If you had to pick a messy California problem that has gotten little attention in the press, the financial mess of California's Unemployment Insurance Fund would be a good candidate. California has borrowed over $11 billion from the Federal government to keep the California program running.

This is an issue that should be near and dear to the hearts of California workers' comp system stakeholders. Why?

First, UI benefits are part of the general worker safety net. I can't prove it with stats, but if there is a reduction in the availability of unemployment benefits, there's likely to be more pressure on workers to seek some funds through the workers' comp system, whether rightly or wrongly.

Second, if employers are forced to pay higher amounts into the Unemployment Insurance Fund, this will be seen as "bad for business' and increase political pressure to hold down workers' comp costs.

California's Legislative Analyst has now produced a report, "Managing California's Insolvency: The Impact of Federal Proposals on Unemployment Insurance". A pdf version of the report is downloadable here:
http://www.lao.ca.gov/reports/2011/ssrv ... 070711.pdf

Here is the executive summary of the report:
"Background. The Unemployment Insurance (UI) program provides weekly benefits for workers who have lost their jobs through no fault of their own. The UI program is authorized in federal law, administered by California’s Employment Development Department (EDD), and is financed by contributions paid by employers.
Many States Face UI Fund Insolvency. Beginning in 2008, the UI funds of many states, including California’s, were under stress and soon became insolvent. To continue payment of UI benefits, many states sought loans from the federal government. As of June 2011, California’s outstanding federal loan totaled over $10 billion. The state is required to make interest payments on its federal loan, the first of which is expected to total $320 million and is due September 2011.
Federal Proposals Have Been Introduced to Correct UI Fund Insolvency. In response to UI fund insolvency in many states, three federal proposals have recently been introduced to address the insolvency issue. Two of these proposals introduce a comprehensive solvency plan aimed at ensuring the long-term solvency of states’ UI funds. In addition to providing a framework for achieving solvency, these two proposals would suspend state interest payments and federal UI tax increases on employers during the next two years. The third proposal includes significant changes to program financing in the short-term and tightens eligibility requirements which could substantially impact future costs of the UI program.
Federal Proposals Could Solve California’s UI Fund Deficit. All three of the recent federal proposals would improve the solvency of California’s UI fund. We find that the two comprehensive solvency plans would likely eliminate California’s UI fund deficit by 2016 and put California on track to develop a sizeable reserve by the end of the decade. This improved solvency would come through a significant increase in the UI employer contributions—amounting to a total increase of $13 billion between 2012 and 2018 compared to current law.
Pending Federal Proposals Complicate Difficult Choices for the Legislature. It is currently unclear whether any federal reforms will be enacted. This uncertainty complicates the Legislature’s decision as to how it should address the insolvency of its UI fund. By acting now, the Legislature could stop the growth of the UI fund deficit and reduce associated state interest costs. On the other hand, such actions have the disadvantage of increasing employment costs and/or decreasing aid to unemployed workers during what is likely to remain a difficult economic time for the state.
Ensure Long-Term Solvency of the UI Fund. Regardless of whether Congress acts to address the UI insolvency problems faced by California and other states, we recommend that the Legislature ensure implementation of a long-term solvency plan by 2014. If federal reforms are enacted, it is likely that no additional action by the Legislature will be necessary to ensure long-term solvency. However, if no federal reforms are enacted, it will be critically important for the Legislature to adopt its own long-term solvency plan. In developing such a plan, we recommend that the Legislature consider an approach which includes both increased employer contributions and decreased benefits for UI claimants."

So it looks as though the eventual way out may involve higher employer contributions, and reduced benefits to workers.

Expecting lots of further help from the Federal government is likely to be unrealistic, just as the people of Athens aren't getting much love from the folks in Brussels.

It's unknown whether this collateral impact would be only minimally bad for California's workers' comp system, or whether the political and economic fallout would be substantial.

But such a scenario may be on the horizon in a few years as the endless legislative "Comp Wars" are fought.

For an earlier post I did on the issue "Over at EDD", click here:
http://www.workerscompzone.com/index.ph ... 026-223149

Stay tuned.

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

One of the bills that's been under consideration this legislative session is
SB 923 (DeLeon).

If California adopts a different system for compensating treating doctors there will be winners and losers.

A recent op-ed piece in the California Progress Report by Dr. Robert Weinmann of San Jose sounds an alarm about the bill. Here, quoted in entirety, is Weinmann's argument:

"SB 923 (De Leon) is before the Assembly Appropriations Committee. SB 923 would replace the current Office Medical Fee Schedule (OMFS) that’s now used to pay the primary treating physicians (PTPs) and specialists who take care of injured workers in California. The OMFS would be replaced by the Medicare RBRVS system. The Medicare RBRVS is advantageous to primary treating physicians because it would raise their payment rates. The bill is sponsored by USHealthWorks which is divided into a management group which includes non-physicians as owners and a medical group which includes the PTPs. The bill would lower payments to specialists."

The background of this dispute goes back to 2007, when the DWC contracted with the Lewin Group to do a study in preparation for the 20008 update to the OFMS (Offical Medical Fee Schedule).
For years, California has compensated physicians by using CVRS, the California Relative Value Scale. But a move to RBRVS was being contemplated. RBVRS stands for Resource Based Relative Value Scale. It's a federal system from the Centers for Medicare and Medicaid Services, and it's used by many other states for computing compensation for workers' comp physicians.
Many doctors-including the California Society of Industrial Medicine and Surgery-have been concerned about the switch-over. In some states that adopted RBVRS, the payments to specialists decreased, causing an exodus of doctors from the system. In the past I've done posts on that topic; for example:
http://www.workerscompzone.com/search.php?q=chico

Weinmann charges that "The question for the injured worker is which system is likely to help them more or harm them less. At the present time the complaint about the OMFS is that it’s among the lowest pay scales in the USA. It is not a surprise to anyone that none of the participating doctors like it. On the other hand, it has paid enough to stay in business. Now USHealthWorks management has developed a bill that is helpful to their own medical group of PTPs – but at the expense of the specialists upon whom the PTPs depend in difficult cases. Not surprisingly, the specialists are not enamored of USHealthworks’ sponsored legislation."

According to Weinmann, "At the Assembly Insurance Committee hearing, Ronald Kent, MD, neurologist, stated that about 80% of specialists dropped out of participation in Workers Comp in Hawaii when that state adopted the Medicare RBRVS. Hawaii realized its error when the beleaguered specialists quit the system. Hawaii then raised it remuneration rates but many of the specialists did not return to the system once they realized how little the system cared about their own injured workers. They felt betrayed because they were betrayed."

Weinmann continues, noting "Stuart Bussey, MD, JD, also testified. He stated that his practice could get “a boost” from the Medicare RBRVS system because he is a PTP. On the other hand, Bussey also said that he could be cutting his own throat because he would lose access to the specialists such as the orthopedists, the neurologists, and the cardiologists he needs to help with the care of difficult specialty cases. He said he’d end up “holding the bag.” His reference was to holding the malpractice bag because he now would have patients to whom he could no longer provide indicated care.

Moreover, Weinmann notes that "Andy Parker, MD, Vice President of USHW, testified that he hadn’t seen any access problems – it was as though Dr. Parker and Dr. Kent were at different hearings. Maybe, Dr. Parker didn’t hear Dr. Kent’s testimony which is buttressed by Hawaii’s own internal reporting."

In conclusion, Weinmann claims that "The obvious solution is simply to reform the OMFS – that is the solution proposed by the California Society of Industrial Medicine and Surgery (CSIMS). It has not been accepted by USHealthWorks. It would appear as though the USHW management system isn’t worried that the PTPs in their medical group might lose access to specialists who would withdraw from the system once their already stingy pay schedule were replaced by an even stingier one. Injured workers know how difficult it’s been to get consultations and treatment from orthopedic specialists and other specialists. We believe that Senator De Leon knows it, too. We even believe that Dr. Parker knows better. The trick is to make them care enough to set aside SB 923 which will further deprive injured workers from access to specialty care.
Local unions need to exert their influence within the labor movement to stop this unwise legislation."

Here are links to the Lewin Group studies on RBRVS:

The initial study by the Lewin Group on adapting RBRVS to the California workers' compensation system can be found here:

http://www.dir.ca.gov/dwc/RBRVSReport/RBRVS_May2008.pdf

The Lewin Group supplemental study:
http://www.dir.ca.gov/dwc/RBRVSLewinRep ... rt2010.pdf

Currently, it's not clear whether SB 923 will advance through the legislature. Here is the most recent analysis of the bill posted online by legislative committee staff:
http://www.leginfo.ca.gov/pub/11-12/bil ... _comm.html

Stay tuned.

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

Not convinced that Comp's Got Talent?

The blog is working hard to bring you tales of talent in California's workers' comp community.

There's no Gong Show here. I lead you to the talent and you can make your own assessments.

Today's talent is Attorney Rich Owen of Bakersfield. Rich was an attorney for SCIF for many years before his retirement. I had the pleasure of getting to know Rich while our terms overlapped on the California State Bar's Workers' Compensation Executive Committee. He's now doing voice-over production work.

Rich sings bass with the Masters of Harmony, one of the nation's premier barbershop quartets.

The Masters of Harmony has won numerous awards and produced eight CDs of a capella music. They are currently competing in Kansas City at the Barbershop Society's international choral contest, seeking their 8th gold medal.

To learn more about the Masters of Harmony, check out their web page:
http://www.mastersofharmony.org/about_us/

Heres' a link to some of their work that is listed on Amazon:
http://www.amazon.com/s/ref=nb_sb_noss? ... &ajr=0

Stay tuned. In the coming week I'll be doing a recap on significant developments in California workers' cop for the first half of 2011.

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

Sometimes we see stuff in workers' comp so bizarre, you just shake your head. They couldn't make this stuff up no matter how hard they try.

Such it is with the 3-cent appeal.

Unhappy with the award of a credit for an overpayment of $13,113.33, self insured Kraft Foods Nabisco, adjusted by Broadspire and represented by Sabrina Tseng of Lewis Brisbois Bisgaard & Smith LLP, claimed an overpayment credit of $13,113.36

That's a 3-cent difference.

Kraft, Broadspire and Lewis Brisbois apparently decided they were not willing to be shorted.

After all, there is a principle. So an appeal was filed.

Just where in the decision making chain such poor judgment prevailed isn't clear.

Apparently no one decided to pull the plug on the effort to recoup the 3-cents. It was an effort that must have cost several dollars in postage and stationery costs. Not to mention hundreds if not thousands of dollars of attorney billable time to file the petition for reconsideration.

We would hope that billing was not the point.

Imagine the face on the California Workers' Compensation Appeals Board commissioners (Deidre Lowe, Ronnie Caplane, and Frank Brass) as they sat down to review the case. Imagine their arching eyes as they realized what they had in hand was a 3-cent dispute.

What followed, in a panel decision, Vadnais Vs. Kraft Foods, was a notice of intention to award sanctions against Kraft Foods, Sabrina Tseng and Lewis Brisbois Bisgaard & Smith LLP, jointly and severally, in the amount of $500.

The WCAB panel seemed interested in who had decided to pursue the appeal, noting that "If the comments we receive enlighten us as to who, specifically, felt compelled to delay these proceedings by filing a frivolous petition for reconsideration over a paltry three cents, and why, we may choose to limit the parties subject to our sanction order".

No wonder lawyers get a bad name.

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

A storm is brewing over the State Compensation Insurance Fund's recent correspondence that medical providers will be required to sign a new contract to remain in the SCIF MPN.

Here is the text of a letter from CAAA's current president, Barry Hinden, addressed to Destie Overpeck, Chief Legal Counsel of the California Division of Workers Compensation and to Christine Baker, Director of the California Department of Industrial relations:

"Destie Overpeck, Chief Legal Counsel
Division of Workers' Compensation
Department of Industrial Relations
1515 Clay Street, 17th Floor
Oakland, CA 94612-1402

Dear Ms. Overpeck,

The California Applicants' Attorneys Association has reviewed the State Compensation Insurance Fund MPN General Provisions and Criteria recently sent to all providers in the SCIF MPN (copy attached). We believe that this document constitutes a modification to the SCIF MPN which must be filed with and approved by your Division pursuant to California Administrative Code section 9767.8. If SCIF has not filed a Notice of MPN Plan Modification, we urge the Division to immediately order SCIF to withdraw this material until such time as proper Notice is filed and approval is secured. Alternatively, if this material has been filed with your Division pursuant to section 9767.8, we believe numerous provisions of the Criteria violate California law, and we request that the Division immediately withdraw its approval and require that SCIF amend or delete the improper provisions.

Under CAC section 9767.8(a)(5), an MPN applicant must file with your Division any "change in the policy or procedure used by the MPN ... to conduct 'economic profiling of MPN providers' pursuant to Labor Code section 4616.1." In CAC section 9767.1, "economic profiling" is defined as "any evaluation of a particular physician, provider, medical group, or individual practice association based in whole or in part on the economic costs or utilization of services associated with medical care provided or authorized by the physician, provider, medical group, or individual practice association." Because a number of items in the General Provisions and Criteria deal with the "utilization of services associated with medical care ..." this document falls under the mandate of section 9767.8(a)(5) and must be filed with your Division before adoption and use.

In addition, the DWC should consider issuance of this material as a modification of at least 10% of the providers participating in the MPN, which is also subject to approval pursuant to CAC section 9767.8(a)(1). The cover letter sent out with this material informs physicians that the contract must be returned by June 30, 2011, and that absent return of a signed and notarized contract by that date the physician's membership in the MPN will cease. This means that if even a relatively small number of physicians either refuse to sign this contract or neglect to return the contract in a timely manner, there could be more than a 10% change in the composition of SCIF's MPN effective July 1, 2011 that would trigger the mandate of section 9767.8(a)(1).

In fact, as of July 1, 2011, SCIF will effectively have an entirely new MPN, and not even SCIF now knows who will be members of that MPN whether the new MPN will include sufficient numbers to comply with the access requirements set forth in CAC section 9767.5. Should SCIF's actions result in a change of more than 10% in the membership of the MPN, or should the loss of some physicians result in a violation of the access standards, we believe the failure of SCIF to comply with the notice and approval requirements of CAC section 9767.8, as well as underlying the statutory requirement in Labor Code section 4616(b) that plans for an MPN must be submitted to the Administrative Director "for approval," renders the SCIF MPN invalid effective July 1, 2011.

The failure to withdraw this document will place workers in an impossible situation. As of July 1st and for some undetermined period thereafter, injured workers will have no way to identify which physicians remain in the SCIF MPN. Workers will not be informed whether their treating physician has met the June 30th deadline, or whether other treating physicians or specialists in the MPN have complied with SCIF's requirements. This uncertainty may cause disruptions in treatment, if SCIF now considers the treater a non-MPN physician, will delay the worker's ability to change physicians or select a specialist, and may raise questions regarding the admissibility of reports and evaluations from the now non-MPN physician (see Valdez v. Warehouse Demo Services, WCAB En Banc decision, April 20, 2011).

For the above reasons, we respectfully urge that the Division immediately order SCIF to withdraw the MPN General Provisions and Criteria until such time as a proper Notice of MPN Plan Modification is filed and approved.

Should this material have already been filed with and approved by your Division, we strongly urge that the Division withdraw that approval and immediately notify SCIF of that action. There are numerous provisions in that document that violate California law. For example, Criteria #17 violates numerous mandates of Labor Code section 4610, including the time deadlines and the critical mandate that only a licensed physician may modify, delay, or deny a request for authorization for treatment. Criteria #20 prohibits even the prescribing of compound drugs, which not only violates the mandate of Labor Code section 4600 to provide "medical ... treatment ... that is reasonably required to cure or relieve the injured worker," but also improperly sidesteps the entire utilization review process in violation of section 4610.

Most alarmingly, Criteria #21 limits certain treatment "not withstanding MTUS ...." This provision violates Labor Code section 4616(e), which provides that "all treatment shall be provided in accordance with the medical treatment utilization schedule established pursuant to Section 5307.27 . . . ." In addition, this violates section 4600(b) which states that "notwithstanding any other provision of law, medical treatment that is reasonably required to cure or relieve the injured worker from the effects of his or her injury means treatment that is based upon the guidelines adopted by the administrative director pursuant to Section 5307.27 ...."

Although SCIF has the right to establish contracts governing its MPN, it cannot adopt contractual provisions that restrict the injured worker's right to treatment that is reasonably required to cure or relieve from the effects of the injury. Any provisions in this material that improperly restrict treatment must be deleted or amended to correct this violation, and any approval that may have been given to this document should be immediately withdrawn.

In summary, if the State Compensation Insurance Fund has not filed a Notice of MPN Plan Modification prior to distribution of the MPN General Provisions and Criteria to member physicians, CAAA urges the Division to immediately order SCIF to withdraw this material until such time as proper Notice is filed and approval is secured. Alternatively, if this material has been filed with your Division pursuant to section 9767.8, we request that the Division immediately withdraw its approval and require that SCIF amend or delete the improper materials.

Sincerely,



Barry Harris Hinden, President
California Applicants' Attorneys Association

cc: Christine Baker, Acting Director, Department of Industrial Relations
Julie Jenkinson, Executive Vice President, State Compensation Insurance Fund
Bernyce Peplowski, D. O., Medical Director, State Compensation Insurance Fund"

For readers of the blog, a bit of background is in order. In early June SCIF sent a letter to its network docs. The letter notes that to be in SCIF's network doctors must agree not to prescribe compounded medicines.
Doctors must also agree that they will not prescribe opioid medications for more than 60 days without prior approval.

Obviously, SCIF is seeking to exercise control over two increasingly costly and controversial prescribing practices. SCIF has greatly shrunk from its days as the Goliath of the California workers' comp insurance industry.
But its strategy, if implemented, could have a wide impact on who remains in the MPN and how medicine is practiced within the MPN.

CSIMS, representing doctors who practice and evaluate in the comp system, has charged that these restrictions are an "improper restraint on provider's obligations to provide care by defining medical necessity, not on the basis of evidence based guidelines, but rather as a matter of contractual obligation".

Simply stated, can a carrier seek to bar certain types of care if those types of care are not barred by evidence-based guidelines? Can contractual obligations trump the UR process?

Instead of engaging in this substantive issue, CAAA's letter focuses on the mechanics of how SCIF has essentially modified its MPN by a process with procedural defects.

We'll be hearing lots more about this struggle. Meanwhile, I suspect there are a number of doctors who are debating whether they want to enroll.

But perhaps that is the point?

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