It's likely that we'll see a comprehensive California workers' comp reform bill emerging in the next few weeks.

That proposal has been closely guarded by the small group involved in those negotiations.

So before a proposal actually sees the light of day, perhaps this is a good moment to explore the criteria for how a comprehensive comp reform package should be evaluated.

Here are some of the important criteria:

A is for Adequacy.......by now many key employer and insurer stakeholders have admitted that permanent disability indemnity benefits are too low.
Will proposed reform bring a meaningful increase in benefits? This is more complicated than it looks, because if reform affects the criteria for determining PD, a benefit "increase" could be illusory.

C is for current claimants. If the DWC and labor interests agree to reform proposals, will they abandon the interests of those claimants who are currently in the system? This could certainly happen if benefit increases are prospective (say for injuries after 1/1/13) but if limitations are placed on rebutting the PD schedule for those injured before 1/1/13. Thousands of workers could be abandoned, i.e. screwed.

D is for data driven........will proposed reforms be based on solid data or rather on political considerations? Various studies have analyzed possible targets for system cost savings, but some of those studies are now dated.
If reform proponents or the DWC/CHSWC have updated data, it has not been unveiled.

D is also for details. Among cost saving reforms that have been discussed
are benefit notice simplification, copy service cost regulation, RBRVS doctor compensation reforms, opioid controls, QME process changes, MPN reforms, utilization review reforms, and more. Yet, some of these items are so detail-driven that it may be hard to do in a statutory change. Will a reform bill merely direct the DWC to draft detailed regulations dealing with some of these items? If so, are savings predictable?

E is for extinct. Vocational retraining benefits are now extinct. Supplemental retraining vouchers are underutilized. Will reform address these problems?

G is for greed. To what extent will reform proposals deal with the greed of some vultures who feed off the comp system?

H is for hardball politics. What are the politics of a proposed deal, and how will various Capitol interests respond? At a time when the Governor is focusing on a tax initiative and labor unions focusing on defeating an initiative that threatens their political power, where does a reform proposal fit?

L is for LeBoeuf. For years, some workers with severe injuries have been able to show 100% disability under the LeBoeuf case and/or Labor Code 4662. These concepts have survived the 2004 reforms. Would the DWC , labor and progressive Democrats ever sign on to a package which made it impossible for a worker who has lost all earning capacity to be found 100% disabled?

M is for medical access. Any workers' comp reforms would be undertaken in the shadow of Obamacare, the Federal Affordability Care Act. Recently there have been news articles noting a growing lack of physicians in some areas of California such as the Inland Empire. The DWC listening tour highlighted treatment access problems that plague some workers. Reforms could attract physicians to treat injured workers or reforms could drive doctors from the system.

P is for practicality. Past reforms have almost always brought unintended consequences. In part this can be traced to the fact that several rounds of comp reforms were jammed through the legislative process without time for widespread input by those who actually handle these claims.

R is for ratios. For some time it's been clear that employers are asking for reforms which will achieve greater than 1:1 savings. In essence, employers
will support a benefit increase as long as the savings exceed the costs of the benefit increase. The goal is to relieve some of the pressure of rising workers' comp premiums. If there is to be a reform package, what is the ratio of benefit increases to savings? And how can we reliably gauge these calculations?

S is for a sigh of relief. What groups benefit and what groups are untouched? Insurers are unlikely to face strengthened rate scrutiny. Insurance brokers are unlikely to face scrutiny over whether broker fees should be regulated as a system cost. How will self insured public entities fare?

T is for transparency. Once a reform package is unveiled, will the DWC and CHSWC open their vaults to share data and studies which may be a basis for assumptions in the reform package?

U is for untested ideas. Will the reform proposals include untested ideas as a solution to the system's ills? For example, certain stakeholders have mentioned the desire to use "Independent Medical Review" doctors rather than judges to resolve treatment disputes. Untested ideas in a comprehensive reform package could take the reforms away from a data-driven basis.

V is for vision. What is the vision of the reform? Is the goal a system which is more mechanistic? Key stakeholders have been very concerned about "frictional costs". But will reform go so far as to make it hard for individuals to address the impact of a serious injury on their wage earning capacity?

Z is for "zeros". These are the workers who are assigned no impairment under the AMA Guides. Yet, some of these workers are assigned medical work restrictions which knock them out of returning to their jobs. Will reforms allow such workers a path to achieve justice?

These are but a few of the possible flash points of concern about any reform package.

I have no doubt that good people with good intentions have been working on possible reforms. In many cases they are disturbed by questionable practices by some doctors and lawyers. Any reform would be undertaken at a time when California's economy is fragile.

So it's understandable that key stakeholders want to agree on a package and then move it as quickly as possible so that the deal does not unravel.

But the role of worker advocates, the workers' comp press and the legislature is to look carefully at the impact of comprehensive reform.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

Even at the height of last year's Occupy Oakland protests, it seemed strange.

Hundreds of protesters roamed a nearby plaza, many carrying signs promoting all kinds of causes: anarchy, economic equality, immigrant rights, peace, complaints about police brutality, and more.

But a block away, on the curb outside the Elihu Harris State Building that houses the Oakland WCAB district office and many DWC offices, was a group of 4 protesters, carrying handmade signs. The group was protesting the decisions of a handful of workers comp' judges in a particular case.

One of the judges being protested was a judge who retired over 10 years ago. Another one of the judges mentioned in the signs is generally one of the most worker-sympathetic judges I've known.

I've seen the group return on several occasions, sitting peacefully in portable chairs, holding their signs. I'm not aware of the facts of their grievance, but I do admire their stick-to-it-tiveness.

This small band of protesters came to mind when I saw the report by the Workers' Compensation Ethics Advisory Committee.

The committee report, which does not mention names of the judges accused of ethics violations, can be found here:
http://www.dir.ca.gov/dwc/ethrpt11.pdf

The report notes that there are 150 workers' comp judges serving as of December 31.2011. The Ethics Advisory Committee received 41 complaints about judges during 2011.

According to the report:
"In 2011, 41 new complaints were filed by the workers’ compensation community. Out of the 41 new complaints, 18 complaints resulted in investigations. Of the 18 complaints which resulted in investigations, 2 complaints were pending on investigations from complaints filed in 2010 and 3 complaints presently remain pending and under investigation from complaints filed in 2011. There were 3 complaints filed after the last meeting of the Ethics Advisory Committee in 2011. The Ethics Advisory Committee identified no judicial misconduct in 29 complaints, and recommended further action by the Chief Judge or the Administrative Director on 8 complaints."

In many instances the Ethics Advisory Committee discusses the complaint but concludes that "Following its review of the complaint, the Committee did not identify any violations of the California Code of Judicial Ethics or the Division’s ethics regulations."

In some instances, however, the report notes that "the Committee recommended further action by the Administrative Director. The Administrative Director has taken appropriate corrective action."

The report does not detail what degree of discipline constitutes appropriate corrective action in the eyes of the Ethics Advisory Commission. Nor does it reveal what corrective or disciplinary steps were taken by the DWC.

While some of the alleged ethical violations against judges are more serious, many seem to revolve around intemperate and inappropriate remarks made by workers' comp judges.

The report makes for worthwhile reading by those in the comp community if only as a guide to the sorts of actions that can get judges sideways with injured workers, attorneys and lien claimants.

As I think back over my career, I'm struck by how few instances of unprofessional behavior I"ve seen by the workers' comp judges.

Yes, in the days where folks did actually have martini lunches, I do recall a few judges whose judicial behavior seemed better in the mornings than in the afternoons. In those days, afternoon intemperate remarks were perhaps more common.

But as California's workers' comp system has become more complicated, so have the demands on workers' comp judges become greater. Judges often struggle with crowded calendars and large volumes of lien claimants. Judges are being asked to resolve more discovery disputes and QME process issues. Judges operate in a litigation environment where there are some applicant and defense attorneys who are less collegial than attorneys were in days of yore.

It's not surprising that there will be some judicial ethics violations, nor that there will be occasional protesters on the curb complaining about outcomes.

But it's to the system's credit that the Ethics Advisory Committee serves as a watchdog over the system.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

As summer rolls along, so do the press releases regarding stats on workers' comp in California.

Now we've heard from the California Workers Comp Institute, reporting on the experience of self-insureds. Here's their press release, chock full of stats:
"California workers' compensation private self-insured claim frequency showed little change in 2011 as the incidence of medical-only claims edged down slightly, while lost-time claim frequency registered a marginal increase according to a California Workers' Compensation Institute (CWCI) review of data released by the state Office of Self-Insurance Plans (OSIP). Initial results for 2011 show the number of new claims reported by private self-insured employers fell 2.1% last year, with medical and indemnity payments on those claims through the end of the year totaling $192 million, also about 2% less than the comparable figure for 2010 claims. On the other hand, total incurred losses (paid benefits plus reserves for future payments) on the 2011 claims rose to nearly $620 million, up $24.7 million, or 4.2 percent more than the initial incurred amount reported for 2010 claims, as average amounts incurred per claim for both indemnity and medical benefits continued to grow.
The OSIP initial summary of private self-insured data, issued July 10, offers an initial look at California private, self-insured claims experience for cases reported in 2011. The summary includes medical-only and indemnity claim counts, and the total paid and incurred amounts on those claims through December 2011. The new report summarizes the experience of private self-insured employers who covered 2.11 million employees last year (vs. 2.15 covered employees in the first report for 2010 claims), and who reported a total of 77,386 claims in 2011 - compared to 79,075 claims in the 2010 first report. That translates to a claim frequency of 3.66 claims (2.29 medical-only + 1.37 indemnity) per 100 employees, vs. 3.66 claims per 100 employees in 2010 (2.33 medical-only + 1.35 indemnity). Wages and salaries for the private self-insured employees totaled nearly $81 billion in 2011, or 1.5% more than the $79.7 billion noted for self-insured employees in the 2010 first report.
Even though the total number of reported claims continues to dwindle, over the past decade, private self-insured loss experience in California has tracked with insured claims experience, with both paid and incurred losses on private self-insured claims now well above the post-reform low of 2005, driven up by sharp increases in claim severity (the average loss per claim). The growth in medical losses has been the biggest cost driver since 2005, though indemnity losses for private self-insured employers have jumped as well. OSIP's initial summary of 2011 results shows that at the end of the year, paid losses for all 2011 California private self-insured claims (medical-only and indemnity claims) averaged $2,483, only $2 off the 10-year high noted in 2010, and up 43.5% from the post-reform low, as average paid indemnity at first report is up 33% from 2005, and average paid medical is up 51%. At the same time, total incurred benefits per claim at the first report level climbed to $8,006 last year, up 6.4% from 2010, and 43% above the post-reform low, as average incurred indemnity was 31% higher than in 2005, and average incurred medical was 51 percent higher.
CWCI's review of more developed loss data derived from private self-insured's 2nd through 5th reports on 1998 to 2010 claims (12 to 60 months' worth of claims experience) found very consistent patterns showing that private self-insured claim severity bottomed out with calendar year 2005 claims, followed by steep increases in the average losses per claim, which despite continuing reductions in the number of reported claims, have driven private self-insured total paid and incurred losses well above the post-reform levels.
OSIP's 2011 summary of private self-insured data, which reports on calendar year data, follows the January release of public self-insured claims data, which is reported on a fiscal year basis. Thus, the data from public self-insured employers now lags the private self-insured data by six months, reflecting claims and losses reported through June 2011 rather than through December. The OSIP annual summaries for both private and public self-insured claims from each of the 10 most recent years are posted online at http://www.dir.ca.gov/SIP/StatewideTotals.html. CWCI members and subscribers may also log on to the Institute's website to view an Institute Bulletin that includes more details and graphics."

Some of the large self-insured have become very prominent in the politics of workers comp in California. That includes some of the large agricultural producers as well as large grocers, entertainment companies, and aerospace/defense contractors.

We're talking enterprises that are very aggressive about containing their costs and protecting their profit margins.

These prominent self-insureds are likely to be at the heart of negotiations about further reforms in California's workers' compensation system.

That's why it's always interesting to follow the results from the self-insureds.

Stay tuned.

Julius Young
www.boxerlaw.com
www.workerscompzone.com

Is physician dispensing of pharmaceuticals an increasing cost driver in the California workers' comp system?

Apparently not, according to a study by the Workers' Compensation Research Institute.

The WCRI noted in a press release about the study by WCRI researcher Dongchun Wang that:
"As states around the country debate or adopt new regulations to limit the prices paid for doctor-dispensed drugs, a new study from the Workers Compensation Research Institute (WCRI) says the regulations reduce costs, but are unlikely to reduce patient access to pharmaceuticals. The study examines the results of a change to the California statute that has become a model for many other states. Critics of the regulations express concern that many patients will not get needed medications if they do not get them at the physicians’ offices."
The study, Physician Dispensing in Workers’ Compensation, examines physician dispensing before and after a 2007 change in the California statute that governed the prices paid to physician-dispensers. Prior to the statutory change, physicians typically charged much higher prices than pharmacies for the same medication. For example, for the most common drug, Vicodin®, physicians were paid $0.85 per pill compared to $0.43 for pharmacies—nearly double the price. After the reforms, physicians were paid $0.52 per pill compared to $0.48 for pharmacies. After the law changed, physicians were paid prices for prescription medications that were similar to those paid to pharmacies for the same medication."

“There is a great discrepancy between what doctors and pharmacies charge for dispensing the same drug,” observed Dr. Richard Victor, WCRI’s Executive Director. “One question for policymakers is whether the large price difference paid when physicians dispense is justified by the benefits of physician dispensing. Policymakers can learn from the California experience.”

"One of the chief concerns expressed by supporters of physician dispensing (in California and in other states) was that doctors would stop dispensing needed prescriptions when it became less profitable. However, the California post-reform experience shows that physicians continued to dispense prescriptions, even when the prices paid were lower. Before the reforms, 55 percent of all prescriptions were dispensed at physician offices. Three years after the reforms, 53 percent of all prescriptions in California were physician-dispensed so patients had similar access to physician dispensed medications, but at a much lower cost."

"The report also examines several other concerns expressed by supporters of physician dispensing. One is that spending on prescription drugs might increase if a California-type reform were adopted. They argue that physicians almost always dispense less expensive generic versions of drugs, while pharmacies dispense both brand names and generics. The study found that for the specific medications commonly dispensed by physicians, generics were almost always dispensed by both physicians and pharmacies. In many states, when generic drugs were dispensed, physician-dispensers were paid much higher prices per pill than pharmacies for the same prescription."

"The data used for this study include nearly 5.7 million prescriptions paid under workers’ compensation for approximately 758,000 claims from 23 states over a period from 2007/2008 to 2010/2011. The 23 states in this study represent over two-thirds of the workers’ compensation benefits paid in the United States. These states include Arkansas, Arizona, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin. Several of the states in this study (Arizona, California, Georgia, South Carolina, and Tennessee) recently adopted reforms aimed at reducing the prices of physician-dispensed drugs."

The WCRI study compare results from 2007/2008 with 2010/2011. California physician dispensing, which was 53% of all California workers' comp dispensing, decreased 3% and the percentage cost of that dispensing was said to be 52% of system dispensing costs.

The study concludes that 2007 efforts in California did help control the costs of physician dispensing. Moreover, the study compares those results to results in other states which have not undertaken cost controls.

Here is a link to the WCRI study, which is available for purchase:
http://www.wcrinet.org/whats_new.html

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

1%

Betcha thought I was going to write about the 1% versus the 99%.

No, today the 1% in the news is the 1% that CalPERS earned during its fiscal year that ended June 30th. CalPERS is working off of projections of over 7% annual return per year, so returns of a mere 1% can cause severe funding gaps in a system that is already underfunded.

Lately we've seen municipal bankruptcy filings by Stockton and San Bernardino, so possible future problems at CalPERS and ongoing funding shortfall in California's unemployment fund aren't welcome news.

This is all background noise for California's workers' comp system, but it all has potential effects as workers' comp does not operate in a vacuum.

Worthy of your attention is a study highlighted in a New York Times article today on the State Budget Crisis Taskforce. Here is a link to that study, which compares the long term budgetary challenges of many of the largest states including California, Illinois and Texas:
http://www.statebudgetcrisis.org/wpcms/ ... e-Full.pdf

The article in The New York Times, titled "Fiscal Crisis in States Will Last Beyond Slump", by Mary Williams Walsh and Michael Cooper, can be found here:
http://www.nytimes.com/2012/07/18/us/in ... nted=print

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com