|Photo is non-illustrative. Just me windsurfing big waves when I still could...|
That's a pretty pessimistic viewpoint.
But a couple of stories today highlight the truth in that statement.
The State of Nevada is, for the first time in 15 years, is taking a look at the discount rate used to calculate the present value of lump sum settlements and awards.
As you know, the cost of funds, or ability to generate future returns, has been stagnant the past few years as the Federal Reserve Bank has kept the lid on monetary policy following The Great Recession.
I don't need to go into the financial wizardry that has made it so, but the bottom line is that interest rates have never been so low for so long.
That means that a dollar invested today doesn't produce much more than a dollar tomorrow.
Conversely, it also means that if an annuity (a steady stream of regular payments) is based on a higher interest rate than what is market normal, then the recipient of the annuity gets cheated out of future buying power.
A $100,000 award that would be paid out over 20 years has a present value of only $31,180.47 at the 6% rate, but is worth $55,367.58 at a 3% rate.
Las Vegas claimants' attorney Virginia Hunt, with whom I've had the privilege of working in the past, brought this to the attention of Division of Industrial Relations officials, who admit they have been negligent in following the law, which mandates that the division look at the discount rate every year.
The division hasn't reviewed the rate since 2000 and hasn't changed the rate since 1997.
The difference is significant. In September 1997, the federal funds rate was about 5.5%. On Friday, it was 0.14%.
DIR Chief Administrative Officer Chuck Verre told WorkCompCentral Friday, "We did not do what we should have done. It's as simple as that."
Bully for Mr. Verre and Mrs. Hunt for tackling an important financial component of the claims pay process.
In the meantime, the political football that is workers' compensation is being played in Illinois.
There's a budget fight going on in that state between Gov. Bruce Rauner, a Republican, and House Speaker Mike Madigan, D-Chicago; the budget deadline was June 30. Workers' compensation, which was just recently "reformed" in Illinois, is said to be the bargaining chip being used to break the stalemate.
Rauner has said he may support a spending plan that includes a tax increase if Democrats agree to a list of nonfiscal to-do items, including workers’ compensation reform.
But instead of dealing with House Bill 1287, a bill passed by the House of Representatives on June 4 that included a provision to prohibit insurers from charging "excessive rates," a provision that Rauner and his business allies found objectionable, the Senate approved its own version of workers' comp reform, SB 162, introduced by Sen. Kwame Raoul, D-Chicago.
SB 162 incorporated some of the ideas contained in Rauner’s memo, but there are numerous contentious issues in the bill on which the parties are basing fiscal compromise.
In the end, as with everything politics, “It depends who else gets a haircut,” said Raoul.
And the medical part is about yoga.
Yoga has come into vogue as a treatment modality for back pain patients in workers' compensation.
A survey by the Centers for Disease Control and Prevention released earlier this year says the number of yoga practitioners has doubled from 2002 to 2012, highlighting the popularity of this ancient Indian exercise.
One of the best remedies for generalized back pain is exercise - and yoga is exercise.
Even the Official Disability Guidelines recommends yoga for “highly motivated patients.”
The key of course is the injured worker must be "highly motivated," which in practical terms means discipline - participating in the exercise on a daily basis.
Claims payers seem to embrace yoga as "treatment."
"Treating chronic pain is a complex endeavor and in some cases involves utilizing alternative treatment options such as yoga," California State Fund Medical Director Dinesh Govindarao wrote in a statement to WorkCompCentral on Friday. "The biopsychosocial treatment model is an effective way to approach chronic pain patients. State Fund supports the use of alternative treatment options on a case-by-case basis with utilization review oversight."
A difficulty is that yoga providers and claims payers don't particularly gel on billing codes or how to reimburse for expenses tied to yoga instruction and practice.
And that's because there's no standardization of the practice, with literally dozens of different forms or disciplines.
But, regardless, yoga is cheap, it's non-invasive, and its practical effects for the "highly motivated" aren't in dispute - it's good medicine.