(c) 2018 Jon L Gelman, All Rights Reserved.

Monday, February 23, 2009

Is The Recovery Of The Workers’ Compensation System An Illusion?

The present economic downturn has been compared to the Great Depression of the 1930’s or the recession of the 1980’s. The factors that existed during those financial cycles need to be compared to the present political and economic dynamic to determine whether or not history is repeating itself. Analysis of those two periods provides an insight as to whether or not there will be a rebound or surge of claims in the future.

The depression of the 1930’s occurred at a time when the workers’ compensation program in the United States was in its infancy. The benefits delivered were very limited. Occupational diseases were not included in most acts, the population had a lower life expectancy, early retirement plans did not exist, social security was not yet enacted, and Medicare was only an idea. The federal government poured dollars into the economy to construct public works [
WPA] projects while limiting private debt. A consumer based economy didn’t exist at the time of the Great Depression.

Likewise, the recession of the 1980’s had its own characteristics. During the 1980’s, the populations mostly affected by layoffs were those who were the labor force of post-World War II. The workers of that generation suffered from occupational exposures to many deleterious and carcinogenic substances. The occupational diseases were latent in manifestation and epidemic in proportion. Laid-off workers who became victims of the recession of the 1980’s participated in a surge of litigation, both workers’ compensation claims and third-party actions against the manufacturers of toxic substances. Litigation snowballed against , including
asbestos manufacturers, suppliers and distributors because of the minimal money recovered in the ordinary workers’ compensation claim. Asbestos litigation became “the longest mass tort in history.” In the years following the 1980’s the many workers separated from their jobs did not return to employment. Instead they collected both workers’ compensation benefits and Social Security disability.

The medical costs incurred, due to their occupational illnesses, were intentionally
shifted from the workers’ compensation program to the Social Security Medicare program. The Medicare Secondary Payer Act was enacted by Congress in 1980 to end the cost shifting tactics by employers and their workers’ compensation insurance companies programs, Medicare and health group coverage, and pension offsets.

The current workforce,
now being laid-off, is composed of an entirely different demographic than what existed in the 1930s and the 1980s. The social and political factors at the present time are far different from what was facing the workforce of the prior recession/depression years. The US Bureau of Labor Statistics reported, “In January 2009, the unemployment rate of persons with a disability was 13.2 percent, compared with 8.3 percent for persons with no disability, not seasonally adjusted. The employment-population ratio for persons with a disability was 20.0 percent, compared with 65.0 percent for persons with no disability.” The elderly have now been designated as a “new class of workers” as they return to the labor market out of economic desperation. The numbers of unemployed workers who are 65 years old and older now in the workforce, compared to a decade ago, have increased to 7.3% from 4.7%.

The census of workers currently
without employment opportunities include significant numbers of aging baby boomers who were about to seek retirement while looking forward to the "golden years." The erosion of planned retirement savings requires that many older workers now return to work. There is a reluctance to file claims. Therefore, fewer injured workers now seek total disability payments under workers’ compensation. The stagnation of the administration of the workers’ compensation system makes it even more difficult for the elderly who are injured to navigate the system. This only adds to the claimant’s frustration and encourages a greater reluctance to file a formal claim for benefits.

Some workers’ compensation insurance companies now involved in the compensation system have been nationalized by the federal government to the various stimulus and bailout programs. They lack funds to remain economically viable with out further insurgence of capital from the federal government. The federal government is now a stakeholder in the process. Self-insured employers are becoming financially weaker. Corporate assets have been minimized by lack of credit and the massive economic stock value decline. Municipal entities and others involved in joint insurance funds (JIFs) are now having difficulty in maintaining economic viability. Because of the lack of tax revenues and federal support, State and local communities are on the verge of bankruptcy.

The present
ills of the American workers’ compensation system mirror the economic woes of the national economy. The last decade has demonstrated an accelerated decline in the functioning of the system. It is reflective of what Paul Krugman, Professor of Economics and International Affairs at Princeton University, commented in the NY Times, that Americans are having financial “illusions.” “The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.” The workers’ compensation system is so bogged down in increasing medical debt that it is unable to deliver benefits efficiently. The present compensation system can’t be relied upon to rebound.

Compounding this downturn in the financial sector is the fact that
workplaces have become safer. Over the years there has been a decline in fatalities as reported Bureau of Labor Statistics National Census of Fatal Occupational Injuries. As the United States becomes more of a service-based economy with a dwindling manufacturing sector, less injury risk exists in the occupational sector. The workplace has become safer and there are fewer serious injuries and less occupational illness.

corporate downturn has been reflected by the implosion of many defense law firms who have reduced their staffs. Over a thousand lawyers were laid-off in a single day by major defense firms. The legal market restructuring is the result of a domino effect of the downsizing of corporate America. Representing injured workers and defending compensation claims on behalf of corporate America has taken a dramatic downturn. The trend is toward less attorney participation in the present system. Even attorney layoffs have become epidemic as the economic downturn intensifies.

Additionally, workers’ compensation programs have been subject to insurance industry targeted reform. The yet number of claims, eligible for benefits that would require legal representation has
declined substantially as the California wave of reform swept towards the east coast. As the economies of the States shrink, so do the dollars available to operate the administrative programs for injured workers. Workers’ Compensation hearing offices in California will be closed two days per month and in New Jersey, a state that has already imposed a hiring freeze, is about to similarly close State offices.

The workers’ compensation system, based upon new national social and economic characteristics is already being re-crafted into a
new program requiring less need for litigation support. Unlike the Great Depression of the 1930’s and the recession of the 1980’s, the present downturn in workers’ compensation claims activity is not anti-cyclical. It is an illusion of grandeur to believe that the present workers’ compensation system will recover or rebound in its present format. A national universal medical program will ultimately embrace the compensation delivery system and determine the future destiny of workers compensation.

Sunday, February 22, 2009

The Right to Choose Your Doctor

Selecting your own treating physician in a workers’ compensation claim may soon become permitted nationally. A movement in Iowa has now sparked national interest to permit employees the right to choose their medical provider.

Coupled with the effort for employees to seek
freedom of choice “to form unions and bargain for a better life” is the effort to seek freedom to choice a medical provider in a work-related accident or occupational illness.

The effort has been supported by an interest group formed on
Facebook, “Iowians for Workers Choice of Doctor.” “Because life is about more than just work...In Iowa, if you are injured on the job, employers can decide which doctor treats you. You choose what foods you eat and which exercises you do, but they can choose who is best to care for you.”

Iowa Senate Bill 1119 would allow injured workers to designate their choice of physician. “Too much has been made of how much this is going to cost a company and not enough on how this affects an individual and their personal lives,” said Democratic Sen. Bill Dotzler of Waterloo.

The vast majority of states allow workers the freedom to choose their own treating physicians. Studies have shown that employees who have the right to select their own physician have more confidence in their medical care and have a more successful recovery.

The delivery of medical services continues to be a major problem in the national network of workers’ compensation systems now in place since 1911. Federal initiatives for a national healthcare system are under consideration that
would incorporate the entire workers’ compensation system’s medical delivery system.

Saturday, February 21, 2009

CMS to Provide Query Access Through Mandatory Reporting

At a recently moderated telephone conference session CMS announced that beneficiary verification would be available through a query function on its new database system to determine eligibility Medicare beneficiary status. The system will be in response to new insurance carrier mandatory reporting procedures that have been Congressionally imposed. The query will be based on 4 basic criteria including: Social Security number; data birth; name or gender. The verified Social Security information will be provided for all criteria except Social Security numbers and a corrected format.

CMS will not provide outstanding conditional payments or other data by use of the reporting system. Individual beneficiaries may be able to find this information upon governmental website that allows for individual beneficiary access through That site is accessible only by beneficiaries.

The federal is agency is planning for the release of a User Guide prior to the actual date of mandatory deployment and activation of the federal reporting site. Activation is anticipated in July 2009.

Thursday, February 19, 2009

WR Grace Officials on Trial

The focus of litigation against WR Grace has now shifted to the civil courts in a trial against 5 former company officials for damages resulting from the death and harm caused its former workers. In Libby Montana, WR Grace mined asbestos (vemiculite) ore that ultimately was manufactured into insulation and other products.

Five former officials of WR Grace, an asbestos producer, are standing trial for concealing information from the former employees and for not taking the appropriate action to protect their health. The criminal trial has been delayed since 2006 because of pending appeals.

The company has recently filed an amended reorganization plan on Feb. 3, 2009. The plan contains the following comments about workers' compensation claims:

WR Grace - Proposed First Amended Reoganization Plan 2-3-09
"3.1.4 Class 4. Workers’ Compensation Claims
(a) Classification Class 4 consists of all Workers’ Compensation Claims against the Debtors.

(b) Treatment This Plan leaves unaltered the legal, equitable, and contractual rights to which each such Workers’ Compensation Claim entitles the Holder of such Workers’ Compensation Claim. For the avoidance of doubt, in no event shall any of the Sealed Air Indemnified Parties or the Fresenius Indemnified Parties have any liability with respect to any Workers’ Compensation Claim.
(c) Impairment and VotingClass 4 is unimpaired. The Holders of the Workers’ Compensation Claims in Class 4 aredeemed to to have voted to accept this Plan and, accordingly, their separate vote will not be solicited."

Tuesday, February 17, 2009

Medical Costs in Comp Higher Than Group Health

A report issued by NCCI concludes that medical costs in Workers' Compensation were higher in some instances than in Group Health Plans.

The main findings were: 

  1.  For comparable injuries, when WC pays higher prices than GH for specific services, those services tend to be used more often in WC than in GH 
  2.  The proportion of WC medical cost that is subject to physician fee schedules is declining by about one percentage point per year 
  3.  The Medicare fee schedule is very useful as a starting point for the design of WC medical fee schedules, but has notable shortcomings for WC, including too little emphasis on return to function and too little sensitivity to cost differences among states 
  4.  Particularly in specialty areas such as surgery and radiology, fee schedules can result in WC reimbursement rates that are especially high compared with GH  
  5.  While fee schedules tend to concentrate reimbursements at the maximum allowable rate, there are many payments that are either greater than or less than the maximum allowable rate 
  6.  Reimbursement for care that physicians provide at hospitals and other facilities is more likely to exceed the fee schedule than care provided in their offices. This is partly because the fee schedule need not always apply when facilities bill for these services.  
  7.  A higher proportion of reimbursements are at or below the fee schedule when WC medical services are provided through a network as opposed to when they are not. 

Monday, February 16, 2009

California Closes Division of Workers Compensation 2 Days Each Month-Lack Revenue to Operate

Citing lack of State revenue, Governor Schwarzenegger issued Executive Order S16-08, on Dec. 19, 2008, ordering the California Division of Workers' Compensation close the first and third Friday of every month, beginning on Feb. 6, 2009, and ending on June 30, 2010.

Legal documents that would otherwise be due on a furlough day will not be due until the next open business day (normally the next Monday, but Tuesday if the Monday is a holiday).

Sunday, February 15, 2009

Pittsburg Corning to Plans to Pay Asbestos Victims $825 Million

PPG Industries (Pittsburg Corning Corp.) and its insurers plan to pay out millions of dollars to victims of asbestos disease. In a bankruptcy reorganization plan filed with the Court for its approval, it was announced that PPG intended to pay out $825 Million in cash over the next 15 years.

PPG had filed for bankruptcy protection in 2000 under because of alleged potential asbestos lawsuit liabilities. Asbestos fiber, which the company supplied and manufactured, has been linked to asbestos related diseases in former asbestos workers, users and household contacts of former workers, including: asbestosis, lung cancer and mesothelioma.

"While we continue to believe PPG is not responsible for injuries caused by Pittsburgh Corning products, this amended plan would permanently resolve PPG's asbestos liabilities associated with Pittsburgh Corning," James C. Diggs, PPG's senior VP, general counsel and secretary, said in the statement.

The trust would be funded with $1.6 Billion in cash payments through 2027. Approval of the reorganization plan is required.

Saturday, February 14, 2009

The New Economic Recovery Act Fails to Include Workers' Compensation Privacy Needs

The new stimulus package, The American Recovery and Reinvestment Act [ARRA], fails to protect medical record privacy for injured workers. The new economic recovery package includes an appropriation of $19 Billion for the expansion of electronic health records [EHR] by funding intellectual technology. The legislation fails to include an essential prohibition on the dissemination and misuse of workers' compensation medical records.

The spokesperson for the Center for Healthcare Transformation and the Gingrich Group, stated that, "Privacy cannot be compromised, but neither can we compromise progress in pulling our health care system out of the technological Stone Age," ... "We need to find the right balance between privacy at all costs and progress at any cost."

The legislation should be expanded to protect the privacy of workers’ compensation medical records from misuse use. A coalition of legislators, including Rep. Edward J. Markey, Massachusetts Democrat, expressed deep concerns. Markey stated, "Medical information is probably the most sensitive and personal information that we have about ourselves. Without strong privacy safeguards, a health [information-technology] database will become an open invitation for identity thieves, fraudsters, extortionists or marketers looking to cash in on our medical histories." He further remarked that, "tough privacy safeguards" are necessary to reap the benefits of integrated health databases.

While the EHR is a noble project to increase overall efficiency and economy, the misuse of the data of injured workers remains a deep concern. The open door to this information left by the Health Insurance Portability and Accountability Act [HIPA] and ignored by ARRA must be addressed so that the medical records of our working wounded do not become a gold mine for unscrupulous exploitation.

Wednesday, February 11, 2009

Paying for Medical Performance in Workers' Compensation Claims

The workers' compensation medical delivery system is a target of much controversy over its effectiveness. The extensive delays in the delivery of medical benefits because of bureaucratic stagnation, and the massive employee dissatisfaction over the results of industry managed care are a rising chorus of concern.

The Federal government, in an emerging concept, is now looking toward limiting escalation costs and other medical issues, by utilizing a concept that provides reimbursement to medical providers based on outcome success. The system will no longer pay for medical failures or mismanagement. The traditional fee-for-services approach is slowly giving way to newer and innovated approaches for medical provider reimbursement.

Whether the compensation system is either closed panel (employer choice of physician) or open panel (employee choice of physician) the ultimate outcome would determine the level of medical reimbursement. In a nation where there is a premium placed upon getting skilled and talented employees back to work in a full capacity, this concept is gaining popularity.

Paying for medical performance in Workers' Compensation might be just what the doctor ironically ordered so that the disabled population receives appropriate and timely care that so justly deserve.

Sunday, February 8, 2009

Privacy Went Out the Window

Privacy, a core element in the workers’ compensation system, is rapidly become a thing of the past. Both the State and Federal governments have not considered it a key ingredient in the program.

States, in their to conversion to electronic claims record keeping, have eliminated privacy. The State of California electronically released workers’ compensation claim data concerning Nadya Suleman, the mother who gave birth to eight babies last week. This was after months of complaints by claimants and attorneys that the California electronic claims system was flawed.

Likewise the Federal law, HIPPA [The Health Care Personal Information Non-Disclosure Act of 1998] governing medical records specifically excludes workers’ compensation medical information. Final Health Insurance Privacy Regulations that were published by the Department of Health and Human Services on December 28, 2000, establishing standards for privacy of individually identifiable health information records eliminate privacy in compensation claims. While the regulations cover health plans, health care clearinghouses and certain other providers who use computers to transmit claims information, workers' compensation insurance carriers are exempted.

The Institute of Medicine (IOM) committee has recently recommended the Congress and health agencies develop a new approach to protecting privacy in health research. In a 316 page report released by their Committee on Health Research and the Privacy of Health Information it concluded that HIPPA does not protect privacy.

As the country embarks on a new economic recovery program, including national health care, the Federal government must rebuild the national system of workers’ compensation system. Privacy should not be thrown out the windows when administering a workers' compensation benefit delivery system.

Perspectives on Asbestos Litigation - Symposium Published

What has been described as the longest mass tort in the history of litigation, which had its geniuses in workers' compensation, continues to be a judicial learning experience. The Southwestern University Law Review has recently published a issue in conjunction with the symposium on asbestos litigation. Judges, lawyers and professors who participated in this unique seminar reflected upon the lessons learned and the issues that developed in its long course in the civil justice system.

CMS May Participate in Conferences to Discuss Mandatory Reporting

CMS has announced that it will consider participating in conferences to address mandatory reporting requirements and their implementation. It is accepting email requests at

The requests must include the following information:

-Conference Name/Title.
-Contact Person for the CMS Participation Request: Name/address/telephone/email.
-Sponsoring Organization: Name/address/telephone/email.
-Date(s) and Time(s) of Conference.
-Location of Conference: City/State.
-Approximate Number of Conference Attendees.
-Conference Topics: Please attach a draft agenda for the conference if available.
-Target Audience for the conference: Please be as specific as possible (for example, plaintiff attorneys, defense attorneys, insurers, third party administrators, risk managers, etc.).
-Scope of CMS participation requested: CMS needs to know whether audience interest is expected to be directed at Group Health Plan (GHP) related reporting issues as well as Liability -Insurance (including Self-Insurance), No-Fault Insurance, and Workers’ Compensation reporting issues or is expected to be more focused on some subset such as Workers’ Compensation reporting issues.
-Is the event open to the public?

CMS plans to respond within two weeks of the submitted request.

Saturday, February 7, 2009

Taxing Workers' Compensation Benefits to Finance the Bailout

As the greatest economic bailout goes forward, the Federal and State governments are exploring new areas to raise revenue, including from workers’ compensation benefits. The multi-billion dollar national workers’ compensation system, insured by recently nationalized unstable insurance carriers, maybe be a source to fund the rapidly increasing national debt.

The US national debt already amounts to almost $10 Trillion. The population of the US is 305.603, 863 and each citizen's share of the debt equals $35,091.43.

The economies of the Federal and State governments are crashing. California has now enacted furlough days to reduce its payroll. Delays in the delivery of workers’ compensation benefits will be compounded and insurance companies will be able to hold onto the benefits longer.

Benefit programs have increasingly become a source of revenue for the government. The Social Security Administration has enacted a user fee.

Other Federal programs charge for issuing opinions and rulings. The IRS has such a program for private rulings. CMS maybe required to impose a fee for the review and analysis of CMS MCSAA (Medicare Compensation Set Aside Agreements). The IRS already taxes punitive and non-economic awards.

As the demand for funding increases, Workers’ Compensation benefits may become a source of additional governmental revenue, especially in light of the need to monitor insurance funds and expedite the delivery of benefits. These new developments give added urgency to a complete review of the entire workers' compensation system.