Monday, May 5, 2014

Dereliction In Judgment

The Workers' Compensation Research Institute in partnership with the International Association of Industrial Accident Boards and Commissions released a guide last week that should prove imminently helpful to workers' compensation professionals that do work across state lines.

Titled “Workers’ Compensation Laws as of Jan. 1, 2014,” the publication effort was spearheaded by Ramona Tanabe and is a compendium of the various laws in a single documented comparison. It is a beefier version of the report that has been published by the U.S. Department of Labor, Bureau of Labor Statistics (the report can be purchased here).

Many people want to know how their state's laws compare to another. This helps them traverse unique jurisdictional quirks.

Other people like the political implications of the report by using it to say that one thing or another is unfair to a particular segment compared to other states.

Of course, such comparisons are nonsensical. The authors of the report know this and issue such a warning in the first few pages, because they know that the workers' compensation laws are complex, that they become even more so when regulatory and case law interpretations are applied, and that there really isn't any way to do an apples to apples comparison.

Still, the California Applicants Attorneys Association decided to issue a press release that decries the permanent disability rate of the state because it ranks fifth from the bottom of all state PD rates.

“The new study shows the inadequacy of compensation for lost earnings due to work injuries,” CAAA President Jim Butler said in a statement. “It is time to restore the balance to the California workers’ compensation insurance system. Insurance companies are reaping the benefits while working Californians are compensated at the bottom of the nation.”

I like Jim. But he's incorrect in this statement. The study shows nothing of the sort of conclusion he and CAAA are drawing.

We all know that there are many factors in a PD rating - one of them the length of time that the weekly benefit amount is paid out. The study doesn't tackle this complex calculation. And regardless of what the PD rate is insurance companies will always be "reaping the benefits" because they are in the business of insurance, and applicant attorneys likewise would reap any benefit of a PD increase because that's how they get paid.

Sacramento Bee columnist Dan Walters reported on his Capitol Alert blog Wednesday that the comparison shows that “California workers who suffer permanent job-related injuries and illnesses are entitled to workers’ compensation payments that are among the lowest in the nation.”

Again, Walters makes conclusions that are disingenuous - the study does nothing of the sort, particularly when one looks at the temporary total disability indemnity rate, which is among the highest of all jurisdictions (and is pegged to an inflationary standard which will likely keep the relative rate stationary).

So please politically oriented readers of the study - stay away from making statements that mischaracterize the material.

Jesse Ceniceros, president of Voters Injured at Work, said injured workers in California seem to be receiving less and less of the fair and adequate compensation promised by the state constitution each year as medical costs and operational expenses account for a growing percentage of comp payouts.

Maybe that's true - about 60% of each claim dollar goes to the medical side of the equation.

Still, the average cost of a litigated, attorney represented, claim in California is now about $80,000.

That's about twice what it was 10 years ago - a rate of inflation that most investors would envy, but which is unrealistically sustainable if the system is to remain somewhat viable since, based on reports from the Workers' Compensation Insurance Rating Bureau earlier this year about 78% of all claim costs come from the 11% of claims that go litigated with attorney representation.

However, while the applicant attorneys decry the benefit rate of PD, there simultaneously is increased pressure on the dispute resolution system as payers hold back benefits because of some perceptions in the way SB 863 is to be interpreted and/or administered, and the applicant attorneys push back with their own interpretations.

A WorkCompCentral report this morning details how disputes about how to carry out SB 863 changes are bogging down the workers' compensation system and making day-to-day life miserable for both attorneys and their clients.

Much of this consternation centers around the anonymous IMR process.

The Administration relied, in my opinion, on erroneous assumptions concerning the volume of medical treatment disputes, and consequently the IMR sub-system quickly became overburdened with requests for review.

In addition, the law for IMR is circular - once in the IMR system you go round and round and round - the system is so technical, so procedure oriented, that the practice of workers' compensation law is no longer about resolving a case, but is about trying to get to some point where a conversation can be held just to move a case forward towards some resolution.

San Diego attorney John Don said"I have never filed for so many expedited hearings in my 20 years of doing workers' comp."

And defense attorney Scott Star reiterated that "more time has been spent on these issues then focusing on the big picture in the case," so cases are not moving along towards resolution.

Medical provider networks also seem to be a cause of litigation because many MPNs lack sufficient coverage.

"Many of the MPNs have been unable to find enough doctors in some of the sub-specialties, resulting in a fairly big push to move injured workers out of the MPN," Star told WorkCompCentral.  

The last statistics from the WCIRB show a continuing increase in the amount of claims dollars going towards attorney fees - particularly defense fees. Defense lawyers, according to the WCIRB, got $773 million in 2012 - a 22% increase over the $608 million paid to defense lawyers in 2010. Likely that figure will exceed $800 million in 2013.

While the applicant attorneys have also seen some increase, the rate is much more muted - the WCIRB says applicant lawyers took in about $450 million in 2012, up from $386 million the year before.

Which brings me back to the WCRI study.

Any time there is a state by state study in anything workers' compensation there are going to be people who either criticize or celebrate the statistics.

But the statistics lie. There is no way to adequately compare one state to another.

This applies to whether one is comparing state laws, costs, rankings or otherwise and whether the study is reported by WCRI, WCRIB, the State of Oregon or any other reporting entity.

The sad part of all of this is that the debate sparked by the WCRI report is exactly why workers' compensation fails to deliver on political promises: because the conversation gets fragmented.

We don't talk about workers' compensation in a holistic sense. We take and use the various parts to prove certain points, to support disassociated arguments, to dig for what makes it better for whatever special interest is trying to prove a point.

There are many different ways to compare one state to another - but that shouldn't matter. Why should Californians care what their compensation is compared to New York, or Illinois, or Alaska for that matter?

The debate about whether one state's system is competitive versus another state is misguided. There is no state-by-state competition going on here. The issue is not whether one state is better than another in any particular respect. The issue IS whether a state's workers' compensation system performs its constitutional mandate.

In California that mandate is to provide medical treatment that "cures or relieves" and compensates victims and their families  with "support to the extent of relieving from the consequences of any injury or death...".

These are vague and amorphous standards and require looking at the total picture a whole, without segmenting categorized benefits.

Listen - no one will ever be happy all of the time with everything that occurs in workers' compensation. It is a system that tries to do too much of everything for everybody so no one is ever happy all of the time.

That's how it is.

And we can all pick out specific cases and instances where the system fails.

We can also all pick out specific situations where the system works.

Attention on the PD rate takes the attention away from where it should be right now: making the system accessible. If the anecdotes are correct - that the litigation delays are even greater after SB 863 - then there has been a terrible dereliction in judgment.

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