Wah, Wah, Wah

Everybody has to get their share.

At least that's the message that I got out of the latest study from researchers at National Institute for Occupational Safety and Health in their study just published by the Journal of Occupational and Environmental Medicine.

According to them, accepted workers' compensation claims that do not result in medical payments could be costing group health insurers at least $212 million a year because folks who don't get their treatment through work comp for their work injuries or illnesses do so through their group health provider.

Claims that do not result in medical payments through work comp are referred to as "zero-cost claims" in the study.

The researchers' analysis of more than 12,000 claims from 2002 through 2005 revealed that 15.9% of the claims were zero-cost claims. Claimants with zero-cost claims were more likely to use group health insurance services and incur more group health costs.

"In the three months before an occupational injury, 53.9% of workers with positive-cost workers' compensation medical claims and 61.6% of workers with zero-cost workers' compensation medical claims used the outpatient group health insurance at least once," the study says. "Within three months after an occupational injury, group health insurance utilization for outpatient services increased to 61.2% and 74.1% for workers with positive- and zero-cost workers' compensation medical claims, respectively."

In addition, one of the study's most significant findings is that group health insurance costs increased after a work-related injury, regardless of whether the workers' compensation claim resulted in any medical payments.

Claimants with zero-cost claims used group health insurance 20.3% more after their date of injury, which created 400% more group health costs. Meanwhile, claimants with positive-cost workers' compensation claims used group health services 13.5% more after their date of injury, creating a 225% cost increase.

The differences could be due to the fact that zero-cost claims have no workers' compensation medical benefits payments, whereas positive-cost claims may be creating more group health costs due to "under-compensation," the authors wrote in the study.

According to IBISWorld’s Health & Medical Insurance market research report total revenue for the health insurance market is $620 billion.

So while $212 million may seem like a lot, it is only 0.003 percent of the total revenue taken in by the health insurance industry.

In other words, a drivel.

In the meantime the health insurance industry drives workers' compensation costs up through its subrogation efforts. In California, for instance, Kaiser Health System and Anthem Blue Cross are the number 6 and 7 largest lien filers in the state system by volume.

And of course there are studies suggesting that workers' compensation takes on its unfair share of non-industrial medical care because the injured or ill don't have medical insurance or can't afford the care.

Which is why all of these "cost-shifting" studies are ridiculous and highlight the insanity of our fractured medical provision systems.

Maybe the answer isn't "24 hour care" or "universal coverage" but there has to be some way of getting over this finger pointing and cost shifting.

In the grand scheme of things the 0.003 percent of medical care that should have been the jurisdiction of work comp but is paid for by group health doesn't amount to a hill of beans - in the end it us: you, me and the rest of society that eventually pays for all of this anyhow.

To us, it really doesn't matter where the coin comes from because ultimately it's out of our pocket anyhow, whether in the form of higher premiums, higher taxes, higher medical fees, higher consumer prices, etc.

We all pay.

How that money is divided up at the back end is just more special interest pandering.

So group health pays more than it should for medical treatment.

Wah, wah, wah.

The industry should rejoice that this special interest pandering creates more jobs within the system, thereby creating more insurance premium, thus more "capacity" to handle more claims.

Want to stop cost shifting? Take down the walls between the systems - voila, no shifting...

Delay Or Deny At Your Risk

There are so many reasons why both employers and workers feel that workers' compensation is "broken" or doesn't work.

Peter Rousmaniere, who is beginning work this week for WorkCompCentral, suggests in his column reviewing two studies on perceived delays in medical treatment that delay may arise as much from indifferent doctoring skills as days elapsing on the calendar. 

An employer consultant relayed to me a factual scenario indicating another cause of this perception - standard claims administration protocol, which is defensive in nature as opposed to being aggressively pro-active.

Rousmaniere cites a couple of studies in his column. A Texas Department of Workers' Compensation survey of injured workers documents wide discrepancy in perceptions, but also notes that up to 50% of all survey respondents complained of some delay in receipt of treatment.

Another study cited by Rousmaniere conducted by Harbor Health, which specializes in designing workers’ compensation provider networks, looked for differences in claims outcome, including medical cost and litigation rates, and if surgical treatment happened early or late in the course of treatment.

Harbor Health found that early surgery in carpal tunnel cases (earlier than recommended by treatment guidelines) produced slightly more cost in medical expense but much less cost in indemnity expense.

Let's put these findings into context.

Assume a 28 year old male worker who complains of "numbness, tingling and pain in both hands for the past year or so" and that "IW states that he thinks he has carpal tunnel syndrome."

First thing that is going to come to mind for most claims administrators is, "bull!" 28 and male do not fit the normal risk demographics for carpal tunnel syndrome, and the fact that the employee said he "thinks" that he has carpal tunnel suggests that he is looking for a claim.

However we don't KNOW that! All we know is that there is a worker with a complaint. The complaint is some physical symptom presentation that doesn't make biological, anatomical or medical sense.

But a claim was made.

Do you deny? Do you delay? Do you accept and just get the ball rolling?

What do YOU do?

My guess is that most of you would say issue a delay letter and begin investigation in order to protect your legal position.

Note that you are protecting your LEGAL position - not the employment position, not the social position, not the psychological position, not the medical position.

Immediately you have postured defensively.

What is this investigation going to cost you? In terms of actual out of pocket expense, in terms of ongoing liability for indemnity and disability, in terms of potential future medical expenses?

How about lost productivity on the factory floor, or damaged morale within employee ranks? What about over time for replacement workers?

Why gate-keep? Why engage in trying to deny rather than getting the worker immediately and without question to a doctor?

Yes, there is paper work to complete, and the normal three point contact needs to be initiated as well as the normal investigatory activities - but the immediate response should be to assist that employee file the claim, immediately get that employee to a doctor (the employer should facilitate that engagement), get human resources involved (if there is an HR department) to get more information about what is REALLY going on with this employee (as noted, the risk factors don't add up) and make sure that this employee KNOWS that his needs will be met.

Overboard? Taking on a claim for which there may ultimately be no liability?

Perhaps.

But how often do denied claims really, really stay denied? The answer: Only until the worker gets himself to an attorney who knows how to work the system. And then claim costs really escalate.

The perception in delays with workers' compensation medical care is because we facilitate those delays by being on the defensive as soon as a workers says they aren't feeling good, or complain of some symptoms that they relate to their work.

The Texas and the Harbor Health studies cited by Rousmaniere suggest that we can control such perceptions by being aggressive in getting the claimant to a doctor RIGHT NOW, and just taking care of the claim.

If in fact there is industrial causation then the employer/administrator owns that claim and the earlier it is taken care of the cheaper it will be.

And if in fact there isn't industrial causation then at least the employee was shown by the employer that there is a caring attitude and the result should be a more engaged, happy employee on the line.

If that employee isn't happy, then there are other remedies for dealing with a less than satisfactory employee outside the workers' compensation system, and human resources has the tools for that.

Copy Fee Paralysis

I'm a free market believer.

In general I have faith that any given market will deliver goods or services at fair prices based upon the relationship between supply and demand.

This relationship is subject to various factors that can affect either supply, or demand, or both, but in general given any particular good or service a market, assuming sufficient competition, will find a point where value is determined by the market participants (buyer and seller).

This is because in the vast majority of markets the demand part of the equation is voluntary.

For instance, you may not really need a new car right now, but because a lot of people may be thinking the same way you are, prices for new vehicles go soft so you have more negotiating power.

Or the supply of fuel may be constricted because of refinery limitations and you need that fuel to power your new car to work or to take the kids to school so you pay a little bit more for that fuel than you would have considered last week.

When I was young I used to think that the theories of market based economics was equally applicable to workers' compensation.

What I didn't appreciate at the time was that workers' compensation itself is not a voluntary market. Workers' compensation is, in general, mandated by law (except in Texas).

Workers' compensation is what we call a regulated market. The reason it is regulated is because the requirement to maintain workers' compensation is mandatory so the consumer doesn't have a whole lot of choice.

Yes, there is some difference in pricing, but when it really comes down to the bottom line, the consumer (read employer) has no option and must purchase some sort of coverage.

As a consequence, many things in workers' compensation are the subject of micro-regulation or management.

Elements of supply in the workers' compensation industry must be artificially regulated because there is always demand - forced demand due to the mandatory nature of work comp.

Because this demand is artificial it is easy for the suppliers of goods and services to inflate pricing without market repercussion.

Within a regulated market, though, market economics still come into play, but in a different sense. Competition is defined in different ways, typically through goods or service quality, as opposed to quantity, though at certain price points quantity (read supply) may be affected too.

This is easily seen in the latest regulatory fight in California over photo-copy service fees.

SB 863 mandated the Division of Workers' Compensation come up with a fee schedule for copy shops because the perception by the drafters of the bill was that this was an area of abuse.

Never mind that copy service fees constitute less than 1% of claim costs - because it is unregulated in a regulated market the perception was (and perhaps still is) that the copy service industry was taking payers to the cleaners without delivering any value to the system.

There are essentially two kinds of copy service firms - those that cater to payers and defense attorney firms, and those that cater to applicant attorney firms. They have different cost structures because of various market dynamics and consequently their fees vary greatly.

When DWC announced that it was going to study copy service fees to develop a fee schedule the defense copy firms fully supported the idea, arguing that applicant copy firms were grossly over billing and that their fees needed to be tightly constricted.

This tune changed with the first proposal came out of the Berkeley Research Group, hired by the Commission on Health, Safety and Workers' Compensation, to study copy fees and come up with a proposal.

Turns out that BRG's proposal was also going to ding defense copy shops.

Now the two sides, defense and applicant shops, have banded together to argue that neither side can stay in business with the fee proposal.

Funny how combatants sometimes end up as bed buddies...

Anyhow, there have been meetings with the top people all involved to come up with a compromised solution that will keep copy shops in business, supply the records needed by system participants, and reduce that 1% of claims costs even further.

But it's been well over a year since SB 863 was unleashed and nearly a year since most of the law became effective.

We still don't have a copy fee schedule.

There have been conference calls, meetings, debate, proposals, solutions - and no one is telling the outside world what the deal is.

Reports indicate that there is no way any fee schedule will be in place by the end of the year, which is a shame. The resolve to get the fee schedule done is compromised by the interests of the copy service industry.

Here's where market economics can come into play: the DWC should stop listening to all of the "stakeholders" (as they describe themselves even though EVERYONE involved other than employers and injured workers are "vendors").

That's right - DWC should just act. Forget all of the arguments, the whining, the "we'll go out of business" talk. There will be survivors, and some will be buried with their copy machines.

The government issued a mandate - regulate this little tiny market.

So get the job done. DWC should stop pandering to copy shop special interests. There are plenty of proposals on the table. Pick one.

Everybody else will figure it out once they know what the rules are. There will be losers, and there will be winners.

In the meantime the system is held captive due to inaction. Payers stop paying, vendors stop vending. Paralysis is good for no one.

Football, Common Law and Disruption

Yesterday I opined that disruptive social technology would one day result in the forever changing workers' compensation as we know it. I don't know how, and I don't know when, though I suspect we're in the midst of this disruption right now.

It just takes a little longer for disruption to occur to social systems due to entrenched interests.

Since the beginning of workers' compensation there has been this tension between compensable and non-compensable. There are times when either an employer or employee wants a claim to be compensable under the comp system, and it isn't; and there are times when an employer or employee doesn't want a claim to be compensable, and it is.

All of the recent cases, settlements and legislation in the professional sports industry typifies the pressures underlying this conflict.

As you know the National Football League entered into an historic settlement with the player's union to resolve claims of traumatic head injury, finally acknowledging that perhaps the game may in fact lead to serious deterioration in brain function over time.

And the NFL has been instrumental in getting laws passed around the country to restrict recognition of trans-jurisdictional adjudication and continuing trauma claims.

So in one instance the NFL capitulated to the fact that there was no workers' compensation protection for the brain injury claims against it, and in the other instance it was worked diligently to create a web against such liability in the future.

The one thing that these actions fail to fully account for is that workers' compensation is not a natural creature; i.e. it did not get its genesis in what is known as The Common Law.

Common law, as we learn in law school, is largely based on social norms handed down through the centuries from our forefathers in a distant land. The Common Law recognized how society worked and was built upon case law - the recordation of facts in a case, application of social logic to that case, and publication of the result or decision.

In other words, case law is what created The Common Law, because there is no way to predict all of the myriad of factual scenarios that might comprise a "case" or claim.

Bringing this around the block, just because the NFL resolved claims against it for instigating a mode of employment that allegedly precipitates brain injury and pushed legislation to constrict the filing of workers' compensation claims doesn't mean that its members (i.e. the teams themselves) are in the clear.

Nor does it mean that the players aren't without remedy.

It simply takes someone with enough knowledge and skill to point this out and attorneys representing football players in Missouri are doing so.

Five former players for the Kansas City Chiefs are suing the professional football franchise for alleged brain injuries they suffered during their careers, jumping through a unique loophole in Missouri law that allows them to avoid workers' compensation exclusivity before it closes on Jan. 1.

Missouri allows employees to sue their employers directly for occupational diseases, something that was the product of legislative tinkering with the comp system some time ago at the bequest of employers who didn't think they should be paying for disease when the origin is not indisputable.

In 2005, state lawmakers amended the Missouri Workers' Compensation Act to narrow the definition of a compensable injury as being one that happens as a result of an "accident."

The state Supreme Court in 2009 construed this change as meaning that workers could recover under the common law for occupational disease claims because an occupational disease was not an "injury" under the act's newly limited definition.

Two of Missouri's three intermediate appellate courts have since issued decisions reiterating that injured workers could file civil suits for occupational diseases. The Western District Court of Appeals issued a decision in 2011 in the case of State ex rel. KCP&L Greater Missouri Operations Co. v. Cook, and the Eastern District Court of Appeals came to a similar conclusion in the case of Amesquita et al. v. Gilster Mary-Lee Corp. on Sept. 10.

The plaintiffs assert that the Chiefs, as an employer, had a duty to its players to "keep abreast of the scientific developments relating to brain trauma which its employees were regularly exposed, and "to notify, inform and educate plaintiffs and the public of any potential long-term risks of repetitive head trauma."

Fair enough.

Again, workers' compensation is not a creature of natural law, and because it isn't the obliquity of its application will be challenged time and again where either the employer or the employee feels short in the bargain.

When this happens the nature of workers' compensation changes. Loopholes and exceptions are created. This is why we have swiss cheese law in workers' compensation.

These law suits are disruptive. They challenge the status quo.

These suits do not, by themselves, constitute the disruptive social technology, but I think they are the harbinger of things to come.

Just as workers' compensation itself was a disruptive social technology 100 years ago, challenges in the professional sports world are putting pressures on the current system that are provoking change.

To read the complaint, click here (subscription to WorkCompCentral required).

Disruptive Technology

Amazon.com founder and CEO, Jeff Bezos told 60 Minutes correspondent Charlie Rose candidly that eventually the disruptive company that reinvented retail will itself, at some point in time, become the subject of some other disruptive technology.

Bezos quipped that he hoped it was after he was dead when Amazon is disrupted into the history books, but Bezos was quite clear that in his opinion every company eventually succumbs to disruptive technology, that one can not forecast when that will happen and that nearly every one can not see it coming:

Jeff Bezos: Companies have short life spans Charlie. And Amazon will be disrupted one day.

Charlie Rose: And you worry about that?

Jeff Bezos: I don’t worry about it 'cause I know it’s inevitable. Companies come and go. And the companies that are, you know, the shiniest and most important of any era, you wait a few decades and they’re gone.

Disruption occurs, and it occurs faster more than ever because technology has caused human intelligence and understanding to leapfrog all prior generations.

Indeed, disruption occurs to systems too. Systems don't die as quickly as companies do. Disruption takes more time with systems, but disruption to systems DOES occur, and generally in dramatic fashion.

Systems disruption is an area of study in military study.

Military thinkers like to interrupt social networks and physical networks - they focus on attacks to key components that integrate the facilities of social interaction.

Al Qaeda's strategy over the long term is based on systems disruption. Think 9/11 and the Twin Towers. That single event changed a number of American systems forever: travel, event attendance, banking, privacy, and on and on.

Our entire way of life was completely, and forever, disrupted - and not in any positive way other than the fact that 9/11 showed us just how vulnerable we were as a country and as a society.

So why shouldn't workers' compensation likewise become disrupted?

We are seeing signs of this disruption already with the passage of Oklahoma's reform implementing a form of voluntary work protection benefits.

This sort of disruption takes time to occur because the systems subject to attack are deeply entrenched through political and financial controls.

But eventually those who harbor that control die, as Bezos pointed out.

That's the bottom line.

Consequently such control gets divided and democratized so that others can share in the control.

When those controls are democratized, spread out from a single control unit to several control units, the power that was ensconced in that single unit gets divided, diluted, compromised.

It is this power that maintains the system, and when it is compromised the system itself dilutes, making it vulnerable to disruption.

And that is what we are seeing with workers' compensation. The power bases that were fundamental to the underlying structure and thought of workers' compensation have been compromised, diluted, and are now, more than ever, subject to disruption.

The fact that people complain about a "broken system" or that there is even any debate at all about a "broken system" is symptomatic of this state of vulnerability.

I suspect that Oklahoma's forging ahead with this disruption to the normal workers' compensation pattern won't take that long to facilitate other disruptive social technologies.

Not every state is going to implement some version of opt-out strategy. Most say, for instance, that there is no way in the world that California would succumb to any attempts to allow employers to "opt out."

But who said that opting out of workers' compensation is the ONLY socially disruptive technology that can occur?

I'm with Bezos and when I put my chips down on the table I going with the long bet - that workers' compensation itself will succumb to socially disruptive technology eventually.

I may not be around to actually witness it, but I can feel it. It is inevitable. You will either be on board during the transition, or you will be left behind to die.

Fraud Notice???

I got my annual notice from the California Division of Workers' Compensation about fraud.

This notice is mandated by Labor Code section 3822, which states:

The administrative director shall, on an annual basis, provide to every employer, claims adjuster, third party administrator, physician, and attorney who participates in the workers' compensation system, a notice that warns the recipient against committing workers' compensation fraud. The notice shall specify the penalties that are applied for committing workers' compensation fraud. The Fraud Assessment Commission, established by Section 1872.83 of the Insurance Code, shall provide the administrative director with all funds necessary to carry out this section.

Let me just get to the bottom line - this notice is a ridiculous waste of money and resources. The notice smacks of political pandering and does nothing to prevent, curtail or even limit fraud.

The notice I received focuses on Employer Fraud but also warns of all sorts of other fraud.

Employer Fraud is described in the notice as paying less for coverage by under-reporting payroll, misclassifying employees, fudging on job descriptions, paying directly for medical treatment that should otherwise go through work comp (though there are plenty I know who would prefer that to being subjected to work comp treatment!), etc.

The notice further states that it is a felony to make, or cause to be made, some misrepresentation in an attempt to deny or limit claim liability.

There are all sorts of other fraud examples in the notice, and per the Labor Code, the penalties are outlined in the notice.

Listen, I know that fraud can be a problem. We see fraud in all sorts of systems, not just work comp. If there's a system then there's someone who figures its easier to commit the fraud and risk punishment than it is to be legitimate.

Because the risk is outweighed by the reward.

It's nice that the Legislature felt it important that everyone in California know about workers' compensation fraud because, as the notice says, "it harms employees by undermining the perceived legitimacy of all workers' compensation claims."

But I get a notice from my insurance company every year about fraud. Sometimes I get a poster with nasty looking n'er-do-wells posing as the criminals.

There's a fraud notice on every Application for Adjudication of Claim.

There's constant media stories (and WorkCompCentral is not immune to these stories) about someone, somewhere committing some sort of workers' compensation fraud.

So we need ANOTHER reminder?

It's almost like the entire workers' compensation process is undermined by all of the fraud notices - I mean, fraud must really, really be bad in workers' compensation to justify all of these warnings about fraud.

It seems to me that the perceived legitimacy of all workers' compensation claims is undermined by all of these fraud notices because why would we be getting all of these warnings if nearly every claim were in some way fraudulent?

My guess is that the vast majority of these junk mail pieces (it came with some other Employment Development Department notices that are likewise junk) get thrown in the trash without any consideration whatsoever anyhow.

Maybe I'm just cranky and getting old, but I don't need to be reminded of workers' compensation fraud and my guess is that most people in California don't need to be reminded either.

Reverse Roles And Take It In

I hear two opposing arguments about workers' compensation all of the time.

One camp says that workers' compensation is broken, doesn't do what it's supposed to do, costs too much and delivers too little.

The other side says stop the whining, buck up and use the system; that it is what it is and won't get any better and works just fine if you're willing to put in the effort.

Both sides of the debate have some merit, and both are likewise erroneous - it all depends upon how one fits into the system, and what one's expectation is from the system.

The argument that an employer should just pay claims and not worry about the cost because it gets passed along to the ultimate consumer ignores that fact that there are plenty of competing business owners who are going to cheat or otherwise fudge their workers' compensation obligations for a competitive advantage.

In that sense, the cost of any claim isn't passed along to the consumer because the business that tries to do so is driven out of business by the others seeking the unfair advantage.

And for the majority of claims workers' compensation does work just fine - so long as there isn't any lengthy period of disability or medical treatment and expense that fall outside guidelines.

We pass laws and implement regulations because we need to deal with the outliers. In doing so we sweep the vast majority of the workers' compensation experience into these laws and regulations even though they really shouldn't be so constricted.

When I first started practicing workers' compensation defense law our firm required all of the attorneys to take applicant/injured worker cases where there was no conflict of interest. The purpose was to make sure the attorneys had experience dealing with the "other side."

Part of this was to ensure that the attorneys had compassion for what was going on with the injured worker. Part of this was to provide the education that can only be obtained by going through what one must go through in the system. And of course this would translate into a competitive advantage because experience allows us to have a deeper understanding of how everything fits together.

The real advantage as I look back on that experience some 25 years later is that it helps with the understanding that not every claim is bad or fraudulent, and not every claim is meritorious.

Some claims are just paid. Some claims are fought hard. Sometimes we pick the wrong battles, and other times it was obvious that the right battle was fought.

But most claims are just what they are - an injury that requires some medical attention and a couple of bucks to get through the tough time. They fit within the system and the system works just fine.

When we think of the gross volume of claims that go through workers' compensation it is a wonder things work at all, let alone as well as they do.

We make changes and adjustments to the system, and to our handling procedures, to accommodate those that aren't within the four corners of the system as we know it, and there are the claims that don't fit within those parameters either.

So not everything works as intended, and not everything is as bad as it seems. There's always room for improvement, but we don't need to improve everything all of the time.