Tuesday, April 30, 2013

FL Repackaged Drugs - People Are The Losers

As I've mentioned before, in particular with the Florida repackaged drug bill that is circulating the legislature there, compromise means that somebody isn't going to be happy.

And that's the case with Florida school districts, and other public entities, that relied on Florida Statute 440.13(12) (c).

The provision allows carriers and employers to pay for drugs at the discounted rate for which they have contracted, even if an injured worker elects to obtain the drugs through a provider that is not a party to the contract.

According to Scott B. Clark, risk and benefits manager for the Miami-Dade Public School District, that provision of law has saved the school district $3 million since November 2009.

Not an insubstantial amount of money when public funds for education are squeezed tight.

Florida state lawmakers continued toward passing the repackaging bill on Monday. The House Health and Human Services Committee held an emergency meeting Monday morning and amended HB 605, filed by Rep. Matt Hudson, R-Naples, to reflect the compromise included in SB 662, which eliminates 440.13(12)(c). The Senate passed its version of the bill by a vote of 39-0 on Monday.

The legislative staff of the Florida Senate said in an analysis released last Thursday that eliminating the ability to pay the discounted rate also will cost the state Division of Risk Management $210,337 a year.

Though te National Council on Compensation Insurance (NCCI) has not released an official report on the compromise, interest groups were told last week that the bill should reduce overall workers' compensation costs by 0.7% and save about $20 million a year.

The deal was negotiated by the Florida Insurance Council, the Florida Chamber of Commerce and Associated Industries of Florida on one side and the Florida Medial Association and Automated Healthcare Solutions on the other.

Interestingly, the states pharmacies aren't opposed to this deal.

"We feel that it's better than the status quo at this point," said John Fleming, communications director for the Retail Federation, which represents Florida's major pharmacy retail chains.

This could be because of the increased competition against pharmacies represented by well-financed direct to patient marketing ability of physician dispensing outlets.

And it could be that retail pharmacies are just tired of the whole argument.

As part of the compromise, proponents also added language that would require doctors to pay for repackaged drugs within 60 days in order to retain a supply of the drugs. The amendment would prohibit dispensing physicians from possessing any repackaged drugs for which payment hasn't been made to the "supplying manufacturer, wholesaler, distributor or repackager within 60 days of the doctor dispensing the drugs.

This provision was added to encourage doctors to pay repackagers in situations when the drugs aren't dispensed within 60 days.

Of course there isn't any enforcement or inspection mechanism, so this provision has no reality to it and won't make any difference on the street. It's just malarky language - there to appease someone with no real chance of having any effect on behavior.

Where does insurance stand?

Sam Miller, executive vice president of the Florida Insurance Council, said business groups and insurers saw the compromise as the only way to get a price cap on repackaged drugs written into Florida law.

"This is a big issue and NCCI is saying we're going to save $20 million," Miller said. "With a vote of 39-0 in the Senate, it's fairly clear they're going to bring this home for landing."

I called this Ali Law in an earlier post; - where a special interest plays "rope a dope" and is obstinante for so long, that eventually everyone else gets tired and just gives up, so they work up something to make the issue go away. Clearly, that is the case with this bill.

Usually in a compromise everyone walks away with something - not everything they want, but at least a tidbit to ease the pain of what was given up in return.

But in the case of the Florida repackaged drug war, there are only losers - the people of the State of Florida.

It's a bad law, but it will be the law because those in the ring punching it out are tired.

Monday, April 29, 2013

QME Backlog ... Again?

One of the peculiar laws in the California workers' compensation system (and there are many) is the Qualified Medical Examiner (QME) process.

The QME system was devised, as are so many things in comp, to eliminate a pervasive problem - but has itself become a pervasive problem, because, like we see so often, those who make the laws are not involved in actually executing the laws.

In the old days before the QME process attorneys shopped for doctors willing to write a report that was consistent with how that attorney felt the case should be managed. Applicant attorneys had their favorite doctors, and defense attorneys had their favorite doctors.

Then there would be lengthy litigation fighting about which doctor was more correct.

The QME process was supposed to eliminate doctor shopping and the lengthy litigation.

Doctor shopping was sort of eliminated, but the process quickly devolved as DWC strained to keep up with requests for QME panels. Seems the volume of medical-legal disputes was underestimated.

Former Division of Workers' Compensation (DWC) Administrative Director (AD) Rosa Moran had an almost singular focus during her short tenure - to eliminate the back log of requests for QME panels in litigated cases.

Moran did a good job. When she took the job the time to get a QME assignment was 10 months. When she left the job she had gotten that time down to about 4 weeks.

Now, DWC is behind again.

Division spokeswoman Erika Monterroza told WorkCompCentral the Medical Unit was issuing panels within 30 days until July 2012, but is now about five months behind in processing requests.

Anecdotal observations by attorneys put the actual time more like 7 to 10 months.

In one of likely many situations, the wait to get a QME panel was so long, the parties settled the case without an independent medical because neither the worker nor the employer wanted to wait any longer for a panel to issue.

This is a case, again, where the system is in the way of itself, depriving injured workers of the Constitutionally guaranteed right to expeditious resolution of their claims and injuring employers with excessive experience modification factors on their premium renewal because claims remain open for extended periods of time.

It seems to me that this is a process that should be completely automated, with a self service feature that does not require teams of individuals to pour through thousands of applications trying to match physician requests with available QMEs.

The process is not supposed to be subjective - which is the main criteria for building any computer system. The business rules are well known. The process is not complex.

It simply is a matter of paperwork overload - the very thing that computer systems are excellent at eliminating.

The employer-financed funding for DWC this year, I believe, is about $340 million. It seems to me that a small bit of that funding could be budgeted to write the programs necessary to automate the QME process.

But can the The State be trusted to spend wisely on computer systems? DWC doesn't have a good track record.

The Administration spent about $60 million (at last count) bringing online in 2008 its Electronic Adjudication Management System (EAMS) - a system that was to give the DWC valuable information about the case load in the District Offices and the ability to better manage these claims.

I have been critical of EAMS in the past (still am), EAMS has been the subject of unflattering investigative reporting by the Los Angeles Times, and the system continues to frustrate the user population who have otherwise grown adept at maneuvering around its foibles and idiosyncrasies.

Still, there are functions in EAMS involving much more complicated processes than constructing a panel of QMEs that work well and are much more efficient than the old manual activities that were replaced with automation.

We bank over the Internet. We shop over the Internet. We engage in complex communications involving multiple sets of people over diverse geographic zones in efficient and time saving manner - all via networked computers ... but we can't get a panel of three doctors from which 2 are eliminated so that the last one does the evaluation?

I know I'm naive about how government procurement functions, and how much effort is necessary to really do something that benefits the public - seems to me however that someone in Oakland should be able to take a team from the state's information technologies agency and whip up some code to get this job done.

I'm kind of simple like that though - remember, I'm just a dude with a computer on the Internet writing opinion into a networked blog that anyone with a computer and Internet connection can read and comment on, share, search or save. [Note heavy sarcasm here.]

Like those who write our laws, I don't have any actual experience in getting the job done.

Friday, April 26, 2013

Westphal - Use A Bigger Hammer

The recent Florida 1st District Court of Appeal's decision in the Westphal case, and the action of the court to rehear it en banc, is probably the most exciting workers' compensation activity in the state since the reforms of 2004.

The Westphal case has raised emotions in Florida and is probably one of the most divisive court rulings to come out of the courts of appeal in some time.

To the uninitiated, Westphal was a firefighter who sustained significant injuries and was not declared to have reached maximum medical improvement (MMI) prior to reaching the 104 week cap on temporary total disability indemnity benefits.

The 1st DCA in an emotionally charged panel opinion declared the cap unconstitutional because it was "fundamentally and manifestly unjust" although, as I understand the underlying facts from others, Westphal was then put on permanent disability indemnity advances and apparently continues to receive advances pending the determination of this case.

In the meantime, the roar over this controversial decision, which some believe was inappropriate legislating from the bench, had grown so loud that the court announced that it would rehear the case en banc, meaning that all of the justices that sit at the bench in the 1st DCA district would weigh in with their opinions, rather than just the three members of the panel that issued the original decision.

The list of interested persons and entities jumping into the fray with amici brief requests is impressive, including amici brief requests from both the House and the Senate of the Florida legislature.

Other amici include the Associated Industries of Florida; the Florida Chamber of Commerce; the Associated Builders and Contractors of Florida; the Property Casualty Insurers Association of America; the Florida Justice Reform Institute; Publix Supermarkets; United Parcel Service; the Florida Roofing, Sheet Metal and Air Conditioning Contractors Association; the Florida Retail Federation; the American Insurance Association; the National Federation of Independent Business; the Florida United Business Association and the Florida Association of Self-Insureds all opposing the court's ruling.

Supporting the courts ruling include The American Association for Justice, Florida Workers' Advocates, the Florida Justice Association and the Police Benevolent Association.

The emotion that the Westphal case has elicited is evident in the briefs of the opposing amici.

The Associated Industries amicus brief insists that the theory of "natural justice" used by the 1st DCA to declare the cap unconstitutional is an "anachronistic and imprecise equitable doctrine [that] may not be used to invalidate a lawfully adopted statute."

Westphal's attorneys responded to the Associated Industries brief last Friday, insisting that "natural justice" is better understood as "an expression of fundamental fairness," which is "the very essence of constitutionally guaranteed due process of law."

Both sides have their points and we've all seen instances where situations arise that justify either argument - there are the claimants who, if based on generally accepted principals of medicine, have no reason to be temporarily disabled for more than 2 years. And there are cases where the injuries are so serious, but medical improvement continues to be noted, that additional time to reach a point where there is no further appreciable gains is needed.

Most cases, and I'd venture to say the vast majority of cases, will never have these issues.

The Westphal situation makes two points very clear: 1) there are ALWAYS exceptions that don't fit nicely into the law; and 2) workers' compensation is emotionally charged and divisive.

I don't know how the court is going to rule and I don't have an opinion one way or the other as to how it should rule.

My grandfather, who was a master diesel mechanic back in the days when trades were respected, used to joke, "if it doesn't fit ... use a bigger hammer!"

I have faith. Florida will figure it out - and use a bigger hammer.

Thursday, April 25, 2013

OK's Lesson In Value

The big news this morning is that the Oklahoma House passed SB 1062, that state's workers' compensation reform bill, inclusive of the option for businesses that qualify to opt out of the otherwise mandatory system.

The question arose in the WorkComp Analysis LinkedIn group whether this portends a trend reflective of employers increasing wariness and discontent with workers' compensation.

My opinion - no.

But that is an opinion in direct response to the LinkedIn question.

Oklahoma opt-out IS a trend and one that will spread throughout the United States relatively quickly. Relative, of course, speaking in the political time reference - it took nearly 40 years for all states in the union to create workers' compensation systems so I certainly don't expect opt-out provisions to occur overnight.

But the Oklahoma experience is not a reflection of employers feeling that workers' compensation works against them - it is a return to the grand bargain that was the original vision of workers' compensation 100 years ago.

When workers' compensation was devised, it was an agreement between Business and Labor whereby each would give something up the other desired in exchange for each getting something they wanted but lacked - i.e. a compromise.

Business wanted certainty in costs. Labor wanted certainty in life style. Both had to give up certain legal positions, and both sought the assistance of intermediaries - the government, insurance, doctors, attorneys (and eventually the list got very long of all sorts of other assorted vendors) to help get the job done.

The problem really started when all of the intermediaries assumed control over the destinies of the employer and the employee.

Business was mandated to pay for something that, over time, lost value - the only reason to buy workers' compensation insurance for most businesses over time was simply because it was mandated by law. The protections and certainty that was part of the original value proposition in work comp have been compromised over the course of 100 years.

Labor was mandated to use something that, over time, likewise lost value - the only reason to not to sue the employer for injuries and consequences was simply because it was mandated by law. The protections and certainty that was part of the original value proposition were, over time, compromised.

For employers, costs not only increased, but sometimes dramatically from one year to the next. The ability for a business to control costs was lost.

For employees, rapid medical care and financial assistance not only slowed to a crawl jeopardizing workers' well being, but the ability to seek redress was lost.

And in the meantime there were plenty of other interests jumping in taking control away from both the employer and employee - and we're all part of that game.

There is not one person that is in the workers' compensation industry that can claim exemption from being an unnecessary intermediary in the relationship between the employer and the employee - not one.

Each one of us - be it insurance, medical, legal, brokerage, legislative, judicial - we're all in between the primary relationship that work comp was intended to manage. And each one of us exact a cost on that relationship - monetarily, emotionally, intellectually.

Will Oklahoma opt-out change things? Probably not for the vast majority of employers in that state - the requirements to legally opt-out are too onerous for small employers to exercise.

But the Oklahoma experiment will spread - I have no doubt about that.

Two states presently give employers the option to not participate in workers' compensation.

New Jersey's option is too complex and difficult so no employer really exercises that option. Texas has been described more accurately as an "opt-in" state because the reality is that no Texas business must carry any insurance whatsoever - so it is a much more level playing field.

I opined that the threat to workers' compensation from Oklahoma opt-out style options in other states is that the industry will be required to become better, more efficient, more cost effective - and the biggest part of the revolution is that the industry may be forced to be less of an intermediary in the direct relationship between employer and employee.

Oklahoma opt-out gives large employers the ability to structure their own work injury programs, and to integrate those programs with non-industrially related programs.

Efficient, and good, employers will merge their industrial programs with their general health and disability systems so that employees, regardless of causation, are simply taken care of.

The perceived threat is that employees will lose rights and will end up on the short end of the bargain, but studies refute that argument. Yes, there will be some left behind, but that is nothing new - that happens now in the current structured environment.

I think that Peter Rousmaniere and Jack Roberts, in their November 2012 report on privatization of workers' compensation said it best:

"An opt-out program without defined benefits isn’t privatization. It is simply the elimination of workers’ compensation."

Essentially, this is a recognition that workers' compensation may not be particularly relevant and the Oklahoma message with SB 1062 is that the industry better watch itself because the opt-out provision is only one aspect of Oklahoma reform.

Does the Oklahoma opt-out bill reflect a trend of employers increasing wariness and discontent with workers' compensation?


It reflects a trend that both employers and employees no longer feel that workers' compensation either meets their needs, or provides any value relative to the costs of having multitudes of intermediaries messing with the primary relationship.

It reflects a growing trend that the value provided by workers' compensation is perceived to be declining.

Wednesday, April 24, 2013

FL Moves Forward with Ali Law

Politics, more than anything else in America, is made up of compromise. This is good, and this is bad.

The good is that, for most people most of the time, compromise takes care of the concerns and people can move on.

The bad is that, for some people too much of the time, special interests deeply entrenched in the political negotiation process make out much better than reason would dictate.

And so it is with the latest news out of Florida and the wrestling over physician-dispensed medication.

The Senate Appropriations Committee voted 19-0 Tuesday to adopt Senate Bill 662 with an amendment agreed to last week by the Florida Insurance Council, Associated Industries of Florida, the Florida Chamber of Commerce, AHCS and the Florida Medical Society that will set a price cap of 112.5% of the average wholesale price (AWP) set by the original manufacturer plus an $8 dispensing fee.

Drugs sold by pharmacies would continue to be paid for at AWP plus a $4.18 dispensing fee.

According to Sen. Alan Hays, R-Umatilla, who worked out the compromise, the price cap will trim annual costs in the workers' compensation system by 0.7% and save insurers and employers about $20 million a year.

An earlier House version of the bill, HB 605, filed by Rep. Matt Hudson, R-Naples, would cap the price of repackaged drugs at the AWP set by the original manufacturer plus a $4.18 dispensing fee. That bill is stalled in the House Health and Human Services Committee with 11 days remaining before the Florida Legislature adjourns. 

News reports indicate that Hays' bill will likely get through the legislature and go to the governor's desk for signature - and since it is a compromise after 4 years of fighting, likely it will get signed into law.

Is that the right thing?

If you're tired of the fighting and just want to move on, and be satisfied that the National Council on Compensation Insurance (NCCI) says that the Hays and/or Hudson bills will save around $20 million in costs, or about 1.1% overall, then oki-doki.

If you believe that this is just nonsense to protect some special interest profit center, then it's not okay.

Because also contained in the Hays bill as amended are retractions of provisions in the current law that allows carriers and employers to pay "at the schedule, negotiated or contract price whichever is lower" for drugs when the injured work chooses to obtain them from a provider who is not a party to the discount contract.

This should have employers and their insurers screaming - not to mention the fact that if you're an actual pharmacy you have no ability to price compete against doctors who dispense because of the single point of contact advantage that the treating physician has with the injured worker in the workers' compensation system.

Talk about protectionism...

And what's to keep the treating physician from scheduling return appointments ad nauseum for medication checks in order to maintain that additional profit margin built into SB 662?

Joe Paduda, famous (or infamous, depending on which end of his biting criticism you're on) told WorkCompCentral, "There is no rationale for paying dispensing physicians more than retail pharmacies, especially now that we know that dispensing repackaged drugs increases overall medical costs and extends disability duration."

I can't agree more.

Unless there is a legislature that is tired of the fight and wants to move on.

That's where you get an odd number like 112.5%.

SB 662, as amended, is an Ali Law, after boxing legend Muhammed Ali - where a special interest plays "rope a dope" (pun intended), and is obstinante for so long, that eventually everyone else gets tired and just gives up, so they work up something to make the issue go away.

Until the next time a similar or related issue surfaces. Which will happen.

Tuesday, April 23, 2013

Attorney Roles Can't Be Discounted

When departing runway 26 at Santa Ynez airport (KIZA) pilots are instructed to immediately turn left to a heading of 210 degrees for noise abatement.

This keeps the gamblers at the Chumash Casino, which is just off the departure end of runway 26, happy so they can concentrate on their game.

Upon departure a few weeks ago, I quipped to my friend in the right seat, who lives in the Santa Ynez Valley, that we should go to the casino some time for some fun.

"David, you don't want to go there" he said seriously. "The only people who go there shouldn't be there in the first place - they don't have any money and what little money they do have goes to the casino..."

How many workers' compensation claimants look at a work injury as going to the casino?

On the grand scale of all things statistically based, I'm sure it's a distinct minority.

But the few that do create havoc for everyone, and in particular for the attorney who is hired and upon whom the heavy toll of imparting huge doses of reality into jackpot delusion is placed.

I had mentioned before that I live in a blue collar neighborhood with lots of harbor workers as my friends - yes they get injured on the job and yes I get asked how much an injury is worth. That's usually the first thing I'm asked in such situations.

And usually there is quite the look of disappointment when I tell that person to just try to go back to work.

Casino dreaming. Free money....

Over the couple of years that I have been writing this blog, I have variously received excoriations from different segments lambasting lawyers - and in particular those lawyers who have dedicated their practices to representing injured workers.

Sometimes defense lawyers are thrown into the mix just for good, all around abuse, but regardless, when the term "attorney" is mentioned there are plenty of terse adjectives.

While it can be debated what is in the best interests of the injured worker, in the context of doing a job, the claimant attorney's duty is to represent the LEGAL best interests of the client. In the case of workers' compensation, that means two claim elements: medical treatment and indemnity.

Lawyers don't know much about medicine - that's why there are doctors. And as far as the claimant attorney is concerned, the best doctor is the one that makes the client happy, because a happy client complains less. So the claimant attorney will advocate for the best medical care he can get for the client, which means the medical care that the claimant wants - not necessarily what the physicians, employer or carrier want.

The other part of the equation is something that is a whole lot easier to understand - indemnity, aka, money. Most lawyers, like me, are terrible with numbers - that's why we go to law school.

But put a dollar sign in front of a number and all of sudden our mathematical skills come to life.

And, unfortunately, sometimes this is also the main motivation of the client, regardless of the counsel received from the attorney.

Casino dreaming is tough to combat or ameliorate when the client is focused on retribution, or sees a case, regardless of real world dollar value, as a meal ticket to a secure life without financial worry.

And this makes malpractice insurance for attorneys who represent workers' compensation claimants particularly expensive regardless of the merit of such claims and regardless of the risk mitigation claimant attorneys employ in their practice.

In this morning's news it was reported that two California courts of appeal have  rejected malpractice actions by self-represented injured workers against their former attorneys.

One of the workers was dissatisfied that her attorney had settled her disability discrimination claim for $13,000 because she thought it was worth "more like $16,000," and the other said his attorney had obtained a $100,000 settlement from a third-party tortfeasor too quickly. 

In both cases the claimants, gambling on a bigger payout, ended up with either nothing, or ancillary bills that wiped out any net recovery.

Attorneys interviewed for the story, both applicant and defense, surprisingly expressed sympathy for these claimants, and others like them in similar situations.

One of the defense attorneys representing the sued applicant attorney said that he felt badly that the plaintiff/claimant, "was just hitting her head against the wall, and she didn't know it."

The attorney said it was also "sad that instead of having the $13,000 settlement and her job, she was laid off again, has no money and owes money to two sets of attorneys."

Unbelievable compassion....

Whether we like to acknowledge it or not, a work injury is an emotionally trying event. And if the injured person has any delusions as to the value of a workers' compensation case, that makes management of the claim even more difficult.

The vast majority of attorneys that I know in the system have represented BOTH employers and employees. Eventually they will focus their practices on one side or the other, but it typically is not for some grand philosophical reason. Rather it comes down to practice style, to make conflicts of interests easier to manage, and whether one likes their clients or not.

Quite often we hear, in the spirit of "reform", that one of the goals is to reduce litigation and reduce the roles of attorneys in workers' compensation.

And then laws pass, like Tennessee's most recent reform of the definition of injury AOE/COE, that frankly just increase litigation as parties fight over whether or not benefits are due because of some amorphous legislation.

The bigger picture is that attorneys, like it or not, play an integral role in the resolution of claims.

You may not like that there is an additional layer in the claims process, but many times that layer helps bring reality closer to those with casino dreams.

Other times that layer helps bring realism to vague and nebulous laws - for both sides.

And like all roles in the workers' compensation system, there are better examples than others.

Monday, April 22, 2013

TN Sets Tone for Other Manufacturing States

Tennessee is moving forward with a cost-conscious driven reconstruction of its workers' compensation system, with lawmakers passing big changes to the state's work comp laws making it harder to file a claim for benefits in the state.

But at least if there's a dispute it should move along much faster after July 1, 2014.

That's the date that the state's new workers' compensation court within a revamped state Division of Workers' Compensation comes on line. This, in my opinion, will greatly improve the speed at which disputes about workers' compensation move through the judicial process which means faster benefits to workers and lower expense to carriers (which in turn should lower premiums for employers).

And there may be more disputes, at least initially, to determine just what a compensable claim is.

The legislation radically alters the definition of AOE/COE by limiting compensation to injuries that arise "primarily out of and in course of employment" only if a worker can show by a preponderance of the evidence that employment contributed more than 50% to the cause of the injury.

In order to treat injured workers, doctors would have to attest to a "reasonable degree of medical certainty" that more than 50% of the need for medical treatment was caused by in injury.

Tennessee's employers have done a masterful job of deflecting liability for work-related injuries or illnesses in this legislative session.

It seems to me that the only injuries that are going to fall within the jurisdiction of workers' compensation in Tennessee are very specific, completely uncontroverted injuries (in which case maybe that special workers' compensation court isn't going to be needed all that much anyhow...).

Otherwise, I don't see too many doctors stepping up and making any attestation as to causation. They will just provide treatment to the injured worker under an alternative payment plan such as group health or applicable Affordable Care Act plan (if in place), or cash.

Bradley Jackson, director of government affairs for the Chamber of Commerce and Industry, said Friday the 2013 session was a victory for business groups, and there is no doubt about that - particularly if a Tennessee business feels that its group health is a better bargain than workers' compensation.

The ability to deflect a claim out of the work comp arena affects not just the medical component, but also any liability for indemnity, return to work/rehabilitation requirements and "discrimination" claims as well.

But this begs the alternative - if a claim is valid (i.e. there is no dispute that there in fact is some injury) but is legally not a workers' compensation case because the worker can not show by a preponderance of the evidence that work contributed at least 50% causation - is the door open for civil liability (and attendant expenses), and will this raise the cost of other property/casualty insurance for businesses?

I don't know the answer to that, and perhaps some expert from Tennessee could opine on that issue.

Continuing the national trend to appease owners in the National Football League, the House and Senate also voted last week to approve SB 432, which was supported by the Tennessee Titans National Football League team. 

As amended by the House, the bill applies Tennessee benefits to workers injured out-of-state if they are injured in a state in which they have worked less than 14 consecutive days or 25 days a year. The bill would allow Tennessee workers assigned to another state for longer periods of time to choose the state in which they file for benefits.

These restrictions are not dissimilar to the recent restrictions passed and signed into law by Arizona, and which are pending debate in California.

Current Tennessee politics is described as dominated by Republican super majorities in both the House and Senate that helped push through the agendas of the Tennessee Chamber of Commerce and Industry and the National Federation of Independent Business.

So we have to assume that the people of Tennessee are good with these new laws - they voted in the legislators who comprise this strong voting block.

And maybe the reason is that the people of Tennessee see new jobs on the horizon, as America returns to its global status as a manufacturing prowess, beating out the countries formerly considered "emerging economies" we had relied upon for this work.

Jason Zweig, a columnist with the Wall Street Journal, on Friday wrote about Antoine van Agtmael, who is credited with inventing the term "emerging market" to describe, essentially, third world countries with cheap labor and good technology that could manufacture goods for export on a global basis.

Agtmael made fortunes for himself and others that invested with him by investing in companies that made stuff in emerging markets.

Now Agtmael is saying that the next big emerging market is the United States itself.

As wages and commodities increase in price, improved technology and energy independence is making it much cheaper to manufacture in the United States.

"U.S. manufacturing is becoming more competitive than you would think, and China's less," Mr. van Agtmael says in Zweig's column. "And the idea that manufacturing is old-fashioned is itself old-fashioned."

Even more pointedly:

"My belief is that markets are not efficient, but they are emotional," Mr. van Agtmael says. "They are driven by raw feelings. Why has everybody been surprised by how well the U.S. stock market has done lately? Because they're only beginning to realize the glass is half-full again instead of half-empty."

And that may be so with the state of Tennessee, which has an economy with a substantial manufacturing base.

According to the National Association of Manufacturers, manufacturers in Tennessee account for almost 15 percent of the total output in the state, employing 11.4 percent of the workforce. Total output from manufacturing has ranged from $31 to $40 billion for the past several years - $36.3 billion in 2009.

In 2010 manufacturing was responsible for 92% of the state's exports.

So making stuff in Tennessee is a major component to the state's economy and we have to assume that, consequently, the changes to the state's workers' compensation laws are reflective of this reality.

But the requirement that a worker show by a preponderance of the evidence that employment contributed more than 50% to the cause of the injury seems to me like one of those emotional decisions of which van Agtmael speaks. It sounds good on paper, but after the ink dries and it is applied in real life its effect may be far from what was intended.

Tennessee may not seem like a trend setter, but for states with current, growing and/or emerging manufacturing bases to their economies, it is setting a well defined path and I believe that other states will follow its lead.

Friday, April 19, 2013

Witness Fees -Tugging At Costs

Controversy about a California bill that would change the fees hospitals and other medical providers could charge to comply with records requests is overstated.

Sen. Bill Emmerson, R-Hemet, sponsored Senate Bill 588, which proposes to amend the California Evidence Code to allow in-house record retrieval services for hospitals and other medical providers to charge a $30 search-and-retrieval fee, 50 cents per page for the first 25 pages, 25 cents for each additional page, and a fee of 50 cents per page for documents requiring special processing. The bill would apply only to cases where the applicant or plaintiff has authorized the release of their medical records.

The bill would also delete a statutory provision authorizing all reasonable costs to be charged against the person whose written authorization required the copies, and replace it with a provision requiring the attorney who requested the copies to pay the fees listed in the bill.

SB 588 would require the Director of the Department of Health Care Services to change the fees at least once every three years, unless the Consumer Price Index has not changed, would require in-house copy services to provide electronic copies, and would also subject electronic copies to the bill's fee schedule.

A hearing was held Wednesday in the Senate Health Committee, which approved the bill on an 8-0 vote and forwarded it to the Senate Judiciary Committee.

Who has Emmerson's ear?

Michael Hawkins and Kyle Probst of Healthport Technologies, a medical records company that serves more than 10,000 health care providers and one-third of the nation's hospitals, testified in favor of SB 588.

Probst, general counsel and director of government relations for Healthport, told the committees that his company drafted the bill because it affects Evidence Code sections that directly pertain to Healthport's business.

At least Probst is honest about where the bill came from and why it was proposed.

He also makes a very poignant argument, one that will no doubt make its way to the group presently researching a copy service fee schedule - the bill would also increase fees that are more commensurate with the amount of work needed to comply with records requests.

"Currently, if you were to ask for copies under the statute, it is set at 10 cents a page for an attorney request," Probst said, noting that the Evidence Code fee has not changed since 1986. "The national average for an attorney request across the country, in the 50 states, is 93 cents a page for the first page. So, you are looking at an 83-cent difference, just from the average."

Some are saying the bill is a separate fee schedule for copy services. It isn't - rather is an adjustment on the compensation to the record-producing entity, in this case hospitals and other medical providers, to their "witness fees" in compliance with a subpoena duces tecum (a subpoena for records) .

Argument in the WorkCompCentral story about this bill this morning focused on the perception that SB 588 would create a separate fee schedule for copy services thus frustrating the intent of SB 863.

As noted above, this is not an accurate argument because it is not about copy services, but rather witness fees.

Nevertheless the bill does highlight two issues.

First - why are hospitals and other specified medical providers different in the compliance with a subpoena duces tecum than any other record-producing entity? Their costs for the retrieval and production of records is no different than, say, a police department's records or employer's records.

Second - the fact that there are such disparate laws, and fees, concerning the production of evidence highlights what some of the copy services have been arguing all along regarding copy service fee schedules - there's a lot of "back end" work that must be performed, and a lot of hidden costs that must be absorbed, by a record reproduction service in order to get the records to the parties in litigation.

In my opinion, SB 588 does no harm to workers' compensation other than increase the expense of litigation (what else is new...) but does bring the reality of that expense, in civil, administrative or any other form, into focus.

There's always something tugging at the cost component of workers' compensation.

Thursday, April 18, 2013

MA Tax on Indemnity Just Wrong

The desperation of some lawmakers when it comes to resolving budget issues is impressive, if not downright scary to the average person, or in the case of Massachusetts, the average injured worker.

Massachusetts Gov. Deval Patrick is pitching a plan that would apply the state's personal income tax to all indemnity payments made as part of workers' compensation awards beginning on July 1, 2014.

Work comp indemnity in Massachusetts works the same as in most other systems - benefits for temporary total incapacity are paid at two-thirds of a worker's pre-injury wage to 60%. Lawmakers also capped benefits at 100% of the state average weekly wage.

These standards were established in 1991 and, according to the Massachusetts Workers' Compensation Advisory Council, were based on the assumption that benefits would remain untaxed.

And that makes sense - the purpose of the indemnity is to provide some living money while recovering from injury - and generally factored into that equation is that no taxes would be deducted in that the maximun "earnings" are capped and there is, theoretically at least, no ability to generate income while disabled.

The Massachusetts Taxpayers Foundation estimated that eliminating the exemption for workers' compensation awards would produce $8 million annually under the current tax rates.

Patrick's budget estimates revenues from taxing workers' compensation awards at $6.7 million for fiscal 2013-2014.

What isn't accounted for is the additional frictional expense of collecting those taxes - a task that likely would fall on the state's insurance companies and plan administrators. Collectively, I am willing to bet that implementation and ongoing collection of $8 million in taxes from work comp indemnity payments matches or exceeds what gets collected.

And that expense will get passed down to policyholders, which means the state's employers end up with double taxation, except with additional layers of expense thrown in for good measure.

Massachusetts isn't a big state and it doesn't have a lot of industrial accidents.

The state Department of Industrial Accidents reported workers filed a total of 13,449 new claims in fiscal year 2011-2012.

Alex Zaroulis, director of communications for the Massachusetts Executive Office of Administration and Finance, said Wednesday that Patrick sought repeal of the exemption as part of a broader effort to raise $1.1 billion by eliminating tax breaks.

"The thinking was that eliminating the exemption for workers' compensation benefits as part of a bigger package of changes would be a fair approach, Zaroulis said Wednesday.

That thinking is wrong. Taxing the income benefits of injured workers who are already receiving at least one-third less money than they would otherwise be making if able bodied is decidedly unfair.

And $8 million isn't going to make much of a dent in the elimination of "tax breaks."

John Regan, advisory council chairman and vice president of government affairs for Associated Industries of Massachusetts, said, "My strong sense is that the House and the Senate won't go along with it. Unless something extraordinary happens, my sense is this is no longer on the table."

It shouldn't be on the table in the first place.

Wednesday, April 17, 2013

CA Liens Are Not Black & White

It would seem that the issue of liens in the California system would not be so difficult to resolve.

Some commentators have said that no other state has liens, so they ask why are they necessary in California? Their rationale is that if the service is legitimate on a legitimate claim then it should be paid according to the fee schedule or law and if not then it won't be paid.

It is a black and white perspective.

That reasoning fails to deal with cases that are initially denied and then later admitted - usually after months, or years, of litigation - during which period the worker needs some services, whether it is medical treatment to cure or relieve the effects of the injury, medical-legal to obtain evidence to support causation (or other) legal theories, or interpreter or copy services likewise for evidentiary purposes.

SB 863 introduced significant changes to the "lien laws" in California work comp. Emergency rules were issued to implement them, and like anything done under extreme time pressure, the rules were not perfect and were not intended to be permanent. The temporary rules are for a temporary period - governing such controversies until more permanent rules could be adopted.

The Workers' Compensation Appeals Board (WCAB) is in the process of promulgating such permanent rules and yesterday held a well attended public hearing on proposed rules.

The comments received by the WCAB were predictable. Employers complain that low dollar value vendors, like interpreters and copy services, are skirting the intent (if not the black letter law) of SB 863 by filing petitions for costs.

And such vendors argue that SB 863 could not have intended to limit such low dollar value vendors because they have no alternative to getting paid.

I think that the entire industry needs to take a step back and examine a couple of fundamental questions - sort of like a decision tree.

1. Does the industry want to provide some mechanism for workers to receive services when their claims are denied for AOE/COE reasons?

a. If yes, then go to #2.

b. If no, then issue over - workers with denied claims can look to other means to get treatment and/or compensation, if any... (I offer that this is not an acceptable, nor reasonable, prospect).

2. Medical treatment during the pendancy of a decision during the first 90 days after the filing of a claim must be provided (subject to treatment guidelines) up to a limitation of $10,000 in services; does the industry want to provide for other services that may be necessary with some other, similar, limitation?

a. If yes, then go to #3.

b. If no, then:

i. workers with claims pending a decision would either have to foot the bill themselves (which would likely be in contravention to the California Constitution) or,

ii. bills from vendors that support the workers' case during this period are just paid without any further mechanism for contestation or dispute resolution (reverse of the independent bill review system).

3. Interpose some limitation on the services, type, amounts and value (i.e. fee schedules and service guidelines), that a worker can receive during the first 90 days of decision pendancy on a claim - bills that fall within those limitations get paid automatically (with self-imposed penalty for failure to pay valid bills). This results in 2 scenarios:

a. Bills that are not paid in full (or at all) because of some dispute - go to step 4;

b. Bills that are paid and there is no further dispute - game over.

4. Reverse the roles - if the payer has a dispute with a bill, then the payer can file for the contestation/dispute resolution process (and front the applicable fee) with in a prescribed time period, otherwise the bill is to be paid in full; This can be a consolidated type of hearing before a specialized review process, such as an independent service review process.

a. If the payer is found to have been correct then the vendor is penalized, and owes the payer some fee or discount.

b. If the vendor is correct, then the payer must pay the balance, and the cost of dispute resolution.

This shifts the economic burden to the party with the better resources for absorbing the cost - it also creates incentives to resolve as many billing disputes as possible - both vendor and payer have consequences that are not very palatable in losing a billing dispute.

There are also issues with services provided on accepted claims where either the body part is denied, or where services themselves are contested - I believe that the SB 863 lien solutions are pretty well crafted to deal with these situations and don't need a whole lot of refinement - some fee schedules are needed, but otherwise the vendor/payer dispute resolution process is, in my opinion, nicely handled by 863.

All parties have to recognize that they are all part of the issue. Vendors that abuse the system by providing unnecessary services at unreasonable prices are going to face objection. Payers that fail to pay reasonable bills for required services in a timely manner exacerbate friction within the system.

I'm not saying that the four step process above is the answer (and in fact would require legislation, not just regulation) - I'm just providing an alternative way of looking at the issue while final rules are being drafted to deal with liens and petitions for costs in the system.

I know there are lots of holes in this proposal, and I know that there are lots of objection to these ideas.

But it's like I tell my staff - don't make excuses, find a solution. Move forward - if something is in the way then either go around it, over it or through it, to meet the goal or objective.

If we look at what drives the "lien problem" from some different, perhaps obtuse, perspective, we may see some solutions to the more complicated issues.

Tuesday, April 16, 2013

SB 809 CURES California

California's Controlled Substances Utilization Review Evaluation and Management System, or CURES, is getting closer to obtaining the financing necessary to operate.

The Senate Committee on Business, Professions and Economic Development on Monday passed a bill that would impose license surcharges on providers and tax drug manufacturers and insurers to fund the system.

Senate Bill 809, by Mark DeSaulnier, D-Walnut Creek, would impose a 1.16% licensing surcharge on providers who are authorized to prescribe controlled substances. The bill would also require the Board of Pharmacy to increase fees for wholesalers, out-of-state wholesalers of dangerous drugs and veterinary food-animal drug retailers by up to 1.16%.

Additionally, the bill will impose a tax “for the privilege of doing business” in California on drug manufacturers and insurers, including workers’ compensation carriers. The bill does not specify what the annual tax would be.

CURES needs the financial backing to operate, and if there is a tax on workers' compensation insurers to make that happen then it should be so - over the long term curtailing addiction to pain medication will lower the experience ratings of affected employers and ultimately should reduce the risk to carriers writing in the state.

This is particularly timely in that, as reported by the Wall Street Journal yesterday, the patent on the most popular opioid, OxyContin, expires today.

The Journal calls OxyContin one of the most powerful and abused painkillers on the market.

Usually when a drug patent expires manufacturers of generic versions jump in and supply the market with much cheaper copies.

In this case, though, the US Food and Drug Administration (FDA) is in the process of determining whether manufacturers will be allowed to produce generic OxyContin, or whether they may make only newer versions designed to impede abuse, which won't come off patent for several more years.

And there are some significant statistics that suggest that generic OxyContin without abuse impediment ingredients will only increase the nation's opioid issues.

There are powerful business interests tugging at the FDA. The Journal says the pain medication market is good for $9.4 billion in sales annually. OxyContin itself generated $2.8 billion in sales, 30% of the market, last year.

In 2010 OxyContin was infused with a polymer that made the pill more difficult to crush making the drug more difficult to inhale or inject. That innovation cost Purdue Pharma LP, manufacturer and patent holder of OxyContin, $100 million and the patent on that version of the drug doesn't expire until 2025.

According to Purdue, since the new drug went on the market sales have declined about 10%, which they attribute to its abuse-deterrent technology.

There is evidence that generics without abuse-deterrent technology would increase opioid abuse.

Opana is another painkiller that competes with OxyContin. Opana is manufactured by Endo Pharmaceuticals.

When OxyContin's new formulation was released in 2010 sales declined 7%. Opana, not yet reformulated with abuse-deterrent technology, increased 72%. Last year, when Endo reformulated Opana with abuse-deterrent technology sales dropped 25%.

A generic version of Opana without such technology was introduced in early January and the market share for it has been growing, according to the Journal. Experts interviewed in the article opine that this reflects increased abuse of Opana, by a factor of up to 80% more often.

While the FDA ponders what to do about opioids coming off patent, states also need to do their share to curtail opioids gone wild while still ensuring that those who need such medications are not unduly burdened or denied.

I think now is the time for California's CURES system, and the regulations that have been pending surrounding its application, to come into full operation. SB 809 is good for California and the state's workers' compensation system.

Monday, April 15, 2013

Dude, You Got Balls

The title of the email from LinkedIn group California Workers' Comp. Professionals was, "We purchase California Workers" Comp liens.....a pool value of $2 million or more."

The subtext was "Contact me if you have liens to sell."

Okay - baited, hooked. Let's see what this is all about.

The message was apparently from a member of a Kansas business, Loyalty Business Funding - a business credit and funding group with numerous business financial products according to its website.

One of the primary drivers of the "lien crisis" in California that led to the monumental reforms under SB 863, and what has come to be known as "lien armageddon" with the dismissal by operation of law of millions of dollars in lien value on 1/1/2014, were lien purchasing businesses.

The modus operandi of these groups is to purchase liens for a few cents on the dollar, regardless of whether those liens have satisfied or paid at fee schedule. Then, once the liens have been purchased and the paper is in their possession, the lien purchaser engages in tactics that are best described as relentless harassment.

So, best I can tell, here is a company that has no vested interest in the workers' compensation system other than squeezing more money out of the system for purely selfish profit.

Further, here is a company that either is undaunted by the lien fee and resolution processes instigated by SB 863, or is ignorant of those processes (in which case lien claimants you should take advantage of this ignorance immediately and access as much of that $2 million as you can).

But worse, here is profligate nose thumbing at the system in a very public, caustic manner.

Imagine the chutzpah of the person posting this so publicly in a LinkedIn group that is mainly populated by people on the employer/insurance side of the work comp equation.

Or, again, maybe it's just plain old ignorance. I wouldn't discount that since his education as posted in his LinkedIn biography is "Off Market University." 


The biography of the poster of this message indicates a history in real estate sales, and apparently is a co-founder of Loyalty Business Funding. They offer a product which he describes as:

"The Business Credit Builder & Funding Suite is the most comprehensive funding solution available! Access to certified business advisers finance officers, and funding for your business through thousands of lending sources. Build your Business Credit to obtain additional money with no personal liability. Guarantee of $50,000 in business credit within 30 Days with our program."

Wow - no personal liability! Where do I sign up and get some of that $2 million?

[Huge sarcasm here.]

You want to know what's wrong with workers' compensation?

Look no further than this example of a blatant distortion of the system from financial manipulation firms - companies with no interest in the operation of workers' compensation, nothing at stake in the system, and apparently zero appreciation for ethics or morality (is that why he spends so much time "relating with God"?).

Dude, you got balls.

Friday, April 12, 2013

Revered or Reviled - TN Shifts Burdens

Tennessee is making workers' compensation history.

I'm not sure it's going to be history that will be revered, or reviled, however.

The Tennessee House of Representatives on Thursday voted 68-24 along party lines to approve Senate Bill 200 Thursday morning and sent the bill back to the Senate, which approved an earlier version of the bill 28-2 on April 1. The Senate is expected to routinely approve an amendment added in the House that will require the state Division of Workers' Compensation to submit annual reports on the impact of the reforms beginning in 2015.

I think history will revere the part of SB 200 that creates a new Court of Workers' Compensation Claims.

Tennessee and Alabama currently use their state civil trial judges as the first venue for resolving workers' claims disputes.

The governor will be able to appoint a DWC administrator for two six-year terms. The administrator, in turn, would appoint workers' compensation judges. The governor would then appoint a three-judge appeals court.

The new court would handle disputes involving job-related injuries or illnesses occurring on or after July 1, 2014. Appeals of decisions from the DWC would go to the Tennessee Supreme Court, where the chief justice could send the cases to special panels of three judges. At least one member of each panel would have to be a justice of the Supreme Court.

I think this is a tremendous improvement to the dispute resolution system for Tennessee. Like the concept of workers' compensation itself, the new work comp court will be largely administrative in processes and should result in much more expeditious processing of litigated claims. Everyone wins with this proposal in my opinion.

SB 200 also will institute medical treatment guidelines after a consortium of doctors, insurers, employers and labor groups make their recommendation prior to Jan 1, 2016.

Again, a positive development in my opinion. Most states have guidelines now, and while guidelines have been criticized as "cookbook medicine" depriving individuals of choice, the fact is that for the vast majority of claims guidelines reduce delay in authorization and expedite payment to physicians because they eliminate disputes.

Other provisions that bring Tennessee into the 21st Century include creation of an electronic medical bill submission and payment process by July 1, 2014, and an ombudsman's office for injured workers who aren't represented by attorneys.

Not all claimants who would like some legal advise can get an attorney because their case may not be perceived to have sufficient value for attorney involvement - the ombudsman program should assist these claimants and such programs in other states have proven very effective in reducing disputes simply by providing workers' compensation claimants with better information.

Now for the revilement.

The new AOE/COE standard in Tennessee will make workers' compensation largely irrelevant and will transfer much of the social burden that should be covered by work comp to other state systems and the general health scheme.

The legislation limits compensation to injuries that arise "primarily out of and in course of employment" only if a worker can show by a preponderance of the evidence that employment contributed more than 50% to the cause of the injury. 

In order to treat injured workers, doctors would have to attest to a "reasonable degree of medical certainty" that more than 50% of the need for medical treatment was caused by in injury.

These provisions should eliminate a large chunk of workers' compensation claims because there is no doctor, when utilization review appeals are going to be subject to a $250 fee, that is going to stick his financial neck out and provide treatment with these draconian standards.

The effect is to shift the burden of treatment for injuries that would otherwise be covered industrially to the general health system, which means, essentially, shifting the burden further upon all of the productive taxpaying citizens of the state.

In addition, while at first blush it would seem that SB 200 increased indemnity benefits, in fact what the bill does is reward failure in education and production by increasing permanent disability rating factors for lack of education and demonstrable unemployment where the claimant lives.

Injured workers on partial disability who've been unable to return to work or have a job earning less than their pre-injury wages could petition DWC to multiply the award by a factor of 1.35. The bill also would increase the award by 1.45 if the worker lacks a high school or general equivalency diploma, by 1.2 if the worker is older than 40 and by another 1.3 if the worker lives in a county where the unemployment rate is 2% higher than the statewide average.

Essentially, the bill says, "let's keep the poor even poorer" by making sure that those with less education are rewarded for not getting that degree and rewarding the unemployed to huddle together away from the nice, employed, productive (and wealthy) areas of the state.

Backwards thinking if I ever read it....

SB 200 is here.

Thursday, April 11, 2013

Westphal, Davis, and Total Disability

The Westphal case opened up a huge controversy in Florida, and now the 1st District Court of Appeals (DCA) is being asked to also consider another "cap" case alongside Westphal in a consolidated hearing.

Tammy Davis held an administrative position with Nascar Holdings and injured her back while bending and twisting at work. Her doctors later diagnosed her with chronic regional pain syndrome and depression.

I didn't find anything about "chronic" regional pain syndrome, but according to the National Institute of Neurological Disorders and Stroke (NINDS) there is a generally recognized diagnosis known as complex regional pain syndrome (CRPS), which is a chronic pain condition that is believed to be the result of dysfunction in the central or peripheral nervous systems. 

According to NINDS, the syndrome used to be called "reflex sympathetic dystrophy syndrome," There is controversy over whether CRPS has its basis in biology or psychology, which could be important to the Davis case.

Regardless, the Judge of Compensation Claims (JCC) found Davis reached physical MMI in March 2011, but said Davis has yet to reach MMI for her psychological condition.

In Florida, a worker's mental injury is not compensable unless it is a manifestation of a compensable physical injury, and Florida Code Section 440.093 provides that a worker can only receive indemnity benefits for a mental injury for up to six months from the date she achieves MMI for her physical injury.

More specifically, subsection (3) states:

Subject to the payment of permanent benefits under s. 440.15, in no event shall temporary benefits for a compensable mental or nervous injury be paid for more than 6 months after the date of maximum medical improvement for the injured employee’s physical injury or injuries, which shall be included in the period of 104 weeks as provided in s.440.15(2) and (4). Mental or nervous injuries are compensable only in accordance with the terms of this section.

Consequently Nascar terminated Davis' indemnity benefits, and stopped paying for Davis' psychological care, six months after she reached physical MMI.

I'll pause here - read 440.093(3) again - does it say anything about terminating TREATMENT? (More on that later.)

The defense argues that there are "substantively different historical antecedents" for Section 440.093 and Section 440.15, which provided "a rational basis for the distinction between the two kinds of 'caps,'" and so the validity of Section 440.093 should not depend on the viability of Westphal.

The claimant argues that an affirmance of the Westphal panel decision ought to mean an invalidation of Section 440.093 also. I can see that legal argument since 440.093 makes specific reference to 440.15 in that the 6 months is included in the 104 week cap.

Friend, defense attorney George Kagan representing Nascar, requested the 1st DCA to consolidate the Davis case with the Westphal case.

Mark L. Zientz, the attorney for Davis, said in this morning's WorkCompCentral report on the case that he did not object to Kagan's request for consolidation because he felt the judges might "not get the full picture" on the inadequacy of Florida's comp system if the judges only hear about the problems with Section 440.15.

"I've been saying for years that the system as a whole is inadequate," he said, and it seems "the courts are finally starting to look at it with a critical eye."

The issue in the Davis case is that the claimant is seeking 100% permanent disability. Without inclusion of the mental injury that status can not be achieved.

According to the WorkCompCentral story, Zientz averred that Davis is totally disabled, but since her physical disabilities alone were not enough to qualify her for permanent and total disability benefits, "she needs to reach MMI psychiatrically to get PTD."

Yesterday I went on a rant about disability. I got lots of response, and as usual, much of it was divisive.

I guess my issue with a PTD status in nearly any case (not just the Davis case) is because, to me, permanent total disability should mean that there is absolutely no capacity to engage in any meaningful ability to generate income whatsoever.

And my guess is that's not the case with Ms. Davis.

But my concept of PTD has nothing to do with how disability is actually applied. "Disability" is a legal status tied to either social benefits (e.g. special parking privileges) or financial benefits (e.g. indemnity).

I don't know Davis. I don't know her circumstances. I don't know her mental issues. I do know that depression should not be entirely disabling and that it can be controlled with appropriate medication and therapy (assuming compliance which may be tied to whether or not there is appropriate medical delivery available).

I also know that there are many, many people with severe disabilities, including depression, that would otherwise qualify for total disability under workers' compensation laws that have the ability to engage in various activities that would otherwise generate some income.

And note that the employer not only terminated Davis' indemnity under 440.093, they also terminated her treatment - if there was any argument for PTD status it would be the employer's acquiescence through actions. Apparently the employer did not feel that any further treatment would help, so why pay for treatment if it isn't going to help?

Seems to me that's a tacit admission of total disability...

Wednesday, April 10, 2013

Don't Know Anything But Driving a Truck

In August at the Workers' Compensation Institute's annual conference in Orlando, FL, I am part of a panel that will discuss current trends in workers' compensation and what that portends for the industry.

As we all know, there are many permutations to the workers' compensation industry and usually when someone talks about trends they mean trends in claims - and for good reason because that is where a big chunk of the money goes.

But there are other trends, some subtle, some not so, that affect other aspects of the industry.

And one of them, which scares me and should you, is that people aren't going back to work.

The Great Recession, as this past economic downturn is now being called, resulted in an unprecedented number of people going on some form of disability system - many of them via workers' compensation.

The Wall Street Journal on Sunday ran a story "Workers Stuck in Disability Stunt Economic Recovery."

According to the story, the latest unemployment report showing a four-year low of 7.6%, which would normally reflect job growth in the economy, actually reflects workers leaving the workforce in favor of disability.

And economists in the story opined that relatively few people are going to trade in their disability status for paychecks because such programs don't provide much incentive to do so.

"Economists have found that more people apply for disability during periods of high unemployment, partly because they can't find work. Ailments they might endure during good times are instead used as an avenue out of the labor force," the article states.

The anecdote provided in the WSJ article is of a truck driver who quips that he's not happy about being on disability because "it kind of reminds me of welfare" but paradoxically follows that with a statement that he is afraid to leave the disability program because it feels like "a blanket covering you, and to walk out from it ... at my age, it's a little intimidating."

Massachusetts Institute of Technology professor, David Autor, who has studied the disability program, says that the disability roster is filled with low-wage earners who have limited skills and consequently they are "pretty unlikely to want to forfeit economic security for a precarious job market."

According to the WSJ article, since the start of the recession in 2008, more people have gone on disability, on net, than new workers have joined the labor force.

Canadian journalist, Colby Cosh, in Maclean's magazine, penned a biting criticism, "Disabled America: where work is for suckers."

Noting that in Canada and Europe there has been some attention paid to recalibrating disability systems, in the United States our systems are black and white - can work or can't work. "This discourages any return to self-sufficiency: once an American starts drawing disability they will move mountains to evade any job in the above-ground economy."

And in yesterday's Wall Street Journal the headline read, "Good News, More People Are Quitting Jobs" noting that while unemployment remains high, more businesses are having difficulty finding workers, primarily because there are fewer who are qualified for the positions open.

Or perhaps because there are fewer willing to work...

This is a deeply troubling trend that goes well beyond claims or the cost of these claims - fewer workers means lower payrolls, which means lower premiums, which means that the nation's insurance carriers will have less to work with, which means rates go up, which means employers pay more, which begets more meaningless work comp reform, which ... you get the picture and it's not pretty.

Jason Turner, Executive Director of the Secretary's Innovation Group, is on a panel at a two day conference this month in Washington, DC sponsored by the American Enterprise Institute, examining issues inherent with disability programs. In his former role as a state welfare reformer, reviewing the dysfunctional welfare system of cash benefits with no obligations at all he said - - "For those who can work, only work should pay."

The truck driver in the WSJ story said, after getting approval for disability, that he considered looking for another line of work, but "I don't know anything but driving a truck."

In other words, this truck driver "can't work."

At some point in time, if workers' compensation, or any other disability program - state, federal, private - is to overcome the cultural demise of the American Work Ethic, the reward system inherent in being disabled needs to be re-engineered.

We, as a society and a culture, figured out how to determine how much money a person receives for being "disabled." That's become nearly a science with the AMA Guides, rating formulas, indemnity ratios, etc.

How about we take all that knowledge and science we've generated studying dis-ability and get together and figure out incentives for being "abled?"

My guess is that a truck driver who doesn't know anything but driving a truck would find a whole new set of skills if the motivations were realigned.

Tuesday, April 9, 2013

AZ Did It, CA's Next; Why Stop There?

Arizona Gov. Jan Brewer signed SB 1148 on April 3.

This new law prohibits people working for employers in the state from filing workers’ compensation claims for injuries suffered while temporarily working in other states.

SB 1148 defines temporary work as fewer than 90 continuous days out of the 365 days immediately preceding the date of injury. In addition to prohibiting an Arizona worker from claiming benefits in another state, the bill also prohibits an out-of-state worker from seeking benefits in Arizona provided:
  • The employer has a policy that covers his workers while they are in Arizona.
  • The laws of the state covering the workers temporarily assigned to Arizona are the sole remedy against an employer for a workplace injury.
  • An Arizona employer with workers temporarily in another state is subject to Arizona workers’ compensation laws, not the laws of the other state.
Arizona is mad at California and apparently isn't going to take it anymore.

Jim Stabler, chief counsel for SCF Arizona, testified in support of the bill during a House Commerce Committee hearing in March. Stabler said SCF has to maintain a full-time third-party claims office in California because of the state’s “nebulous cumulative trauma doctrine.”

"Nebulous" is defined as "hazy, vague, indistinct, or confused."

From Sullivan on Comp, section 5.5:

A cumulative injury is commonly referred to as a cumulative trauma (CT) injury or a continuous trauma injury. Per LC 3208.1, a cumulative injury occurs as a result of "repetitive mentally or physically traumatic activities extending over a period of time, the combined effect of which causes any disability or the need for medical treatment." The California Supreme Court has also stated that a cumulative injury occurs "as the result of a number of minor strains over a period of time" and are "traumas which are minor in themselves but eventually result in disability." The Court of Appeal has added, "A cumulative injury is one which results from repetitive events, occurring during each day's work, which in combination cause any disability or need for medical treatment."

I don't find this doctrine "nebulous" at all - it may be disconcerting to someone not from California, or an insurance executive with uncomfortable with California law, or a professional sports team seeking to escape long term liability for traumatic brain injury medical claims - but I would not characterize it as nebulous.

Yesterday the California Applicants Attorneys Association (CAAA) issued a press release statement officially condemning AB 1309 (Perea, D-Fresno), a measure similar to the one just signed into law in Arizona.

Assemblyman Perea said in a statement after his bill was introduced that “there’s no rationale for burdening our system with thousands of claims for millions of dollars for non-specific injuries from athletes with little connection to our state.” Athletes are entitled to workers’ compensation benefits, “but they should file where they work and live, like anyone else,” he added.


So are traveling salespeople, truck drivers, flight attendants, migrant farm workers, executives with multi-state jurisdictions, etc.

Oh, and don't forget the coaches, cheerleaders, attendants and all of the other people that travel with the athletes.

Why are athletes singled out?

What is different about professional football, baseball, hockey and basketball players?

That's rhetorical - the difference is long term medical issues - like traumatic brain injury, encephalitis, hip and other joint replacements - medical issues that have root in long term abuse and over use, but otherwise would not be covered by a state's workers' compensation system (other than California's) because they are maladies that build up over time. THAT's what's different.

California recognizes that some injury modalities may not be properly recognized in the context of a single "injury".

Like it or revile it - California grew to the nation's biggest state in part because the government made a promise to the people that moved here that there was a safety net. Some of that safety net is in state disability coverage, some of it is in state unemployment benefits, and some of it is in California's workers' compensation laws.

Is it perfect?

Heck no - far from it. And we have seen the response from business groups since the early 1990s trying to rectify what they see as an impediment to their thinking of how business should be done.

The real danger with AB 1309, as CAAA rightly points out, is that it is the first step towards the entire elimination of the cumulative trauma doctrine.

As much as I dislike the multitude of presumptions that favor certain classes of workers making injury claims, I also dislike the discrimination against certain classes of workers.

And more importantly, I disfavor the disintegration of laws that seek to provide redress and remedy where an injury, as real as any other injury, doesn't fit neatly within the context of a specific event.

Arizona can have their SB 1148 (thought I think the people of that state will live to regret it). But California doesn't need AB 1309.

Supporters of AB 1309 should be truthful and admit that they'd just rather get rid of workers' compensation ... if only they could also avoid civil liability for using up the working class.

Monday, April 8, 2013

Did The Westphal Court Get It Right?

On Friday I said that what the First District Court of Appeals in Florida was saying in the Westphal case was that the "value" in the workers' compensation promise to injured workers was missing.

The National Council on Compensation Insurance (NCCI), Florida's official rate-making agency, announced Friday that the Westphal decision is going to cost $65 million in annual workers' compensation costs and could also produce indirect costs that can't yet be calculated.

Here we go again - swinging the discussion back to costs...

In defense of NCCI, their job is to estimate costs so that carriers and self-insureds can perform proper financial planning.

But the announcement of an annual increase of $65 million creates the illusion that there's something wrong with what the 1st DCA did.

Based on the Florida Department of State, Division of Corporations data, there are about 2 million active businesses in the state as of March 2013. I say about because the list includes entities that may or may not actually be doing business due to entity relationships, replication of business names, etc.

What this means is that the Westphal case will cost each employer an additional $32.50 per year, if that risk was evenly spread out against all employers in the state.

You and I know that is not the case. Some employers will pay more because of higher payrolls and risks, and some employers will pay less, if anything at all.

The point is that while $65 million sounds alarming, it isn't.

Also, the methodology in which NCCI used to make its estimate may, or may not, be appropriate.

NCCI reviewed average TTD durations in other states and analyzed lost-time claims filed with the Florida Division of Workers' Compensation in which no permanent disability benefits were paid.

Because Florida law requires that injured workers be rated for impairment six weeks prior to expiration of their TTD benefits, NCCI also examined Florida TTD claims in which workers received at least 98 weeks of benefits and concluded those claims represent about 7% of all TTD benefits paid in Florida.

NCCI said that, if the Westphal ruling had been in effect, those claimants would have seen a 70% increase in indemnity payments.

NCCI also said injured workers who currently receive TTD benefits for shorter durations may delay returning to work, while those with less severe injuries may receive greater total awards as a part of future settlements.

So there is quite a bit of "guesstimating" in NCCI's calculations - the real answer of course can't be known prospectively.

The unfortunate timing of NCCI's analysis however is that it may have an undue influence of the court.

The 1st DCA has agreed to rehear the Westphal case en banc - which means that all of the justices in the court get to weigh in on the opinion.

The 1st DCA should not concern itself with the cost of its opinion. It should concern itself ONLY with whether a correct legal analysis was performed and a correct conclusion was reached.

We all know that sometimes the courts will bend the law to reach a certain outcome or conclusion, but most of the time the courts are most concerned with whether the law was followed.

In this case it is the supreme law of Florida - that state's constitution.

After my Friday opinion published I received criticism from some in the insurance industry that the court in Westphal should not be legislating from the bench, and that there are other systems such as private disability plans (STD/LTD), Family Medical Leave Act (FMLA), etc. that have in place benefit duration caps, so too should work comp.

My answer was a) most work comp systems do have caps, and b) those other systems are completely different from workers' compensation.

Workers' compensation in many states is generally a constitutionally guaranteed right to the people. Neither STD, LTD nor even FMLA have any constitutional affiliation whatsoever.

The Westphal court said that the gap created by the 104 week cap on temporary total disability (TTD), with no exceptions, until the claimant is otherwise determined to have reached maximum medical improvement (MMI) and ready to have a final benefit determination violates Article 1, Section 21 of the FL Constitution.

That section says, "The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay."

The Westphal court, noting earlier binding precedence, said that provision of the constitution must be construed broadly. Accordingly, because Westphal was put into a position of having no remedy during the period when his indemnity ceased and being declared MMI and eligible for permanent disability indemnity (PD) there was an unconstitutional delay in the administration of his rights.

The court noted that the employer, not Westphal, held all the cards relative to medical treatment and as a consequence held all the cards relative to timely provision of benefits and adjudication of disputes (Westphal page 8).

"Under chapter 440, Westphal was then required to refrain from working and go without disability pay or wages—and wait. Westphal had to wait until the E/C’s authorized doctors opined that he had reached maximum medical improvement, with no guarantee that such a day would ever come. But, even once he fully recovered, Westphal could not, under normal circumstances, recover disability benefits for the indeterminate waiting period."

We must remember that workers' compensation is NOT STD, LTD or FMLA. None of those programs are guaranteed to the People. None of the programs are exclusive remedy. None of those programs are mandatory.

Workers' compensation is guaranteed to the people, is exclusive, is mandatory (unless you're in Texas and perhaps soon Oklahoma).

The court in Westphal isn't dealing in "fairness" - they are dealing with that state's constitution.

The three elements of government, executive, legislative and judicial, exist uniquely to America because they theoretically provide a balance - if the executive or legislative branches overstep their bounds the judicial is there to redraw the borders.

And visa versa. The 1st DCA is not legislation from the bench, it is a check on the excess of the legislature (or executive as the case may be).

En banc, the 1st DCA must concern itself ONLY with the interpretation of the law as it applies to Mr. Westphal, a St. Petersburg firefighter who suffered severe injuries in 2009 and whose TTD benefits ran out before he reached maximum medical improvement.

THAT is the issue before the court. Not whether their ruling will increase some Florida's business another $32.50 per year.

Friday, April 5, 2013

Westphal Is About Value

Five states, including California and Florida, have 104 week caps (with some exception) to temporary total disability indemnity benefits.

A 3 member panel of the Florida 1st District Court of Appeals (DCA) last month created a huge stir by ruling that the limit violated Florida's state constitution, stating that any "system of redress for injury that requires the injured worker to legally forego any and all common law right of recovery for full damages for an injury, and surrender himself or herself to a system which, whether by design or permissive incremental alteration, subjects the worker to the known conditions of personal ruination to collect his or her remedy, is not merely unfair, but is fundamentally and manifestly unjust."

Those are some of the strongest words I have ever heard come out of any court regarding the politically negotiated statutory limitations imposed by a workers' compensation law.

What is interesting about the court's statement is that there is a recognition that the "grand bargain" meant that employees that sustain an injury at work had, 100 years ago, foregone their prior right to sue their employer for redress. In exchange workers were promised quick and complete medical treatment, and fair remuneration to cover the daily expenses of life.

Over the course of evolution of workers' compensation laws this deal seems to have become demented. I dare say the vast majority of us weren't around 100 years ago so we can't completely empathize with conditions that existed back then which led to the "grand bargain" - we only know what we know, which is the experiences we have had since we came into comp.

And our experiences shape our reality. What my perception of reality is differs from yours and the next person's.

A few days ago I posted that every single claims file should be audited in response to recently released statistics from the California Division of Workers' Compensation Audit Unit. The extrapolation of the data demonstrated that, very likely, there was over a hundred million dollars that had been illegally withheld from workers' compensation claimants but nothing is done about it.

The promise to take care of people who are hurt at work, in my view, wasn't matching the reality presented when critical measurements are taken.

My interpretation of what the Florida 1st DCA is saying in the quote above is that unless the primary constituents get together and return to a system that eliminates "conditions of personal ruination to collect his or her remedy" then there will be judicial reconstruction.

The courts are to interpret the law as applied to the facts of a case.

But "the law" is not just the statute that is in question. "The law" also includes the history of the law leading up to the statutory question. And "the law" also includes the Supreme Law - the constitution of the state and even the United States Constitution.

In the Supreme Law certain fundamentals are recognized - the drafters of these high level documents granted certain rights to the people, and imposed certain limitations on the functions of government and business.

Workers' compensation has become all about the costs of implementation and delivery. This is a culture that started some time ago but has really accelerated with various studies from Oregon, Massachusetts, California and other states that review, compare, and analyze costs of claims administration.

Never is there any comparison of the value that any particular system imparts - be it to employers or employees.

Two years ago I posted about a lecture given by Dr. David Dietz, VP, National Medical Director for Liberty Mutual Group, at the 66th Annual FWCI Workers' Compensation conference in Orlando, FL.

Dr. Dietz commented that the delivery of workers' compensation benefits, and in particular medical benefits, lacked any value accountability - the measure was only on the cost of benefits, ignoring the mountains of data that the industry holds collectively that could be used to determine whether any good was coming out of these expenditures.

As an example, Dr. Dietz asked the audience of several hundred people in the lecture how many would choose workers' compensation for their health care over their general health insurance.

Not a single hand went up - a damning testimonial to the sad state of affairs in workers' compensation.

And in the meantime we expect the alleged beneficiaries of our industry - people hurt at work - to completely hand over control of their entire lives, their medical and financial well being, to some unknown third parties working under foreign, incomprehensible rules with artificial limits.

A system none of us would voluntarily subject ourselves to.

The Florida 1st DCA yesterday voted to rehear the Westphal case En Banc (a hearing by the full membership of the court) because, appelants argued, the panel decision has thrown that state's system into turmoil.

The reality is that the 1st DCA's opinion didn't turn the system into turmoil - it was already there. The court simply recognized that the law didn't do what it was supposed to do: protect workers from financial ruination while recovering from injury.

Value was defined by Dr. Dietz as quality divided by costs. Quality is the health outcome of the injured worker.

We measure the cost ... a lot.

We don't measure the health outcome of the injured worker and from what I have seen in my 29 years in workers' compensation, we as an industry don't much care.

The 1st DCA simply recognizes that the system had devolved and that value is missing from the discussion. Now is as good of a time as any to start talking about value.