Thursday, June 12, 2014

Brakes And Friction

Traveling to the California Workers' Compensation Insurance Rating Bureau's Annual Meeting yesterday I got talking with a workers' compensation attorney about the state of the industry, specific to California.

I told him that I didn't think it was in good shape and that SB 863 has ended up doing more harm than good, and likely won't offer any relief from claim costs, and in fact may stimulate costs even more, at least in the short term.

The reason, I offered, was because SB 863 did more to micro-manage the system than any prior reform attempt and consequently is causing more friction.
Brakes work because of friction.
The evidence, I said, is in the rise in defense attorney fees over the past couple of years to nearly a billion dollars annually today.

It seems, I said, that workers' compensation has become much more about process rather than substance. The reason litigated claims consume so much of the claim dollar is because more time and energy is spent maneuvering to take some perceived advantage of procedure: objecting to Medical Provider Networks, Qualified Medical Examination panels, Utilization Review decisions, etc., rather than get to the meat of cases to get them settled.

My traveling friend, a defense attorney, agreed. He told me it seems most of his time is now spent at the Workers' Compensation Appeals Board District Offices on expedited hearings over some medical control issue rather than dealing with the case in chief and getting claims resolved.

He also said that he has seen a dramatic increase in cumulative trauma and post termination claims - the applicant's bar has figured out the weaknesses in the law, in the procedures, and in the court opinions interpreting this whole mess, and are exploiting those weaknesses to get to the pay day.

These actions beget defense exploitation of procedure as well. The carriers and their attorneys have also found where the narrow paths are in claim management that give some control over where and how money gets distributed.

Fingers can be pointed, and blame can be assigned, but the way an applicant attorney is going to look at it, these latest experiments at workers' compensation "reform" are simply problems and obstacles towards getting the ultimate goal, which is a healthy permanent disability rating.

Likewise, there are some that are going to deny and delay as much as possible for capital preservation, but for the most part those in control of the claim dollar are simply modulating the outflow in accordance with what the law says is the obligation.

Honestly, I can't fault either side (when motivations are pure and not ethically or morally questionable) because that's how the system is set up.

But at some point in time one has to ask what is enough.

What is enough?

What stimulates workers' compensation reform, the push and the pull, is that question - at various intersections of the financial equation that drives conflicting motivations there is push back. Someone along the line has had it, and says "this is enough," and the brakes are applied.

With SB 899 the applicant bar said "enough" to the indemnity reductions. With SB 863 the employer community said "enough" to open ended medical treatment.

And so on.

All along the way the brakes are put on.

Brakes work due to friction. The pads squeeze on the rotor, and friction slows the rotor, usually in a controlled fashion.

Friction causes heat. This is the necessary by-product of braking and is one of those basic theoretical dynamics we all learn in grade school - Sir Isaac Newton's theory that all actions have a equal, but opposite, reaction nicely describes braking.

Engineers, particularly those in the mechanical fields, have to deal with friction all of the time in their designs and problem solving. They know that the more moving parts there are, the more energy is needed to accelerate and maintain action, and more force (i.e. friction) is needed to slow or stop the action.

In general there are two ways of dealing with friction: reduce the moving parts or increase the amount of lubrication (or perhaps a combination of the two).

Workers' compensation has lots of moving parts. It's a complex, social benefit system with parts related to capital collection (premiums), investment, redistribution, administration, medical treatment, litigation, evidence, indemnity, rehabilitation - the number of moving parts in workers' compensation is extraordinary.

Unfortunately, with each workers' compensation reform we have been successful in neither reducing parts or friction. In fact it seems that we have increased the amount of moving parts, and have failed to increase a corresponding amount of lubrication.

All of this is to say that I don't expect much good news to come out of the WCIRB Annual Meeting today.

Perhaps I will have something different to say tomorrow. Perhaps not enough.


  1. Amen, David. I suspect your post tomorrow will be even more invigorating than today's post. Keep up the sad but true assessment of a system gone berserk.

  2. Outstanding post, well said. There are plenty of fingers to point on both sides. We should look back on the previous systems and maybe try some things out that did work. Prior to SB 899 and the old treating physician's presumption, agreed medical examiners or each party getting their own QME worked just fine. My files were much thinner then and most of my court appearances concentrated on resolving the case in chief. Now I spend most of my time in court on peripheral issues with an increasing number of very unhappy applicants. Perhaps letting the AME and QME doctors having final say on medical treatment issues would be better than the ridiculous utilization review and IMR system everyone is currently bogged down in.