Today, legislative committees from the Assembly and Senate convene for a joint hearing on the issue of workers’ compensation. Specifically, the hearing is noticed as “A Discussion on the Impacts of S.B. 899 on Permanent Disability Benefits.” Eight years removed from the reforms much has changed, and committee chairs Senator Ted Lieu and Assemblyman Jose Solorio should be recognized for initiating this important dialogue.
The hearing is expected to kick-start a broader discussion led by the Brown Administration about increasing disability benefits as part of a comprehensive set of changes to make California’s $15 billion workers’ compensation system operate more efficiently and effectively.
Done right, a comprehensive package with quantifiable, cost-saving reforms could get the system back on track and rein in increasing medical and litigation costs. Done wrong, employers could face significant new costs as we continue to struggle against economic headwinds. This includes schools and other public agencies that have seen their workers’ compensation costs increase 32 percent since 2006 at the same time we have been forced to lay off teachers and cut educational services.
The straightest path to getting it “wrong” for employers and injured workers would be to isolate benefit discussions away from related issues that impact the frequency and severity of permanent disability claims. The real goal of the SB 899 reforms – one that we need to sustain – is getting injured workers back on the job because research tells us recovery is the best possible outcome economically, psychologically and physiologically.
The three related issues that need to be addressed in any discussion over how the system handles permanent disability are these:
1. Ensuring Quality Medical Treatment. Providing effective care to injured workers reduces the chances that they will require permanent disability benefits. Having worked with injured workers for more than 25 years, I have seen too many instances where improper treatment actually worsened the worker’s condition and left them more disabled.
Legislation signed by Governor Gray Davis in 2003 moved California toward a higher standard of medical care in workers’ compensation. The adoption of “evidence-based medicine” that utilizes national, peer-reviewed treatment protocols was designed to change the culture from “more treatment is better treatment” to one where the treatment protocol is supported by best practices.
While some of the worst “medical mills” were shut down after the reforms, we have seen the re-emergence of plaintiffs attorneys referring injured workers to physicians who are not authorized to treat and do not treat in line with the medical evidence. These providers are empowered by the ability to file liens over payment disputes. Such liens cost the system $200 million annually and delay justice for injured workers. The flow of liens must be curtailed as a first step toward more effective treatment.
2. Promoting Return to Work. Regardless of how generous PD benefits are, they will never replace all of an injured worker’s lost wages. Research from the RAND Institute for Civil Justice confirms that injured workers who get back on the job have the best economic outcome. For a time after the reforms, California’s return to work rate increased, reducing wage loss among workers. More recently, this rate has slipped as litigation has increased resulting in the slowing of claim resolutions.
Despite incentives that were created in SB 899 to promote return to work, more needs to be done in this area so that injured workers are given a pathway to what’s in their best interest, rather than what’s in the interest of those who profit from their disability.
3. Preserving Objective Ratings. The most vexing problem with California’s workers’ compensation system is the number of permanent disability claims filed. The “frequency” of these claims before the reforms was three times the national average according to the National Council on Compensation Insurance. A low threshold for acceptance and subjective rating factors allowed attorneys to flood California’s system with claims where no disability could be measured, but would nonetheless result in benefits from which attorneys would take their percentage.
The legislature’s enactment of an “objective” rating system was specifically designed to reduce litigation and direct dollars toward disability that could be measured by medical diagnostics and consistent from one worker to the next.
Over time, attorneys have argued for a questionable interpretation of these objective medical criteria and secured court rulings that have allowed greater subjectivity and inconsistency to creep back into the system. As expected, permanent disability claims – which always remained higher than average – are now being filed at a higher rate. More claims, more litigation and higher payouts are again stretching limited dollars across a broader cross-section of workers and endangering the ability of the system to provide adequate dollars for injured workers.
These issues cannot be divorced from a discussion over permanent disability benefits. Of course, benefit levels need to adequately compensate injured workers, and we need to understand how current benefit levels are meeting this goal. Just as important to the debate, however, is understanding how the different facets of the workers’ compensation system can be improved to produce quality outcomes for injured workers and prevent an explosion of new costs for employers.