Wednesday, October 19, 2011, 09:36 PM - Understanding the CA WC systemThe California Supreme Court has spoken again about COLAs.
Call it Baker Redux.
In response to a Petition for Rehearing filed by San Jose attorney Arthur Johnson, the California Supreme Court issued a modified opinion that can be found here:
http://www.courtinfo.ca.gov/opinions/do ... 79194M.PDF
Johnson's Petition for Rehearing had noted that the Baker decision, issued in August 2011, used the term "seamless transition" in reference to the transition from temporary disability benefits (which have a COLA under Labor Code 4453) to permanent total disability benefits (which have a COLA in certain circumstances under Labor Code 4659(c).
Johnson noted that after SB 899 there is a 104 week cap on temporary disability. Some claimants may not be permanent and stationary for years once the 104 weeks of TD has been paid out. Under Johnson's argument:
"This situation would then mean that two claimants equally disabled at 100%, but who become permanent and stationary at different dates, would have dramatically different pay-out rates over their lifetimes. If a person for example, fell and was paralyzed from the neck down (such as Christopher Reeve), became permanent and stationary immediately, the temporary disability would end immediately and permanent total disability benefits would begin immediately and a total disability COLA would apply to January first following the date of injury."
Continuing, Johnson noted that:
"However, if a similar injured worker fell and sustained multiple internal injuries with broken bones, and took ten years to heal before becoming permanent and stationary, that injured worker would receive 104 weeks of temporary disability and then temporary disability would stop. Perhaps permanent disability "advances" would be made at a partial disability rate, as we often now see in practice. Perhaps not. If and when the claimant was found to be 100% totally disabled, the total permanent disability payments would revert back to the last payment of temporary disability, two years following the date of injury pursuant to L.C. 4659(b). However, pursuant to the terms of this decision, the COLA would have "flat-lined" for the 10 years it took to become permanent and stationary."
In essence, Johnson argued that the Supreme Court's decision ignored the realities of workers' comp, discriminating against injured workers whose disabilities do not become permanent and stationary for many years.
But now we have Baker Redux.
Apparently tacitly acknowledging some of Johnson's argument, the court added a new footnote to its opinion:
"On page 439, in the paragraph carrying over from page 438, a new footnote 2 is added following the clause “i.e., the permanent and stationary date in the case of total permanent disability benefits, ” stating: “Our discussion of total permanent disability benefits pertains only to those payable for injuries occurring before April 19, 2004. For later injuries, it may be that an injured worker would become entitled to total permanent disability payments, and corresponding COLA’s, before the worker’s medical condition is permanent and stationary. (See §§ 4650, subd. (b) & 4656, subd. (c).) We express no view on that question, which is not presented under the facts of this case.”
This would seem to leave open the issue of COLA calculation start date in a case where the worker is likely 100% even if the worker is not yet deemed P&S.
Advantage Arthur Johnson.
Baker Redux may not prove to be the California Supreme Court's finest hour.
The Court's modified opinion in Baker Redux has now given us this:
"On page 446, the third and fourth sentences in the first full paragraph on the page are replaced by the following: “Moreover, workers who sustain industrial injuries qualifying them for total permanent disability payments receive temporary disability payments which, depending on the date of injury, may themselves be indexed to the SAWW, thereby protecting the worker from the effects of inflation during the period of eligibility for temporary disability benefits. (See §§ 4453, subd. (a)(10), 4653, 4661.5.)”
But as my fellow CompGuys.org commentator Jake Jacobsmeyer has noted, it appears that the Supreme Court is confused. Jacobsmeyer noted in an e-blast tonight that "to some extent the Court's language suggests a lack of understanding of some aspects of workers' compensation".
Specifically (and I think correctly), Jacobsmeyer noted that:
"The minimum and maximums for TTD are indexed under Labor Code § 4453(a)(10) but injured workers only receive the benefit of such indexing to the extent earnings support the increases but TTD itself is not indexed to the COLA. Additionally since Labor Code § 4661.5 does not affect any benefits until 2 years after the date of injury, the Courts observation that IW are protected from inflation based on increases in TD under Labor Code § 4453, subd. (a)(10), 4653 & 4661.5 does not appear accurate. "
Writing to a largely employer based audience, Jacobsmeyer claims that
" We can anticipate the Court’s mischaracterization of the impact of Labor Code § 4661.5 may be used by applicant attorneys to try and cause some mischief in the future. However the language is dicta at best and certainly is not part of the Courts holding in this case. The Court is not interpreting Labor Code § 4653, just making an observation about it."
In any event, it's quite fascinating to see the California Supreme Court make an adjustment in Baker V. WCAB and then in doing so, making another error that will likely trigger a "Baker Three".
Might the Court get cold feet for comp?
Monday, October 17, 2011, 09:45 PM - Understanding the CA WC systemIn speaking at a recent conference in Southern California, DWC Administrative Director Rosa Moran indicated that a number of potential cost savings targets are being identified.
According to Moran, copy service costs will get a close look.
Compared to the costs associated with utilization review or bill review, copy service costs are small potatoes. Broker commissions costs vastly exceed copy service costs as well.
And of course, there are "nurse case manager" costs.
But like interpreter costs and vocational expert testimony fees, copy service costs are likely to get attention. These are items that can be relatively easily quantified and addressed. Moreover, these sorts of providers are secondary system stakeholders who will have trouble mounting a challenge to reasonable cost controls.
But what's reasonable?
As David DePaolo has noted in his blog (see link below), copy service bills are often higher where applicant attorneys order records. In part this may be due to problems collecting bills. Applicant attorneys order medical and employment records on a medical-legal basis. Those bills are often protected by a lien that then requires court appearances or negotiation and thus increased cost for the copy service.
But what about "bells and whistles"?
When I started in workers' comp, copy services provided a very basic product. Not every service even bates-stamped the records.
Over the years other services were added. Copy services served subpoenas. Some developed online calculators and online rating services. Some now provide EAMS filing services. Many do record summaries.
Some provide specialized employment record reviews to search for compliance with MPN regulations. Others now provide cloud-based record storage and scanning services.
These are the bells and whistles.
Copy services providers that failed to upgrade have lost market share or failed.
These features make applicant attorneys, defense attorneys, adjusters and QMEs more efficient. Copy services reviews of medical records may help the attorneys, adjuster or doctors focus on important factual
issues in the records. Searchable pdfs can be invaluable.
The services that include online calculators may help get cases settled more efficiently, as parties need not rely so much on the DEU as in the old days.
But these bells and whistles cost money.
To have an even playing field, carriers should not be permitted to retain one level of service for themselves and another for the injured worker or the worker's attorney.
And policymakers need to remember that many defense law firms will bill at attorney rates for attorney or paralegal record reviews. Will clamping down on copy service costs shift record review costs on the defense side from copy services to defense attorneys?
Another aspect of this is the fact that carrier non-compliance is frequently the reason that applicant attorneys order records. Despite rules which require adjusters to serve medical reports on the worker's attorney, it is not uncommon for carriers to ignore this requirement.
In the real world, the worker's attorney may be missing months of medical reports that are just sitting in the adjuster's file. Lack of access to these records can generate "transactional costs" and delays.
One way of cutting down on copy service costs would be to lessen the urge to order records in the first place. This could include measures to clarify the rules regarding service of medical reports. And it should include creation of meaningful disincentives for failure to serve reports, irregardless of whether the failure was willful or just negligent.
Here is a link to the blog post by David DePaolo:
Wednesday, October 12, 2011, 09:12 PM - Political developmentsIn a 2002 press briefing, then Secretary of Defense noted that
"There are known knowns; there are things we know we know.
We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don't know we don't know. ”
So it is with California workers' comp after this legislative season is done.
Governor Brown has signed some bills, but vetoed other ones. Bills that were opposed by business groups and Brown's Department of Finance were nixed.
I had suspected that Brown might veto a bill that would have allowed an additional exception to the basic 104 weeks of TTD rule. But I had assumed he would sign a bill revamping the Supplemental Job Displacement Voucher system. And if pressed, I would have wagered that he might sign a bill outlawing discrimination in apportionment determinations under Labor Code 4663.
Brown vetoed all three, to the consternation of some CAAA members and small bands of injured worker activists, including the folks at Voters Injured at Work.
The fascinating thing is that Brown seems to invite a more comprehensive approach to workers' comp reforms. But it's clear that that will be only on special terms-i.e. benefit increases will need offsetting cost savings.
Christine Baker and Rosa Moran have been saying this in appearances at various stakeholder meetings this summer and fall.
Applicant attorneys who may have assumed that the Governor was somehow indebted to them because they threw some fundraisers for him are in for an awakening. Likewise, only the extremely naive would assume that the Governor had an abiding interest in rebalancing the harsh aspects of the 2004 reforms.
So what cost savings could be placed on the table, and when?
Are we at a point where many of the system stakeholder groups are basically satisfied with where they are now in the system and therefore not that interested in "rocking the boat"?
How much has been-or could be-squeezed out of the "12 Point" plan of cost savings outlined in the waning days of the Schwarzenegger administration? Has the DWC already backed off of some of the potential cost-savers?
Will we see a revival of the "secret negotiations" between some employer groups and labor lobbyists? Will the Moran-led DWC insist on broader stakeholder participation in talks?
Now that CAAA has prevailed in Almaraz-Guzman, Baldridge and (apparently) Ogilvie, why would CAAA-or labor for that matter- negotiate away an end to rebuttal of the PD schedule, at least for the more severely disabled worker?
If CAAA has "some ideas" to share with Christine Baker and Rosa Moran that have not yet been rolled out to the CAAA membership or the workers' comp press, when will those see the light of day?
Are conflicts between lawyer and doctor interests inevitable if savings are to be achieved?
Does the "Southern California" practice model, replete with doctor-driven claims, liens, MPN escapes, and the never-ending search for "medical control" stand in the way of a solution?
Is anyone willing to look at the systemic costs of brokers?
With UR costs spiraling and questions surrounding the value of UR being increasingly raised, how will that play into negotiations?
And are there out-of the-box ideas lurking out there? What about those unknown unknowns?
These are Rumsfeldian conundrums for consideration by comp connoisssieurs.
Friday, October 7, 2011, 09:57 PM - Political developmentsGovernor Brown has acted on a number of workers' comp bills, signing a handful but vetoing many of the bills that reached his desk.
This will be a major disappointment for injured workers and applicant attorneys, who hoped Brown would look favorably on some of the bills that were similar to bills vetoed by Gov. Schwarzenegger.
Among the vetoes were:
AB 211 (Cedillo)-simplifying the retraining voucher process
AB 584 (Fong)-requiring UR review be done by California doctors
AB 947 (Solorio)-allowing TD for longer periods under limited circumstances
AB 1155 (Alejo)-outlawing discrimination in workers' compensation apportionment
With AB 584 and AB 1155, Brown appears unlikely to be moved. He sees no need for either bill.
As for voucher reform and expanded TTD elgibility, Brown will only support these concepts as part of an overall reform.
On the other hand, Brown signed some bills that some believe may save costs:
AB 1168 (Pan)-requires the DWC to develop a voc rehab expert fee schedule
AB 335 (Solorio)-requires the DWC to develop streamlined notices
AB 378 (Solorio)-requires the DWC to tighten up regs on allowable costs of compounded medications
AB 397 (Monning)-requires proof of workers' comp when renewing a contractors license
AB 586 (Fong)-cancer presumption
SB 457 (Calderon)-dealing with liens
In the coming week I will reflect on what all this means and where things stand.
Here is a link to Brown's announcement which includes veto messages on the various bills:
Tuesday, October 4, 2011, 12:53 PM - Understanding the CA WC systemCalifornia falls short of compensating many injured workers for their earnings losses.
The 2004 reforms and the failure of the DWC to revise the PD schedule has effectively meant that uncompensated wage losses have increased.
What is often not considered is retirement security.
As many folks who are working and who have 401ks know, retirement security seems dodgy at best.
Injured workers who are unable to return to their jobs often have to cash out 401k plans just to make ends meet. That's if they even have such plans.
And for the lucky minority who have legacy-style "defined benefit plans", an injury may make a difference in the ultimate benefit or may stop a career years before the qualifying age for the pension.
So it's with interest that I noticed a study done by the UC Berkeley Labor Center . The paper, entitled "Meeting California's Retirement Security Challenge", is edited by Nari Rhee of the UC Berkeley Center for Labor Research and Education. Included are chapters by Jacob Hacker, Sylvia Allegreto, Joaad Saad-Lessler, Lauren Schmitz, Christina A. Clarke, Amal Harrati, Beth A. Almeida, Christian E. Weller, Anthony Webb, and Theresa Ghilarducci.
The paper notes that in California only slightly over half of employers offer pension plans, and the majority of those are not defined benefit plans.
As the paper notes, we have gone from a 3 legged stool model (Social Security, employer sponsored pension and private savings) to a 2 leg model.
Here, quoted at some length, is a summary from the paper's introduction by Jacob Hacker:
"America’s framework for providing retirement security was historically referred to as a “three- legged stool.” Social Security, private pensions, and personal savings—each “leg” was supposed to carry an important part of the weight of securing workers’ retirement. For lower-income workers, Social Security was far and away the most important leg of the stool, providing a lion’s share of retire- ment income (Frolik & Kaplan, 2010, pp. 282-3). But for middle- and higher-income workers, tax-favored private pensions were assumed to be vital for achieving a secure retirement—especially after the Employee Retirement Income Security Act of 1974 put in place rules designed to ensure that DB pension plans would be properly run, broadly distributed, and secure (Purcell & Staman, 2009)."
"The problem is that this unique employment-based system is coming undone, and in the process, risk is shifting back onto workers and their families. As recently as 25 years ago, more than 80% of large and medium-sized firms offered a DB pension; today, less than a third do, and the share continues to fall (Langbein, 2006). Companies are rapidly “freezing” their defined-benefit plans (that is, preventing new workers from joining the plan) and shifting them over to alternative forms (such as the so-called cash-balance plan) that are more like 401(k)s. For workers fortunate enough to partici- pate in an employer sponsored retirement plan, 401(k) plans have become the default vehicle for private retirement savings.
The expansion of 401(k)s has not led to an overall increase in employer sponsored retirement plan coverage. Instead, 401(k)s have largely substituted for traditional pension plans, and the share of workers offered any plan at their place of work has actually declined. In 1979, just over half of private wage and salary workers aged 18–64 who worked half-time or longer were covered by an employer sponsored retirement plan. Thirty years later, the share had fallen to less than 43% (Economic Policy Institute, 2011). For younger private workers, even college-educated workers, traditional pensions are essentially unavailable; they are lucky if they have access to a 401(k)."
"The one exception to this story is, of course, the public sector, where DB pensions remain the norm—almost certainly because of the much higher rates of unionization in the public sector than in the private sector (Munnell, Haverstick, & Soto, 2007, pp. 2-3). Recently, these pensions have become a source of controversy for two reasons. First, in part because of the severe downturn of 2007–2008, many states’ plans are substantially under-funded (Dalton, 2011). The scale of this shortfall is frequently overstated and funding ratios have improved with recovering stock values. But states will nonetheless have to increase contributions to plans going forward (which currently represent a little less than 4% of state expenditures) or reduce future outlays (which is difficult given union contracts) to achieve adequate funding (Lav & McNichol, 2011, pp. 3-4). It is crucial to note, however, that “state and local plans do not face an immediate liquidity crisis; most plans will be able to cover benefit pay- ments for the next 15–20 years” (Munnell, Aubry, & Quinby, 2010, p. 14)."
"The second reason for controversy is more political than economic. As private DB pensions have disappeared, the argument that the public sector should follow suit becomes increasingly powerful. Yet assessing the virtue of such a shift requires examining the shortcomings of 401(k)s and other DC plans alongside the financial problems faced by public DB plans.
401(k) plans are not “pensions” as that term has been traditionally understood, i.e., a fixed benefit in retirement. They are essentially private investment accounts sponsored by employers. As a result, they greatly increase the degree of risk and responsibility placed on individual workers in retirement planning."
"Traditional DB plans are generally mandatory and paid for largely by employers (in lieu of cash wages) (Frolik & Kaplan, 2010, p. 361-363). Thus, they represent a form of forced savings. DB plans are also insured by the federal government and heavily regulated to protect participants against
￼mismanagement (Ibid.). Perhaps most important, their fixed benefits protect workers against the risk of market downturns and the possibility of living longer than expected (so-called longevity risk) (Broadbent, Palumbo, & Woodman, 2006)."
"None of this is true of DC plans. Participation is voluntary, and many workers choose not to participate or contribute inadequate sums (Munnell & Sundén, 2006, pp. 2-3). Plans are not ade- quately regulated to protect against poor asset allocations or corporate or personal mismanagement (see Stabile, 2002). The federal government does not insure DC plans, and DC accounts provide no inherent protection against market or longevity risks (Jefferson, 2000). Indeed, some features of DC plans—namely, the ability to borrow against their assets, and the distribution of their accumulated savings as lump-sum payments that must be rolled over into new accounts when workers lose or change jobs—exacerbate the risk that workers will prematurely use retirement savings, leaving inad- equate income upon retirement. Perversely, this risk falls most heavily on younger and less highly paid workers, the very workers most in need of protection.
As DB pensions vanish, Social Security is the only guaranteed pension left for the vast majority of private sector workers. Yet the role of Social Security has declined in the last 20 years. The wealth represented by expected Social Security benefits fell in the 1980s and 1990s, due both to the maturation of the program and cutbacks that occurred in the late 1970s and early 1980s (Wolff, 2002). Looking forward, Social Security is expected to replace a smaller share of pre-retirement income than it did in the past (CBO, 2005). That is true even if Social Security pays promised benefits—an assump- tion that is safer than many believe but still hinges on favorable economic and demographic trends and some adjustments in the program (Ibid.; Sanders, 2011; AARP, 2010)."
"In essence, we have moved from the traditional three-legged stool of retirement security to a much more wobbly two-legged stool—Social Security and private savings (inside and outside of 401(k)s). Rather than enjoying the protections of pension and retiree health plans that pool risk broadly, Americans are increasingly facing these risks on their own. The greatest impact has been on the middle class, which relied much more much more heavily on DB pensions than either poor or affluent households. As private risk protections have eroded, in short, retirement savings has become at once less equal and more risky."
These trends have great consequences for injured workers in particular.
It's once more reason that California workers' comp policymakers need to keep in focus the goal of adequately compensating long term earnings
Here is a link to the entire report by the UC Berkeley Labor Center:
http://laborcenter.berkeley.edu/researc ... e_1011.pdf