Does Chicago have the Worst-Run WC Defense Program of All Time?

Thursday, August 2, 2012 | 0

In our view, you can’t run a defense program worse than the City of Chicago’s workers' compensation defense program is being run. The only reason it isn’t a headlines-grabbing “scandal” is that so few people truly understand workers’ compensation or its metrics.

We are laughing out loud to see the recent battle between Ed Burke, the chairman of the city’s Finance Committee who runs the city’s workers' defense program and City Inspector General Joseph Ferguson. There is no question the inspector general and one of the city's most powerful political leaders are at an impasse over WC claims records that could provide the rest of us with some idea why Chairman Burke continues to do what we feel is such a depressing job in mismanaging this aspect of city government to the tune of over $100 million each year. While Mayor Rahm Emanuel continues to win kudos by bringing new employers and jobs into our city, the pallor of this situation will continue to weigh on his record also.

Your editor will personally donate $100 to the favorite charity of any reader who can find documentation that there is a municipality on this planet that pays anything close to the $100M amount for WC benefits on an annual basis. That staggering nine-figure number should be shocking to all Chicago taxpayers. Please compare this payout to the State of Illinois which has about double the number of workers as the  city doesas badly as the state runs run their WC defense program, it has about the same annual payout as the city of Chicago. Is it hard to see why both governments are running massive annual deficits?

If you aren’t sure, the city of Chicago is running an annual budget deficit of over $600 million each year. It is our view part of that immense deficit is due to impossibly bad management of all aspects of the city’s workers’ comp defense program. Finance Chairman Ed Burke has been running that money-hemorrhaging program with an iron fist and as secretly as it can be run for decades.

Inspector General Joseph Ferguson and his staff released a statement last Thursday which outlined City Council Finance Committee Chairman Ald. Edward Burke, 14th, has repeatedly denied their office any access to records "needed to assess the effectiveness and efficiency of a city program."

In response, Chairman Burke's office argues Inspector General Ferguson doesn't have the right to see the records. Effectively, Burke is telling all of us he has a right to hide them and how he handles things from public view.

Workers’ Comp Benefits are like a Giant ATM for City of Chicago Workers

According to Inspector General Ferguson, the City of Chicago spent $115 million in 2011 on WC payments to government workers supposedly hurt on the job, and budgeted $97.5 million for the program this year—they always overshoot their WC budget. That staggering payout has to be compared to the fact the city has about 30,000 workers covered by the Illinois Workers' Compensation Act. You may note city of Chicago police and firefighters are excluded from workers' compensation coverage by law. This means the city pays over $3,000 on average for every one of their workers, every year. We assure our readers no municipality in the United States pays that much or anything close to that much for workers’ compensation benefits.

We are also advised on any given day, about 10% of the city’s workforce is off all work and on temporary total disability!! How does that happen? Could any private company survive continuously paying 10% of your workforce not to work? Well, Alderman Burke has vociferously fought and basically refuses to do two things almost every other workers' compensation provider in our state does. Ed Burke won’t allow:

“Light duty,” or what we call medically modified duty, to bring city workers back to work sooner and
Surveillance to confirm city workers off on workers' comp leave aren’t secretly working or otherwise active while being paid TTD.

Alderman Burke gets asked about either concept by the media on a relatively regular basis and usually responds to say he is “looking into” light duty and doesn’t feel surveillance saves money. We consider both positions untenable—hundreds of studies indicate both concepts when used properly save gigantic dollars.

We are also fairly certain the city doesn’t implement any of the medical costs savings techniques the rest of us do such as nurse case management, utilization review or in many claims, independent medical examiners. We are certain they aren’t looking for a preferred provider program to try to save taxpayers even more money. The city of Chicago simply isn’t taking any cost-saving steps to try to attack the enormous amounts they are paying—instead, Ed Burke, as the head of the program, is trying to hide all of it from view.

To Dream the Impossible Dream — One WC adjuster; One WC defense lawyer; 3,000+ WC claims

Please note there are about 3,000 pending lost time workers’ comp claims being managed by Ed Burke and his staff. We are advised they have one claims adjuster —yes, we said one; uno; a single WC adjuster for 3,000 claims. The ratio of 3,000 claims to one WC claims adjuster is even sillier than Illinois state government — Central Management Services claims adjusters supposedly “handle” or mishandle about 1,500 WC claims per adjuster which is still a staggering number. In the private sector, claims adjusters handle about 125-150 claims before starting to scream about overwork. No human can possibly effectively and efficiently handle 3,000 WC claims — it is a concept that is certain to fail and clearly does year after year.

While they have only one adjuster, their day-to-day legal team is also composed of one lawyer. They do send out their emergency petitions to a private defense firm but the regular claims go to one person who is as completely overwhelmed as the adjuster. Please note the private firms that get that legal defense work do not have to do RFP’s or competitively bid for the work—the method and means to obtain/retain that legal work is managed wholly in secret by Chairman Burke. Again, that isn’t “illegal” but most folks feel clandestine selection and retention of municipal vendors has at least the appearance of corruption.

Please note WC claims adjusters are the “tip of the spear”—they are the front lines of any WC defense claims management program. They have to be sharp, knowledgeable on facts and the law/rules. They are the gatekeepers and protectors of any company, government body or municipality that is trying hard to pay what they owe but not overpay ongoing WC benefits or pay claims they don’t owe. When you wildly overload claims adjusters as the City of Chicago continues to do, the adjuster has no choice, they have to pay and pay and pay and pay some more. The only conceivable way to “manage” 3,000 or more WC claims is to accept literally everything no matter how goofy and start paying any benefit asked. If the City’s WC claims adjuster were to stop rapidly churning out taxpayer money in every possible direction, they face a 50% penalty and late payment penalties and 20% attorney’s fees on top of the very generous WC benefits Illinois already provides.

Why Do It? Why Does Ed Burke Run the City’s WC Program So Poorly?

Not to be silly, overpaid workers can be very loyal. If city politicians want folks who will donate time and money and win elections for you, give them and their buddies and friends lots of easy and lucrative WC benefits for doing so. Nothing Ed Burke is doing is illegal — his wife is an Illinois Supreme Court justice; he doesn’t have to go far to get legal advice on how to best follow the law. Obviously to the extent he keeps winning elections and donating his resources to insure Mayor Emanuel and others let him quietly keep doing what he is doing, this strange state of affairs may continue.

The problem we have said on numerous occasions one awful side effect of poor WC claims management in the public sector is that it poisons the private sector—our arbitrators and commissioners get used to every single city of Chicago claim being poorly worked up and badly defended. They get used to giving City employees and their politically connected lawyers whatever the lawyers ask for. When that happens over and over, it starts to taint the same hearing officers when they consider private sector claims that are aggressively handled and properly defended.

Eugene Keefe is a founding partner with the Keefe, Campbell, Biery & Associates workers' compensation defense law firm in Chicago. This column was reprinted with his permission from the firm's client newsletter.