Friday, August 10, 2012

Setting Up For Reform In 2020

According to reports coming out of Sacramento, the proposed California workers' compensation reform bill would provide state employers with a $700 million net reduction in system costs while still providing up to a 67% increase in permanent disability indemnity benefits.

It's a fiscal miracle that can only occur in the face of elections!

Part of the way the proposed changes would do this would be to simplify some elements of the California system that have never made much sense.

For instance, elimination of the 15% up and down modifier to a permanent disability award based on return to work offer/acceptance found in Labor Code section 4628(d) or dispensing with the second opinion requirement on back surgery requests.

Another complexity eliminator is simplification of the Permanent Disability Rating Schedule by removing rating modifiers related to future earning capacity, age adjustment, and taking away sleep, sex and psyche add-ons.

Other provisions though will increase system costs in my estimation.

For instance there is a provision to impose a $150 filing fee for liens - the last time that was attempted the Division of Workers' Compensation (DWC) just stopped doing it because its infrastructure got in the way of collecting the fee and cost more than the fee did (albeit the fee at that time was $100).

Another example is the creation of an Independent Medical Review system for resolving treatment disputes. Presumably this activity would be paid for with a fee paid by the employer of no more than $500, but what about the administration of the IMR process, its participants and appeals (which would be limited to allegations of fraud, bias or conflict of interest)?

A built-in systemic cost is that the proposed billing and system reforms would require billing disputes go through an independent bill-review process that is set up and contracted by the Division of Workers’ Compensation. Providers would have a limited time to object to billing adjustments and there will be a limited right to appeal any bill-review decisions.

In addition interpreters have new licensing requirements and will need certification by the DWC (of course paying a fee for the privilege).

Several groups have come out to oppose the process in which the negotiations were carried out. Doctors in particular have several axes to grind as the reimbursement schedule gets changed to Medicare's Resource-Based Relative Value Scale (RBRVS) and medical provider networks (MPN) that are approved by the DWC are presumed valid for purposes of treatment control.

According to reports, the secret negotiations on the proposal occurred only between organized labor and big business.

The California Society of Industrial Medicine and Surgery, besides the opposition one would expect from the group relative to the various provisions affection doctors, said in a press release that part of its concern was the lack of inclusion of input from most of California.

“Unfortunately, the unions didn't ask any injured workers to help with the legislation and the large employers didn't ask small employers," the group said in a press release.

The Senate Republican Caucus mirrored those sentiments:

"While reports of negotiations occurring between large self-insured employers and labor groups may be an encouraging sign that California’s workers’ compensation system is on the verge of important, timely and necessary reform, the fact that insurers and non-unionized, non-self-insured/smaller employers are not at the negotiating table should be cause for some concern," the caucus said.

In the final analysis I'm not sure any of that would matter. What will happen with this "reform" is that some cottage special interests will be eliminated, some new cottage special interests will be created, there will be pandemonium and confusion for 2 years, followed by judicial shaping of the law for 4 years, along with incremental cost increases as these groups figure out ways to maximize their financial interests, followed by a year or two of complaints about costs and/or systemic failures, and a new "reform" around 2020.

See you in the future.

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