of workers' compensation in contract talks.

Workers' compensation has become a volatile talking point in professional athletics primarily because most states traditionally permit the filing of claims where there is even just a scintilla of nexus between injury and venue.

Now in response to team complaints there are a few states which are trying to limit choice of law (Florida and Louisiana namely), and the NFL explicitly is attempting to do so with its collective bargaining agreements.

The Players' Association (NFLPA) argues that neither the NFL, nor any state, can inhibit the filing of claims in a state other than the home state of the team where a state permits such claims so long as it can be shown that there is some aspect of injury that occurred in the state. California is one of those states and apparently is a favorite among professional athletes seeking compensation due to a relatively more liberal system.

The issue is before the US Court of Appeals for the 9th Circuit after the Tennessee Titans won a ruling before the US District Court for the Southern California district. The player in the case, Bruce Mathews, and the NFLPA have appealed and the case is pending.

The issue is an interesting one to us legal wonks as there is an old US Supreme Court case, Alaska Packers v. IAC (1935) that stands for the principle that a state has the right to assert jurisdiction over a legal dispute, when it is trying to protect public safety and employees within its borders. This means that parties cannot contract around that state's authority in an individual employment contract or a collective bargaining agreement.

The California Workers' Compensation Appeals Board has held for many years that such attempts to limit its jurisdiction are illegal and unenforceable. This position has been upheld in state courts, but has not been tested in federal courts until now.

This may seem elemental to some, but the bigger picture in this day and age of seemingly expanding federal authority over the states is whether state sovereignty will be honored, or another element of independence is lifted from state rights.

And in the broader scope of general employment agreements, can contracts divest an employee of state guaranteed rights?

Most attempts to limit injured workers' access to remedies occur at the state legislative level. Getting the federal judiciary involved in the process blazes a new, and perhaps unwanted, trail into state versus federal authority and represents, in my opinion, a potentially dangerous precedent towards the erosion of state rights.

ME Penalty Case - A Lesson In Forestry

A Maine employer/carrier got dinged with a penalty of more than $140,000 for letting a claim fester after the examiner issued a notice of controversy one day late.

We reported in WorkCompCentral News this morning (High Court Upholds $140K Penalty for Notice Sent One Day Late: Top [2011-06-13]) the case of Doucette v. Hallsmith/Sysco Food Services, wherein the Maine Supreme Court said it has no flexibility in its decision to award nearly five years of incapacity benefits to claimant Matthew Doucette because of a rule that imposes penalties against employers and insurers that do not file a notice of controversy within 14 days after receiving a claim.

This brought to mind a conversation I had yesterday with Jon Gelman, who was visiting the West Coast on vacation (and I had the audacity to ring him up for lunch!). I commiserated that work comp in "the old days" was much more efficient, and easier, because it was much less complex.

In "the old days," I noted, each side would show up in court with their respective opposing expert opinions, sit down and work out a settlement and get the case moved out of the system. This benefited the employee because they could move on with their lives. This benefited the employer because the less time the claim was open the less impact there was on the experience modification factor (aka X-Mod).

Now, as I complained to Jon (who was nodding his head in agreement), work comp has become so complex with numerous statutes and regulations detailing every little aspect of a claim that it is much easier to get lost in litigation over minutiae and lose sight of the ultimate job - closing the claim!

It seems that, as opposed to "the old days," the technical details of the law now get in the way of closing the claim - trees are blocking the view of the forest!

As a result of the Supreme Court case the Maine Workers' Compensation Board is considering revising the rule that imposes the penalty because of this perceived "unfair result" - but the result would not have been unfair if the employer/carrier had paid attention to the claim and had seen the potential for such a penalty building. The employer/carrier over the course of the 5 years that this was pending should have seen the forest, but instead focused on the trees.

In my opinion, the result IS fair. It is a lesson that regardless of the technical nature of a claim, the ultimate goal is to get a claim closed. It is best for all involved.

The penalty is there for a reason, and unfortunately its deterrence against unreasonable behavior was ineffective for this particular claims administrator. I bet in the future the administrator (and others) will be more careful with their claims management and will be teaching examiners to keep an eye on the forest while chopping down trees.

Big Business and Comp; Policy Affects Small Business

WA Governor Gregoire cites that state's recent reform legislation (WorkCompCentral News - Governor Pitching Comp Reforms to Keep Boeing in State: WEST [2011-06-10]) for keeping Boeing - the state's biggest single employer with a direct payroll comprising more than 75,000 workers - in the state manufacturing its 737 jet along with other aircraft. 

By comparison, the next biggest WA employer is Microsoft with just over 40,000 workers in Puget Sound (http://www.microsoft.com/presspass/inside_ms.mspx). 

The total population of Washington according to the US Census Bureau was over 6.6 million as of 2009. That means that Boeing employs just 1.1 percent of the population. I couldn't help but wonder how a single employer could have such a huge policy impact, but then I examined the "trickle down" numbers.

While the number of workers that are directly employed by Boeing is small compared to the overall working population of Washington, the economic impact of Boeing on the state is huge, with $4.5 billion in economic activity in the state per year attributed to the aerospace company, hundreds of contracting smaller firms in the state employing thousands of others, trickle down to other small businesses in the way of restaurants, housing, and ancillary small business services (all of the Washing stats I cite are based on this document: www.washace.com/docs/BoeingEconomicContributions.pdf).

Another 10,000 jobs are in Washington that directly support Boeing business and according to the Washington Alliance for a Competitive Economy more than 10 percent of all jobs in the state are dependent on Boeing.

Aerospace jobs pay well, with the average wages being about $85,000 per year, with much of that attributed to trickle down to smaller businesses such as restaurants, lodging, dry cleaning, groceries, housing, etc.

While Boeing is self insured in Washington (Washington is one of the few remaining state run monopolistic systems) it must still follow that state's laws, so the lesson to learn, apparently, is that what's good for Big Business is good for Small Business. I'm not sure I agree on a micro-economic basis, but it's hard to argue with the overall impact that Big Business has on a small state's economy.

Limiting UR to In-State Physicians Nonsensical

Pending in the California Senate Committee on Labor and Industrial Relations is a bill introduced by introduced by Assemblyman Paul Fong, D-Cupertino, that would limit workers' compensation treatment utilization review to physicians licensed in the State.

AB 584 would amend Labor Code Section 4610(e) to state that only California-licensed physicians can perform utilization review on treatment requests by California injured workers. The committee voted 4-1 to approve the bill, which still must go to votes before two other committees and the full Senate for a vote before it can reach Gov. Jerry Brown's desk.

The argument in favor of AB 584 is that the review of treatment decisions is the practice of medicine, and thus only physicians with a license in the state in which the practice is being conducted may perform such reviews.

Proponents also argue that the practice of medicine in California is unique because of special education requirements (e.g. 12 hours of chronic pain study), and because of the Medical Treatment Utilization Schedule (MTUS) which, some argue, is so convoluted and difficult to navigate that only physicians from California can perform this service.

In truth, the review of treatment considerations is more akin to checking the applicable guideline (generally ACOEM in California) to see if the protocol for moving to the requested treatment application have been met prior to authorization.

Medical training and the uniqueness of the medical license recognize a particular education, knowledge and skill set inherent in the diagnosis and treatment of medical conditions, and should be based on science as much as possible. 

The human body, so far as we know it, is the same whether that body is in California or in Texas or in Alaska, or some other country for that matter. Publications of treatment guidelines and legal resources (including the interpretation of those resources) are nearly universally available in the Internet Age.

The key word in the practice of utilization review is review. The physician making a prospective or retrospective review need not be actually attending the patient. It is akin to grading a paper - the instructor need not actually see the student take the test.

In other words, where the injured worker is located, or where the physician is located, seems irrelevant to understanding the application of the science and the law to any particular review consideration.

Finally, I note that the bill limits review to physicians licensed in California, not where they are physically located. Perhaps the one argument I might agree with is that it might be easier to check the license status of a physician against the database of the California Medical Board rather than some other state's database - but this doesn't seem to be too persuasive in the age of the Internet.

To me a limitation such as AB 584 just doesn't meet the test of logic.

NJ Next in Line for Single Payer?

I started surfing 37 years ago. When I started I fell off a lot, of course, as I learned but over the years became proficient and now have graduated to the point where surfing is just part of normal every day life.

And so it will be with state run single source medical systems in my opinion. First there was Vermont, now it appears that a swell is building in New Jersey.

A coalition of New Jersey unions and political and health care reform groups has launched a push for a state single-payer health care system patterned after legislation signed into law by Vermont Gov. Pete Shumlin last month, which aims to fold workers' comp into group health plans.

The difference between proposed legislation in the Garden State and Vermont is that the New Jersey effort proposes up front rolling work comp into the single payer plan. Vermont did not do that, instead directing the state's insurance commissioner to study the issue and report back to the legislature by the end of the year before any decision is made about including work comp into the single payer system.

The New Jersey effort is being lobbied for by Labor, specifically a Rutgers University administrators' union, a New Jersey local of the United Steel Workers, the New Jersey chapter of the National Organization for Women, the New Jersey chapter of the Progressive Democrats of America, several local health care groups, and the New Jersey Black Issues Convention, according to the website of the New Jersey One Plan, One Nation Coalition.

These pioneering states will fall off the wave occasionally as it builds. But eventually will provide the direction and strategy for other states to paddle into the building swell.

Other states are going to be watching, studying and learning how to surf in this new ocean of opportunity.

We are in for interesting times over the course of the next 10 to 20 years. Whether you believe single source medical inclusive of work comp is good or bad, I believe this is a huge national trend that will be the forerunner for sweeping "reform" as opposed to the incremental changes that has been called "reform" in the past.

MO Businesses Shown Irony in Reform

Missouri went through the reform cycle in 2005. The drum beating was the same rhythm as other "reform" states - that workers' compensation was out of control driving business out of state because too many were getting too much without demonstrating a nexus with occupational exposure, so liberal standards needed to be tightened.

Now Missouri business is crying help because they created a situation that opened exposure to civil liability after reform amended what is, and isn't, an occupational disease in order to control the costs of those claims.

Since workers' compensation reforms in 2005, some occupational disease victims have sued their employers for negligence in civil court to obtain larger settlements than they would receive through workers' compensation - action that was sanctioned by the state's Supreme Court holding that the 2005 "reforms" excluded occupational disease claims from workers’ compensation coverage.

Missouri legislators adjourned their 2011 session May 13, failing to agree on bills to overturn this opinion (among other snafus created by the 2005 "reforms").

Here's a serving of the applicable trite maxims: be careful what you ask for - you just may get it; for every action there is an equal and opposite reaction; the devil is in the details; there is no free lunch,...

Missouri business made their bed, now they must lay in it. Workers' compensation is a compromise. Business AND labor must remember that there is give and take because work comp is not a product of natural law, but is the consequence of bartered political negotiations.

And when one party at the bargaining table perceives inequity, corrective legislation - watered down through the legislative process - will open holes and/or create new issues identified by the courts.

And because the judicial process is so slow, the "reform" cycle takes about 7 to 10 years. Missouri "reformed" in 2005. We're 6 years into the cycle and the timing is spot on.

As some states (most notably of recent, Illinois) seek to tighten the causation standard for compensability, they would do well to heed lesson from the Missouri experiment: having a liberal workers' compensation system is better for business than not having one at all.

Nurse's Presumption Bad Rx for CA

California AB 375 by Assemblywoman Nancy Skinner, D-Berkeley, would create the state's first presumption for workers in the private sector by providing that a blood-borne disease or Methicillin-resistant Staphylococcus aureus (MRSA) is presumed to be a work-related injury for the state's 150,000 hospital employees.

The California Assembly passed the bill Wednesday on a 49-25 vote and the bill marks Skinner's third attempt to create a presumption for workers who provide direct patient care in an acute care hospital. Her efforts in 2009 and again in 2010 both died when her legislation was held in the suspense file in the Assembly Appropriations Committee.

This year's bill does not cover the influenza A (H1N1) virus, as previous versions did, and it shortens the window for which a worker can attempt to invoke the presumption from five years after leaving employment to 180 days.

In addition, amendments made to the bill during this year's legislative session removed a provision that would have applied the presumption to neck and back injuries.

Regardless, passage of a presumption law applicable to private industry is bad precedent.

I won't jump on the Business band wagon and proclaim that a law that affects only 150,000 workers in the state is a "job-killer". That's a stupid argument when we all know that you can't move medical services out of state. 

And I don't agree with Labor's argument that working in hospitals creates a risk more unique than any other job - that's a safety issue, not a compensation issue.

Rather, the issue with AB 375 is precedence, aka the "slippery slope". If the science points to employment causation for any disease, exposure, or injury, then workers' compensation should be invoked to provide benefits.

If on the other hand the science says that the exposure is not employment related then there should be no benefits.

The Legislature should stop invoking mandates in place of science. Are some employers/carriers going to deny claims and/or create delays? Probably - but this is far more desirable on a case by case basis than declaring that regardless of the science someone is entitled to workers' compensation benefits.

The biggest problem with workers' compensation in most states is the culture of entitlement. This is provoked by laws such as AB 375 that mandate benefits regardless of what the science says.

AB 375 is wrong because it expands entitlement culture and this is the wrong direction for the health of workers' compensation as a social benefit and an industry.

Higher AOE/COE Standard or Risk The Big Verdict?

Illinois Republicans still plan on attacking workers' compensation in that recently reformed state because the law that was sent to Governor Pat Quinn's office (HB 1698) did not change the standard of causation to qualify for benefits.

Current Illinois case law requires that injured workers prove by a preponderance of the evidence that an injury or disease was accidentally caused or arose out of employment. HB 1698 codified this standard.

Republicans object because as interpreted this standard requires as little as 1% of employment causation to be compensable. They are looking for a more strict standard, and from what I'm reading (in WorkCompCentral this morning, of course), Republicans want a standard requiring proof that an injury or disease was at least 51% caused by work.

Curiously, this morning's news also ran a story on a long shore case where a $6 million dollar liability verdict for an injury that occurred in Illinois turned on whether the employer was a contractor or subcontractor (see "5th Circuit Defines 'Subcontractor' in Published Opinion"). The carrier facing the civil liability, NYMAGIC, argued for subcontractor status because of an exclusion in its policy. NYMAGIC lost its argument.

Now, causation standard and contractor/subcontractor status are not the same, obviously. The point is that if Illinois (or any state for that matter) increases the compensability standard for workers' compensation benefits, then the only recourse if there is any evidence of a negligent employer is civil liability - and as noted above that liability can be very high.

While some questionable injuries or illnesses may end up compensable under a lower threshold standard, one reason why work comp came about was because business wanted to reduce the risk of large civil verdicts.

A review of history demonstrates that it is better to cover those claims under a restrictive risk management system (i.e. work comp) with a loose compensability standard than chance a more expensive outcome in the civil courts. Sometimes you get what you ask for, and then realize you should not have asked for it! Illinois Republicans should take heed.

Texas Finds Value in Ombudsman Program

Texas does things differently, and in my opinion, does some things better than other states (okay - sometimes does things not so well either).

One of the unique Texas programs is the process of subjecting state agencies to periodic reviews by the Sunset Advisory Commission.

To those of you not from Texas, each state agency, depending on legislatively dictated time frames issued as part of authorizing legislation, gets a functional and budgetary review by the Commission, comprised of House, Senate and public members. The Commission then makes recommendations to the Legislature about efficiency, funding, or other issues that it may uncover during the review process.

The Commission held hearings on the Texas Division of Workers Compensation last year and issued recommendations to the Legislature. Many of those recommendations were incorporated into the legislation that was recently passed and now pending signature by the Governor.

A part of those recommendations were to continue the Division and another unique agency related to workers' compensation - Office of Injured Employee Counsel (OIEC). This agency provides counsel and assistance to injured workers attempting to navigate the workers' compensation system on their own, free of charge.

Other states have programs similar to OIEC - these offices typically do not provide representation services to injured workers but do provide assistance to those who either wish to remain in propria persona, or can not find private counsel to take their cases.

These programs aren't for all cases, nor for all states. But at least in Texas independent review finds that such a program is valuable to its citizens.

Illinois House Passes Reform, Continues the Cycle

The Chicago Tribune reported last night, passed my bed time I might add, that the House passed a compromised HB 1698, sending the measure to the desk of Gov. Pat Quinn, whose office has indicated he will sign it.

From the circumstances surrounding the vote, I can only think that House Republicans backed off from more onerous demands (primarily on the issue of redefining causation) with the threat that there may be no workers' compensation system at all, since the  Senate Executive Committee Monday approved, on a 9-6 vote, legislation to abolish the workers’ comp system, sending the measure to the full Senate.

This is a little lesson in the power struggle of business versus labor in a dramatic fashion - the business/insurance lobby wants workers' compensation on its terms to limit liability and expense, but when faced with the prospect of returning to 1911 would rather keep a broken system in place rather than deal with negotiating true reform - one that is not based simply on limitations on causation, medical costs and indemnity restrictions, but one that deals with fundamental motivations and expectations.

So in my opinion Illinois will end up like the rest of "reform" states - tweaks to a fundamentally flawed system whose design is buried in 19th century labor practices and fails to come to terms with the modern work era.

Illinois will return to a "reform" agenda just like all other "reform" states - the cycle of a 7-10 year spin on the system will continue as political football continues to serve narrow financial interests instead of a bigger societal picture.