Reform is NOT About Costs; It is About Stability

Monday, June 18, 2012 | 0

Hints at what the agenda in California is going to look at were disclosed yesterday by California Department of Industrial Relations Director (DIR) Christine Baker during a discussion about reform expectations at the Workers’ Compensation Insurance Rating Bureau’s (WCIRB) annual conference in Napa.

“PD benefits need revision, liens are choking the system, the medical system has delays that may be tied to the (qualified medical evaluator) process, which is broken, the fee schedules are out-of-date, the work comp opioid use is outside the medical norms and the frictional costs are really absorbing much of the system,” Baker said. Baker also identified issues with the medical provider network (MPN), pointing to the proverbial unintended consequences that seem to arise whenever new rules or legislation are introduced.

In the case of MPNs, unintended consequences include the requirement of recertification of an MPN whenever there is a change in more than 10% of physician membership - ergo, MPNs just don't report changes because the hassle of recertification is worse than the penalty of not reporting.

In addition, Baker identified another big problem with MPNs: that 25% of physicians practice non-occupational medicine. Consequently there are a lot of doctors in the system who are not going to treat injured workers.

Liens of course were part of the conversation, and I will say that Baker's comments give me some optimism that the "lien problem" will be dealt with in an intelligent, effective manner.

Baker said liens are a reflection of a root cause of problematic cost drivers in the system. The best way to address liens is to fix the root causes, such as delays in medical treatment and appropriate care.

Anecdotally, I've heard complaints that since the new lien regulations were released, and with more "reform" pending, that carriers and third party administrators are processing much fewer liens and delaying payment on lien claimants' bills in anticipation of some magic words that will emanate from either Sacramento or Oakland that will somehow clean those accounts payables off the books.

I'd say that's a root cause, if that anecdote is accurate.

Christopher Citko, senior staff counsel for the Department of Insurance, I think made a very insightful comment.

“The difficulty in our system is that despite having a no-fault system, we are still attempting to create individualized remedies for injured workers and end up with some receiving less than they should and others receiving more,” Citko said. “That doesn’t make a fair and reasonable system, nor an efficient system.”

In other words, what Citko alludes to is that workers' compensation has evolved over the years into a complex, unpredictable system.

And I would argue that Citko's observation is more what the reform conversation should be about - stability and predictability should be the driving motivation of any reform talk.

Costs are not what the real issue is. Costs are simply a symptom. Costs will always go up. The issue is whether costs go up irrationally or unpredictably.

The reason we have workers' compensation, in the grand scheme of things, is because neither business nor labor didn't like the unpredictability of tort law when a work injury occurred.

Baker has identified the right people in the dialogue, telling attendees at the WCIRB function that if Labor and Management work together it should be possible to increase benefits without passing on those costs to employers.

She used the term "costs," but what I think what she is really saying is that if the two stakeholders come together stability can be restored so that business can plan more accurately, and workers can rest more peaceably.

David J. DePaolo is founder, chief executive officer and editor-in-chief of WorkCompCentral