Tag Archives: workerscompensation.com

Top 10 WC Predictions for 2017

2016 was a hectic year here at the Cluttered Desk. That is due in part to the fact I wasn’t behind it much of the time these past 12 months. Travel demands this last year exceeded all before it, and I spent a fairly significant amount of time away from the office. This makes foretelling the events of 2017 difficult; mostly because I am still trying to accomplish the tasks I was supposed to finish way back in 2015.

Now that I think about it, predicting the past would be much easier.

At any rate, I wanted to lay out for you EXACTLY what will be occurring as the year 2017 unfolds. I wanted to do that, but have absolutely no clue as to what the future will exactly be. Instead I will make these Top Ten Predictions and hope for the best.

1. The president will appoint a federal commission on workers’ compensation

President Trump will appoint a federal commission to identify and recommend improvements for the workers’ compensation system. The 142-member group, composed mainly of fellow students from Ivanka’s Hot Yoga class, will toil for 10 months trying to identify the most pressing issues for the industry. They will ultimately be overwhelmed by the system’s current complexities, causing complete work stoppages for the panel. Originally intended as a key part of the “drain the swamp” campaign, workers’ comp will ironically instead “swamp the drain,” causing chaos and confusion throughout the government. The commission’s final report will be issued via Twitter, with seven characters left to spare.

2. A federal emergency guest worker program will be established

Construction of the long-awaited “Great Wall Numero Dos” will begin along our southern border just four weeks after the new administration is in place. Unfortunately, it will be discovered that in the third week of new management the country deported all the people willing to perform the back-breaking labor in the middle of the desert Southwest. An emergency guest worker program will be established to allow people to return to the country to build the wall designed to keep them out of the country in the first place.

3. Florida will successfully reform its workers’ compensation system

Florida legislators will pull out all the stops to fix the state’s ailing workers’ compensation system this year. When the dust of reform settles, the system will be housed in a large canvas tent with three rings, and there will be shiny new cages for all the animals. Caretakers will be allocated glistening new poop-scooping shovels. The job of Chief Deputy Judge of the Office of Judges of Compensation Claims will be retitled “Ringmaster.”

See also: 10 Predictions for Insurtech in 2017  

4. The state of California will opt out

Unhappy with the fact that much of the rest of the nation did not agree with it in the recent presidential election, California will push for and ultimately be successful at separating itself from the U.S. The effort will get a huge boost when petitions supporting the measure gain 162 million signatures from people living outside the state. The move will not quite be complete, however, as most of the inland and southernmost regions will choose to remain a part of the U.S. This will leave Los Angeles County and the San Francisco Bay area to go their own ways. They will have screaming internet and cutting-edge technology but no food, because all of that is grown inland. Additionally, most LA commuters will have to register as foreign workers, because their three-hour commute means they now reside on foreign soil. The newly formed country of Los Angelinos will have an immediate crisis in workers’ comp, because their outrageous injury costs will no longer be subsidized by what used to be the rest of the state. The chairperson of the Los Angelinos People’s Politburo will embark on a reform effort modeled after Florida efforts. The new system will look quite similar, with the exception that the tent will be resistant to earthquakes, and all bathrooms will be gender-neutral.

5. Healthcare reform will meet medical marijuana

As Republicans dismantle the Affordable Care Act, they will strive to develop an affordable alternative to ensure prompt medical care for the dozens of people who actually paid for health insurance they obtained through the government exchanges. It will be discovered that locally sourced, organically grown and affordable medical marijuana will be the singularly stellar solution for the country’s medical ills. Free marijuana will be distributed to all persons with any illness or ailment and will serve as the single authorized medicine listed on the new health systems formulary. No one will really recover from anything, but no one will really care, either. The national anthem will be changed to Bob Dylan’s “Rainy Day Women #12 & 35” (Everybody must get stoned).

6. Artificial Intelligence will make inroads into workers’ compensation

The first rounds of automation will be employed in the workers’ comp industry in 2017. Artificial Intelligence will make inroads in claims management, transportation and the medical industry. Surprisingly, artificial intelligence will make the most dramatic advances in the online publishing arena; notably, many workers’ comp blogs will be taken over by these wunderkind computers. This will be ironic, as it will represent the first time actual intelligence of any kind has been applied to that sector.

7. Workers’ compensation will almost be named workers’ recovery

Long a personal goal of this prognosticator, the industry will come perilously close to being renamed “workers’ recovery” this year. The International Association of Industrial Accident Boards and Commissions (IAIABC) will commit to the cause and put the full power of its influence behind it. The effort almost succeeds, but falters slightly in the final moments. The German representatives on the Industry Rebranding Committee insist on a slight change to the word “Recovery.” The final result is the industry will be called “Nur die Klappe Halten und Arbeiten,” which essentially means, “Just Shut Up and Work.” All is not lost, however. The people at WorkersCompensation.com successfully obtain the domain name www.nurdieklappehaltenundarbeiten.com, ensuring that these inane predictions can continue for years to come.

8. Illinois will dramatically simplify and improve its workers’ comp program

In a completely unforeseen move, Illinois legislators will totally scrap their currently chaotic workers’ compensation system and replace it with a simplified, recovery-centric program based on an advocacy-based claims model. Injury durations decrease, litigation ceases to exist and everyone benefits from what is now considered the model workers’ compensation program in the nation. On a completely unrelated note, pigs will fly, and hell will freeze over.

See also: 5 Predictions for the IoT in 2017  

9. Amazon will sell workers’ compensation insurance

Online retailing behemoth Amazon will start to sell workers’ compensation insurance via their Prime “One Click Order” system. Alternately, Amazon Echo owners will be able to order a policy by saying, “Alexa, buy me workers’ compensation coverage.” Policy paperwork will be delivered within one hour via drone. When an injury occurs, employers will simply be able to return the broken worker to Amazon by generating a return authorization and shipping label from within their account area.

10. Bob Wilson will lose 50 pounds – again

Suffering with chronic knee issues and having been told to lose weight by his orthopedic surgeon, Bob Wilson will try in vain to find a new orthopedic surgeon, preferably one who weighs 300 pounds and smokes. Failing in that attempt, he will lose 50 pounds. Again. This will bring his total lifetime weight loss to more than 1,750 pounds.

And there you have it. We will look forward to returning at year’s end to see how accurate I was. Until then, have a great 2017!

This article first appeared at www.workerscompensation.com. 

uncompensated

Time to Focus on Injured Workers

When WorkCompCentral released a report, The Uncompensated Worker, I wrote about how a work injury affects family finances. I applied several realistic work injury scenarios to each state. In 31 states, workers receive a reduction in take-home pay of 15% or more when they’re injured on the job. In half the states, households with two median wage earners—one on work disability and the other working full time—cannot afford to sustain their basic budget.

These findings confirmed what workers’ comp claims adjusters, attorneys and case managers already know: Many injured workers live on the edge of financial collapse.

But the findings are by no means conclusive.  The research done for “The Uncompensated Worker” was too limited. I know, because I did it. To really understand the financial experience of being on workers’ comp benefits, one should run not a handful but thousands of scenarios through a statistical analyzer and then compare the data results with actual cases researched through interviews.

The research agendas of the workers’ comp industry rarely involve looking at the worker her or himself.

Instead, the industry has funded research mainly to understand the drivers of claims costs, specifically medical care. This focus can be explained. Over the past 25 or so years, the workers’ comp industry has absorbed a huge rise in medical costs, more and more layers of regulation relating to medical treatment and even more specialties needed to deliver or oversee medical care.

To illustrate the extent of this industrial-medical complex: Nationwide spending on “loss adjustment expense,” a proxy for specialist oversight of claims, has grown annually on average by 9.4%  since 1990, while total claims costs have risen on average by 2.5%.

The quality of industry-funded research has improved, because of better data and strong talent pools in places like the Workers’ Compensation Research Institute (WCRI), the California Workers’ Compensation Institute and the National Council for Compensation Insurance. Their research focuses on cost containment and service delivery. These two themes often intertwine in studies about medications, surgeries or medical provider selection.

It’s time to pay more attention to the worker. Close to a million workers a year lost at least one day from work because of injury.  We hardly know them. Bob Wilson of Workerscompensation.com predicts that, in 2016, “The injured worker will be removed from the system entirely. … Culminating a move started some 20 years ago, this final step will bring true efficiency and cost savings to the workers’ comp industry.” Industry research, one might say, has left the worker out the system.

An example of how the worker is removed can be seen in how the WCRI did an analysis of weekly benefit indemnity caps. These caps set a maximum benefit typically related to the state’s average weekly wage. (The methodology has probably not been critiqued by states for generations, despite better wage data and analytical methods.) The WCRI modeled different caps to estimate the number of workers affected. But it did not report on what this meant to workers and their families; for example, by how much their take-home benefits would change.

As it happens, Indiana is one of the worst states for being injured at work; it has close to the stingiest benefits for a brief disability. You are not paid for the first seven calendar days of disability. Benefits for that waiting period are restored only if you remain on disability for 22 calendar days. Take-home pay for someone who is out for two weeks or less will likely be 83% less than what it would have been without injury. An Indianapolis couple, both at the state’s median wage, cannot afford a basic month’s budget for a family of three when one is on extended work disability. These poor results are partly because of Indiana’s benefit cap, which is one of the lowest in the country. The weekly benefit cap used in the report, a 2014 figure, was $650.

Les Boden, a professor at Boston University’s School of Public Health, read a draft of “The Uncompensated Worker.” For years, he has studied the income of injured workers and the adequacy of workers’ compensation benefits. He told me, “Studies have shown that many people with work-related injuries and illnesses don’t receive any workers’ comp benefits. I don’t think that the problem is too little research. It’s political. Unfortunately, workers are invisible in the political process, and businesses threatening to leave the state are not.”

I am not sure how the politics of this issue can change until the strongest research centers in the industry begin to pay attention to the worker.

This article first appeared at workcompcentral.com.

The Looming $20 Billion MSA Train Wreck: Welcome Aboard

There is a $20 billion calamity on the tracks ahead, and no one seems to care. As this train hurtles ever closer to its inevitable demise, the passengers ride oblivious. A program created to protect those passengers – U.S. taxpayers — seemingly will do anything but what was originally intended. 

Medicare Set Asides were developed with the good intentions of protecting Medicare, and the taxpayers that fund it, from unnecessarily paying for injuries and illnesses that are the prior responsibility of third parties. Quite simply, people were taking settlement money received from a general liability or workplace accident—money that was supposed to pay for future medical needs from the injury—and were spending it on anything but its intended purpose. While this was great for the bass boat and travel industries, it was a less than stellar deal for the U.S. taxpayer, who wound up paying for the injured persons’ care once they were eligible for Medicare.

Enter the MSA: a vehicle designed to protect a designated portion of settlement funds by placing them aside and requiring they be used for the purpose intended. This is not new. The roots of today’s MSA lie in the passing of the Medicare Secondary Payer Act of 1980. That act was significantly strengthened in 2003, however, and this has resulted in far more activity for the workers’ compensation industry over the past decade.

True to form, the government has not made implementation easy. Extremely detailed reporting requirements, extensive fines for the Responsible Reporting Entity (even for rules not established at the time) and a complex process made for a confusing road for employers and payers. An entire industry has sprung up to manage this process. The risks of not complying are serious, and the liability for getting it wrong is huge. The Medicare Set Aside today is integral to virtually any settlement situation in the workers’ compensation industry.

All of this is done to protect the U.S. taxpayer from Joe Sixpack and his desire for a bass boat.

I am in no way an expert on MSAs. I have, however, spent time over the last two years attending conferences and talking to various experts on the topic, trying to better understand their purpose and procedure. I discovered a singular statistic that absolutely floored me. It was a fact that, in my opinion, flies in the face of logic and makes all the burdened activity around the MSA seem pointless.

What is so shocking? Only 4% of completed MSAs are professionally administered.

The rest, 96%, are given directly to the claimant/recipient and are self-managed. That means that, when all is said and done, when the calculations are made, when the submissions and approvals are complete, the money that is set aside for the purpose of protecting Medicare and the U.S. taxpayer is given right back to Joe Sixpack, the guy we were trying to protect ourselves from in the first place.

It makes no sense. None.

I am not saying Joe Sixpack is a bad guy. I am not saying his intents are not pure. I am saying that managing payments from an MSA, making sure they are properly coded and complying with mandated reporting is difficult. The process may be well beyond the ability of an injured worker turned fund manager.

Even with his best efforts, Joe could be in trouble when Medicare starts paying for his health care. If he has not dotted every “i” and crossed every “t,” as well as made sure all expenditures were classified to show appropriate care for the affected injury, he could find himself denied needed coverage by Medicare.

And when an army of Joes are pounding at the door of Medicare, because of possible denial of coverage, something is going to have to give.

So how bad is it? What are we looking at here?

For that I turned to Ken Paradis, chairman of Ametros Financial, a company that offers professional administration of MSAs. He confirmed that my suspicions were potentially accurate and provided some very interesting – make that scary – numbers.

In 2010, the Centers for Medicare and Medicaid Services (CMS) approved $1.4 billion in MSAs. Assuming a consistent approach since 2001, the inception of the current program, we can estimate that $16.8 billion have been approved for MSAs in the past 12 years. Using a straight-line estimation, this could mean that $16.1 billion is being self-managed.

Not all MSAs are reviewed by CMS—some are set up with no input or review by the government—and these Class III MSAs represent a completely unknown addition in risk to the long-term health of Medicare. Paradis indicated from experience that 20% of MSAs may be in this category. Using the base numbers from our equation, that estimate brings the total risk pool to perhaps $20 billion.

That figure represents true risk for the nation and our industry.

It seems that many are under the impression that self-administered funds are managed with some level of competence by Joe Sixpack’s counsel. However, the existence of waiver or hold-harmless indemnification language in many settlement agreements tells a different tale. The November 2013 manual on MSAs included guidance for non-professionally administered MSAs, which tells us someone out there might need that advice.

After all the convoluted effort focused on setting up MSAs to protect the interests of Medicare, the guidelines on administration offered by CMS are surprisingly simple:

  • Deposit the fund into an interest-bearing account.
  • Use the fund only for the MSA settlement injury.
  • Use the fund only for expenses covered by Medicare.
  • Pay according to the appropriate fee schedule.
  • Prepare and submit an annual account report to CMS.

The first three seem easy enough to understand. The last two, however, are where the wheels will most likely come off the bus for our wayward injured worker turned financial wizard. Fee schedule and medical classification codes are a science unto themselves, yet we expect Joe Sixpack to navigate that labyrinth with a ninja-like accounting skill set that many industry professionals themselves do not possess.

As for those detailed annual reports, anecdotal information shows CMS hasn’t actually seen many of those over the last decade or so. They, and we, are operating blind in that area.

And, as I’ve indicated, it is a damn big area.

The harsh truth is, no one knows what is out there. No one knows what is coming. We are blindly turning on faith that all this energy and effort will somehow end up doing what was intended. Trust me; this is not going to end well.

The cost of professional administration is a mere pittance when compared with the cost and complexity of setting up an MSA. It seems even smaller when we fully recognize the consequences at hand. Some in the industry are openly suggesting that the expense of professional administration could easily be offset by using it in place of the costly and slow approval process. By skipping the approval but securing the long-term health of the MSA, the greater goal of limited liability will be met. The indemnity saved by settling the case sooner would in many cases more than offset the cost of a professional manager.

Under the current scenario, the taxpayers will clearly be on the hook, but the workers' comp industry should not be foolishly complacent. There are potential clawbacks in our future, and many who think they've put these issues to bed may be again facing a call for more cash by our government.

Why the government fails to close the loop on this and secure the protection it originally intended is beyond comprehension. We are requiring the crafting of a lengthy and expensive letter, getting it reviewed, edited and approved, and then no one is putting a stamp on the envelope.

All that effort, all that expense, only to wind up where we were to begin with; with the exception of our new sense of security. Our false sense of security.

This is part of a much bigger issue: 10,000 retirees are entering the Social Security system every day. The Medicare trust fund will be broke by 2022 at its current expenditure rates, and the ability of Joe Sixpack to manage his funds has never been more critical. There is a train wreck coming, and we are all on board for the ride.  An army of angry Joes will soon be pounding on our door, and the $20 billion may be nowhere to be found.

After all the effort and fuss, I find myself wondering: Why?