Thursday, March 21, 2013

CA's "Lien Problem" - Don't Believe The Data

One of the reasons given for the harsh treatment of liens in California's most recent reform legislation, SB 863, was that liens were overwhelming the system.

How liens were overwhelming the system was not specifically identified or defined. Everyone was just told, and most took it at faith, that lien filing was "a problem."

It was assumed, since the propaganda was coming from the Administration, that the filing of liens were "a problem" for the Division of Workers' Compensation (DWC) despite the fact, as I had pointed out on numerous occasions that liens only presented a burden to the DWC if such liens required a hearing - otherwise it was just "paper" going into the system.

Of course it really wasn't paper since the Administration had a sparkling new $60 million computer system (EAMS) allegedly engineered for electronic self-filing of documents, including liens.

And in reality, the majority of liens have been electronically filed since the early 1990s because the last time the Administration had a "lien problem" the Electronic Data EXchange (EDEX) system was devised that had its own funding mechanism (20 cents per filing).

But because there was a "lien problem" the authors of SB 863 decided that it was necessary to impose a lien filing fee, and a lien "activation fee" for liens that were filed prior to 1/01/2013. In addition any liens that aren't "activated" prior to 1/01/2014 are dismissed as a matter of law - lien armageddon.

The proponents of lien armageddon are smart people and certainly didn't believe their own propaganda for they were well informed that the start of lien fees would simply be the target date for getting liens filed, regardless of the maturity of the underlying claim.

In fact, data that I saw from third party filing engines into EAMS supported the forecast and were showing a doubling, or more, of lien filings.

This observation was supported by independent statistics released yesterday by the Workers' Compensation Insurance Rating (WCIRB).

According to the data reviewed by the WCIRB from EAMS the total number of liens filed in 2012 hit 1,179,526, compared to 463,856 liens filed in all of 2011.

The last two quarters of 2012 saw 836,423 liens filed.

The defense players on the other hand saw a neat way to deny payments to these vendors, demanding proof of payment of fees before even talking to vendors about their bills - this prompted a recent warning by the DWC that such practice would not be tolerated and would lead to imposition of audits and fines.

But don't trust the statistics because the underlying data is suspect.

Case in point - that $60 million computer system says that out of those million or so liens filed in 2012, 357 were from copy services.

I know the copy service guys - they file 357 liens in ONE DAY.

So while the EAMS data reflects that there were 691,203 medical liens, 206,119 medical-legal liens, and 123,621 interpreter liens, it is quite obvious that the characterization of liens that were filed is flawed.

I would expect, however, that the provisions of SB 863's lien armageddon will eventually result in a drop in filings of liens - anecdotal evidence from those third party fling engines again supports this observation. So the law will ultimately perform as intended with a reduction in liens filed.

The big question is whether the mass destruction of liens will result in overall system efficiencies and cost reductions. Certainly in 2013 and 2014 I would expect to see some reductions since millions of dollars of claims will be systematically eliminated. But this doesn't necessarily translate into cost savings, only that the value of claims is reduced. We don't really know just how much of those claims would have translated into actual money transferring hands.

And because of EAMS sloppy data we don't really know where the savings would be coming from.

Basing any sort of claim of efficiency, cost reduction or victory on lien armageddon is a red herring. The data is flawed, the savings amorphous (other than a one time event - which may not occur if some lien claimants do as propose and seek appellate reconciliation of legal rights underlying the liens), and doesn't account for the actual burden on the California adjudication system (the District Offices of the Workers' Compensation Appeals Board) both before and after SB 863.

Proponents of lien armageddon should party now while the (unsubstantiated) lien data is fresh. My suspicion is that, ultimately, there won't be any big net effect on system costs after 2014.

No comments:

Post a Comment