Florida Workers' Comp: Failures, Incentives, and Adversarial (3)

People are talking about workers' compensation, perhaps more today than ever. This is the second in an 11-post series (the first is here, links to others are at the end of this post), that attempts to overview various perspectives heard from system observers and participants. The point is that discussion is good, and if this series generates debate and interaction, all the better.

System failures

By their very nature, workers’ compensation systems must be many things to many people and groups. As a result of this necessitated service of much to many, the converse that is mandates is that no system can be all things to any person or group. By their very nature, workers’ compensation systems will be imperfect compromises. Most modern systems will be the product of evolutionary development, with statutory supplementation or amendment occurring in small steps over long periods of time. Many have undergone larger modifications periodically, commonly referred to as “reform.”

“Reform” is generally defined as changes intended to improve something. Because of the many perspectives and internal bias, it is likely that various individuals and groups might have different perspectives on whether these “reforms” have overall been improvements or detriments. Because these “reforms” have also been produced in the legislative or regulatory processes that demand compromise, it is also likely that most persons or groups will find some element of a given “reform” to be positive from their or its perspective.

Critics and participants alike perceive failure in systems that provide less than a seamless response to work injuries. They lament that systems’ complexity and structures have resulted in perceptions of delayed and incomplete care, gaps in monetary benefit delivery, and dissatisfactory recovery of function and ability. The national press comparisons of benefit calculation and delivery, process and procedure, definition and regulation state to state is perceived as contributing to imperfect beliefs , expectations, and the adversarial nature of the systems.

There is a sentiment that workers’ compensation suffers from a poor reputation related to some of the concerns discussed in this report. Summit attendees see the reputations as deserved in some instances but ill-informed and undeserved in others. There is a general consensus that improving the reputation and positive perceptions of the systems would involve a culture shift; some believe that advancements on the issues discussed herein, particularly as they come from voluntary interaction and discussions rather than mandate, might begin a culture-shift that would facilitate such a change in perceptions and criticism over time.

Incentive is different in WC and group health

All economic systems are driven by costs, financial or otherwise. In base form, much human behavior is likewise driven by perceptions of cost/benefit analysis. commentators have identified multiple instances in which individual or systemic cost/benefit analyses are perceived as incentivizing behavior by system participants.

Workers’ compensation systems are significantly regulated (see #2). One notable example is regulatory constraint of reimbursement to service providers (medical doctors, etc.). In the marketplace, there may be prevailing service rates for health insurance, self-pay, government programs (Medicare, Medicaid, Veteran’s Administration) and workers’ compensation. It is possible therefore that a provider may perceive economic benefit in a particular conclusion. If a procedure is reimbursed by workers’ compensation at a rate double that paid by health insurance, a provider may be inclined by self-interest to opine that an injury or illness is work-related. The concern voiced is that the provider will perform the service in any event, and will seek the maximum economic benefit therefore.

The potentiality of such self-serving opinions has driven discussion of “cost-shifting” in the services related to workers’ compensation. There is no unanimity as to the result however. Most acknowledge the potentiality for shifting, caused by disparate economic incentives. Some perceive a tendency for work-related injury/illness care being shifted to health insurance or social medicine, while others perceive the opposite tendency of non-work injury/illness being shifted to workers’ compensation.

The incentive concern is also voiced in employee choices. This may be in the context of seeking workers’ compensation treatment, or in the context of benefits.

An employee is unlikely to have a choice regarding coverage for workers’ compensation. Generally, statutory constructs define which businesses must be covered. Business owners not required to participate are nonetheless able to elect voluntary participation. Thus, employers but not employees are afforded some choice regarding system participation. Conversely, many employees will have significant choice regarding the purchase of private disability insurance, group or individual. Employees may likewise have significant choice regarding whether to purchase health insurance, or at least the parameters of such a purchase.

Despite the mandatory nature of the Affordable Care Act of 2010, some conversation participants believe that a significant population of Americans remain without health insurance.

Health insurance is a dynamic product. It is valued based upon risk to the payer, which in turn is perceived based upon a number of variables. Older patients may be more likely to require care than younger patients; policies with high annual deductibles may be less likely to result in significant loss to a payer; policies with significant co-pay provisions may discourage policy holders from seeking covered care.

Thus, an injured person may face significant personal expense for care if an injury or illness is deemed “personal” rather than workers’ compensation. This potential may influence a service provider, perhaps persuading that any conclusion of “personal” will result in deferral or refusal of care and diminished or eliminated recovery and return of function. In that setting, a concerned service provider’s scientific opinions might be influenced in a manner to outweigh contrary business interests (opinion an injury/illness is work related to facilitate care, despite reimbursement that would perhaps be less than health insurance).

Similarly, damages are statutorily defined and therefore potentially limited in workers’ compensation. Indemnity benefits are generally paid during specific periods defined by the existence and extent of medical imposed limitations or restrictions. Some perceive the absence of non-work related disability coverage as potentially motivating allegations of work-relatedness. An injured individual without such disability coverage could suffer significant economic damage from a decision that some injury or illness is not work-related.

When an injury or illness is work-related, indemnity remains delimited by restrictions on work. There are no damages in workers’ compensation for pain, suffering, loss of consortium or otherwise, which may be awardable in a tort claim. Some Summit participants contend that an injured worker might be incentivized to magnify symptoms or otherwise represent condition in order to attain damages for the injury.

Systems are persistently adversarial

A fundamental objective of workers’ compensation is the absence of litigation. The vast majority of jurisdictions have created administrative adjudicative systems for resolving disputes regarding benefit entitlement. However, these systems have evolved over time. There are increasing similarities between administrative adjudication systems and tort processes in state courts.

This concern is related to other concerns (See discussion in upcoming post, "Lawyers in Systems"). Legal challenges in other benefit delivery systems are perceived as less likely. Some see this incongruent with the nature of contractual relationships generally. In most cases, health insurance is “first-party” insurance. People purchase coverage for their own benefit. Workers’ compensation by comparison is “third party” coverage where the purchaser (employer) is procuring coverage for the benefit of some third party (employees). In most first-party insurance, parties in disputes are responsible for the payment of their own attorney fees and costs. There are exceptions to this general rule created by statutory frameworks for “prevailing party” fees in a variety of jurisdictions.

In most jurisdictions, there is a dual purpose attorney fee provision included in workers’ compensation programs. The first is to compensate attorneys who pursue benefits on behalf of workers. Courts have also interpreted attorney’s fees as a penalty (cost) that deters inadvertence or egregious benefit denial.

The result has been an increasingly adversarial system in which claiming benefits, and litigating entitlement, has become commonplace. Some see this as encouraging distracting litigation and conflict, which detracts from the foundational purpose of workers’ compensation.

Thursday, November 9, 2017

Failures, Incentives, and Adversarial (3)