Wednesday, March 13, 2013

How A New Rating Schedule Gets Conceived

California Labor Code section 4660(i) mandates that Commission on Health and Safety and Workers’ Compensation (CHSWC) "shall conduct a study to compare average loss of earnings for employees who sustained work-related injuries with permanent disability ratings under the schedule, and shall report the results of the study to the appropriate policy and fiscal committees of the Legislature no later than January 1, 2016."

The first element of that work is published in the March edition of the Journal of Occupational and Environmental Medicine by researchers Frank Neuhauser, with the University of California, Berkeley, and Rand Corp. researchers Seth A. Seabury and Dr. Teryl Nuckols.

“American Medical Association Impairment Ratings and Earnings Losses Due to Disability" was commissioned by CHSWC and concludes that the Guides do a pretty good job of equating impairment to overall function (or disfunction as the case may be), but also that the Guides impairment ratings do not correlate well with economic loss. 

In other words there is disparity between the body part impaired and how that impairment translates to economic loss because one body part is more important to certain occupations than other body parts are to other occupations.

“I think people often make the mistake in blaming AMA for having low impairment ratings when the impairment rating doesn’t determine the level of compensation,” Neuhauser said. “The AMA Guides are a good measure of impairment, but how you translate that into dollars is what matters for adequacy.”

Another thing that the study found was that the 5th edition of the Guides rated back impairment lower in a relative fashion than other body parts - thus back injuries resulted in greater economic losses compared to other body parts but weren't credited with enough impairment to be equitable.

That disparity is even greater in the 6th edition.

Neuhauser said researchers plan to explore whether additional modifiers for pre-injury wage and gender might also improve the correlation between an impairment rating and wage loss.

If you haven't noticed over the course of recent history, many of the studies commissioned by CHSWC eventually end up as topics for debate in the process of some proposed workers' compensation legislation. I suspect that further study will occur as suggested by Neuhauser and that somewhere along the legislative road there will be a bill to amend how permanent disability ratings are calculated in California.

SB 899 law in California, which was ushered in by, and subsequently ignored by the Schwarzenegger Administration, was that the permanent disability rating schedule was to be revisited and revised every five years to account for potential disparities and inequities.

That section, Labor Code section 4660, was amended by SB 863 and that provision is no longer there, replaced by the language, "Until the schedule of age and occupational modifiers is amended, for injuries occurring on or after January 1, 2013, permanent disabilities shall be rated using the age and occupational modifiers in the permanent disability rating schedule adopted as of January 1, 2005."

It seems to me that there are three conclusions to be drawn from the conclusions made in this study:

1) Having an intermediary resource to evaluate the relative impact of an injury on the overall functioning of the body is necessary in order to provide as level a playing field as possible in comparing one body part to another;

2) Impairment ratings are only one factor in the determination of equitable compensation if society wishes to compensate for the permanent effects of an injury; an impairment rating needs to be adjusted for economic impact relative to several other factors including age, occupation and how an injury impacts future economic losses.

3) Eventually California will adopt a new rating schedule, probably sooner than later, and likely prior to 1/1/16.

An abstract of the article can be viewed here.

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