Does the Workers’ Compensation System Need a Prescription Change?
The delivery of medical benefits to injured workers is becoming more costly and difficult to administer. The medical care costs in workers’ compensation claims are increasing at double-digit rates.
Overall, more than one-quarter of all dollars that Americans spend are on medical care. Emerging factors that were not existent in 1911 now influence the workers’ compensation program: an aging national population; a shifting workforce; the increased use of prescription drugs; lack of affordable group health insurance, and unreliable economic investments due to a politically unstable world; deregulation of insurance carriers; the decline of a manufacturing base; and an increased Federal effort to recoup benefits.
The manner and method of the diagnosis, treatment, and cure of diseases have changed dramatically. Recent research indicates that many medical conditions do not result from a single contributing cause but as a consequence of a multitude of risk factors, making it difficult to focus liability on a specific event or exposure. This has caused an increase in disputed claims and scientific evidence challenges. The purpose of this article is to report developing trends in the United States in the delivery of medical benefits for injured workers.
AN ADMINISTRATIVE PROCESS
The workers’ compensation system was conceived as an administrative process to provide benefits, in a summary fashion regardless of fault, to injured workers who suffer work-related diseases and conditions due to employment. The program was implemented by individual States and included the provision of adequate medical care to the injured worker as soon as possible following the accident or manifestation of the illness. Coexistent with the right to medical care is the requirement for the payment for medications. The employer is required to furnish to the employee reimbursement for all medication that is necessary for the employee’s medical care, and that is ordered by the authorized treating physician. Medical monitoring, on occasion, may be ordered for latent medical conditions.
INCREASING MEDICAL COSTS
Medical costs are spiraling. The National Council on Compensation (NCCI) reports that workers’ compensation medical costs throughout the nation are rising rapidly. The total costs for workers’ compensation are now apportioned almost equally between medical and indemnity. However, the trend is toward the payment of rising medical costs at a pace that will represent a majority of the workers’ compensation allocation.
Individual States are struggling to make an antiquated workers’ compensation system function properly. New Jersey has reported that the workers’ compensation medical delivery system has created “…a real emergency.” The New Jersey Task Force on Medical and Temporary Disability Benefits its final report of December 10, 2002, reported:
“A worker unable to work because of injury often has no income, without medical treatment, no prospect of going back to work. No situation affects a petitioner and the petitioner’s family more dramatically. This is a real emergency. The most persistent complaint about the current system is its sluggishness in responding to these emergent situations. This is the chief weakness and source of dissatisfaction among injured workers.”[Emphasis added]
A NATIONAL ISSUE
The issues in New Jersey have been mirrored throughout the country. In Florida, Governor Jeb Bush proposed and the Legislature enacted a workers’ compensation plan that reduced benefits by controlling claims and medical expenses. In West Virginia, Governor Bob Weiss reported that the State faced a near-bankrupt workers’ compensation system that was costing taxpayers millions of dollars a day. The system's viability remains in economic jeopardy. Subsequently, the West Virginia legislature enacted major reforms to the workers’ compensation system. In Missouri, Governor Bob Holden was facing a loss of manufacturing-based industries that resulted in 40% of their jobs being lost between 2001 and 2002. He fought valiantly against legislative proposals to put fault back into the workers’ compensation system. In California, workers’ compensation presented as a major issue that resulted in a gubernatorial recall. The proposed California reform measures are based on workers’ compensation payments and issues representing medical treatment.
Several major options are under consideration throughout the country to reduce medical costs. Some critics have proposed that a national workers’ compensation system would limit transactional costs, establish a uniform State benefit program and contain medical costs by establishing one-tier pricing.
The Federal government is not unfamiliar with the administration and distribution of benefits. Since 1882 the federal government has been providing benefits to injured workers and their widows: in 1900, the postal worker's compensation system was established; in 1908, the Federal government established a program for those who work in hazardous environments; and, in 1932 the Social Security Administration was established. However, the Social Security Act did not embrace workers’ compensation in 1932 since the primary goal of the law was to reduce unemployment.
FEDERAL SOLUTIONS DISMAL
The federal programs have produced dismal results over the last few years. The Federal Victims Compensation Fund, enacted following the horrific tragedy on September 11th, 2001, has very strict eligibility criteria and a limited recovery scheme.
The Smallpox Emergency Personnel Protection Act of 2003 (SEPPA) was enacted following an aborted vaccination program after the government reluctantly disclosed available medical research concerning potential fatal cardiovascular reactions. A risk analysis demonstrated that this program may not have been needed at all but was merely implemented to sway public opinion. Ultimately, the federal government halted the Smallpox Vaccination Program and funded $100 million for the purpose of cleaning up the legacy of adverse medical reactions and to ease the burden placed upon the victims and their estates that were struggling to obtain benefits under State compensation programs.
The Energy Employees Occupational Illness Compensation Program Act of 2000 (EEOICPA) (P.L.106-398) was enacted into law in October, 2000 with strong bipartisan support. EEOICPA established a program to provide compensation to employers of the Department of Energy (DOE), its contractors and subcontractors, companies that provided beryllium to DOE, and atomic weapons employers.
The proposed Federal Compensation Fund for asbestos claimants has been bottlenecked by bureaucratic regulations. After years of ongoing litigation and approximately 60 major asbestos company bankruptcies, the Republican administration introduced the Fairness in Asbestos Injury Resolution Act of 2003. Organized Labor and asbestos victims have opposed the bill. Despite the sponsor's desire to craft a bill acceptable to all parties, the legislation is a restrictive measure that fails to provide fair, timely, and certain compensation to victims of asbestos-related disease while relieving manufacturers, employers, and insurers of all liability. The proposed Federal law unfairly shifts the burden and risk of paying for asbestos-related disease to victims and their families.
While federalization may not be the panacea, the target remains to limit the cost of medical expenses. The costs of maintaining duplicate medical delivery systems for workers, major medical and workers’ compensation, continue to represent unnecessary and costly duplicate expenditures in administration and management.
It has been suggested that the mandatory workers’ compensation plan and an optimal major medical healthcare system be combined into an Integrated Health Care (IHC) plan. Presently, the administration of two separate insurance programs appears to represent a mere duplication of costs. In 1999 healthcare administration costs totaled at least $294.3 billion in the United States or $1.059 per capita. The New England Journal of Medicine reports that United States employers spent $12.2 billion dollars on internal administrative costs related to healthcare benefits and $3.7 billion on healthcare consultants for a total of $15.9 billion or $57 per capita. It is reported that a single-payer system, such as in Canada, resulted in employers spending $3.6 billion for private insurance and $252 million to manage healthcare benefits, or $8 per capita. A system with multiple insurers is also allegedly costlier than a single-payer system.
In 1993 the Oregon Legislature enacted the “Combined Healthcare Coverage Pilot Program”. This consisted of a 5-year test under which healthcare insurance and workers’ compensation providers created single plans that combined standard healthcare coverage with the major portion of the mandatory workers’ compensation coverage. While the initial response to the program by insurers and employers was very positive, and seven pilot plans were approved in 1994, they ultimately were withdrawn by their sponsors. Initially, there was a $336,000 grant in 1993 from the Robert Wood Johnson Foundation to provide funding for this pilot program. The program aimed to facilitate easier, more efficient access for injured workers to obtain medical care. Another apparent reason for the system was to reduce adversarial tension between the injured worker and their employer and, ideally, reduce litigation. The program did not take hold because of political and legal considerations, including a proposed national Clinton Healthcare Reform System. California and Oregon proposed universal health insurance. Legislation in Oregon allowed insurance companies other options to offer partially integrated group healthcare coverage in workers’ compensation insurance outside of the pilot program.
Global and national factors have now caused increased attention to establishing a full-time healthcare plan for America’s working families. The safety net of a healthcare insurance program is now failing. Only two-thirds of the 41 million Americans now employed have health insurance. While those who do not have health insurance are covered by workers’ compensation insurance if they are injured as a consequence of the employment, they lack benefits if the claim occurs outside of employment. The increase in the transactional costs for maintaining the delivery of what appears to be duplicate medical benefit systems is a major component of the cost of their operation. The consequence of contested medical claims reduces the ability to provide an efficient and effective delivery system without delay. Immediate access of an injured worker to a medical system may be necessary to provide curative treatment within the window of medical opportunity for an effective cure. Furthermore, savings from instituting a single-payer system could be invested in increased research and development of medical treatments and cures for major diseases resulting from occupational illnesses and injuries.
The workers’ compensation system was enacted in 1911 with the noble mission of a remedial social system providing an efficient and certain benefits system to injured workers. While the system struggles to continue to work for employees, the rapidly evolving landscape is demanding increased attention to reconsideration of an IHC system in light of the consequences of the program’s costs and the consequences of being uninsured for healthcare benefits. The participants in the current program, including not only the employees, but the employers who bear workers’ compensation costs and the purchasers of products or services to which it is passed on, will require a more balanced and certain medical delivery system. The lack of healthcare coverage takes an enormous toll on the uninsured, which results in avoidable deaths each year, poorly managed chronic conditions, undetected or under-treated cancer, and untried life-saving medical procedures. An Integrated Health Care plan must be reconsidered and reevaluated to reduce costs so that a healthcare safety net can be maintained for workers and their families.
Klingel, S.J., “Critical Issues Facing Workers Compensation,” NCCI Holdings, Inc., (2003); Workers’ Compensation plans are based on the date of accident loss and have a “tail of benefits” that may exist for an individual’s lifetime. Major medical plans have exposures for only the policy year. Workers’ compensation plans pay 125% of the AWP (Average Wholesale Price) for pharmaceuticals, while Group Health plans pay only 72%. This difference is based on the types of medicines prescribed and the availability of generic substitutes. “Prescription Drugs—Comparison of Drug Costs and Patterns of Use in Workers’ Compensation and Group Health Plans, NCCI Holdings, Inc. (2003).
Daily Health Policy Report, The Henry J. Kaiser Family Foundation (May 19, 2003).
Efforts by the federal government to recoup Social Security Administration payments through offsets and Medicare Secondary Payer claims continue. The Center for Medicare Services is pursuing a “pay and chase mode” as a result of incorrect initial medical bill coding and conditional payments by providers.
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Exec. Order No. 13179, 65 FR 77487, 2000 WL 1806782 (Pres.), 66 F.R. 102 (May 25, 2001), Guidelines for Determining the Probability of Causation Under the Energy Employees Occupational Illness Compensation Program Act of 2000; Final Rule Thursday (May 2, 2002); 67 FR 22296-0; 2002 WL 820192 (F.R.).
Cornwell, S., “Labor asks U.S. senators to oppose asbestos bill,” Reuters, Forbes, March 10, 2004.
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California enacted The Health Insurance Act of 2003 SB2 which requires business owners to provide health care coverage to their employees beginning in 2006. Stats.2003, c. 673 (S.B.2), §2.; J. Flanagan, “Crisis and Opportunity – Forging a Universal Health Care Consensus,” California Health Consensus Project (March 2004).; A. Hopkins, “Cost of Worker Benefits Weighs on Hiring,” Reuters (March 13, 2003).
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It has been reported that 32% of workers lacking health coverage in 2001 were employed by large firms, up from 25% in 1987. Glied, S., Lambrew, J.M., Little, S. , “The Growing Share of Uninsured Workers’ Employed by Large Firms,” The Commonwealth Fund (Oct. 2003); “For Striking Workers, The Bottom Line is Health Care,” AFL-CIO (Oct. 17, 2003); Collins, S., Daves, K., Lambrew, J., “Health Care Reform Returns to the National Agenda: The 2004 Presidential Candidates’ Proposals, The Commonwealth Fund Briefing Note, Pub.#671 (Oct. 8, 2003). Carlson, G., Holve, R., Finder, B., “Employer Health Benefits 2003 Annual Survey,” The Henry J. Kasier Family Foundation and Health Research and Education Trust (2003); Sheils, J., Haught, R., “Covering America – Real Remedies for the Uninsured: Cost and Coverage Analysis of Ten Proposals To Expand Health Insurance Coverage,” The Lewin Group, funded by a grant from The Robert Wood Johnson Foundation (October 2003);
“Full-time healthcare would save money. Instead of paying for two insurance plans---one to cover healthcare for injuries and illnesses on the job and another for injuries and illnesses off the job--- businesses would buy one plan. As Roger Thompson, former director of Travelers Insurance Workers’ Compensation Strategic Business Unit put it, the present system is ‘like having two trains going down separate tracks and it doesn’t make a lot of sense to have all the administrative costs to maintain these separate systems.’” R. McGarrah, “Full-time Healthcare for America’s Working Families [Draft],” AFL-CIO (August 22, 2003).
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Pear, R., “Big Increase Seen in People Lacking Health Insurance,” The NY Times (Sept. 20, 2003). The share of the population without health insurance rose in 2002, which was the second consecutive annual increase. Mills, R.J., Bhandari, S., “Health Insurance Coverage in the United States: 2002,” Current Population Reports P60-223, US Census Bureau, U.S. Department of Commerce (Sept. 2003).
Employers attempt to shift more of their medical costs onto employees. Fuhrmans, A., “Employers Push Health Insurers To Get Breaks on Their Rates,” The WS Journal (Sept. 23, 2003).
Anand, G. , “The Big Secret On Health Care: Rationing Is Here – Workers Who Are on the Front Lines Decide Who Gets What Treatment,” The WS Journal (September 12, 2003).
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The author, Jon L. Gelman, practices law in Wayne, NJ. He is the author of NJ Workers’ Compensation Law (Thomson-Reuters) and co-author of the national treatise Modern Workers’ Compensation Law (Thomson-Reuters). For over five decades, the Law Offices of Jon L Gelman 1.973.696.7900 firstname.lastname@example.org have represented injured workers and their families who have suffered occupational accidents and illnesses.
Recommended Citation: Gelman, Jon L., Does the Workers’ Compensation System Need a Prescription Change?, www.gelmans.com (2004), https://www.gelmans.com/ReadingRoom/tabid/65/ArtMID/1482/ArticleID/485/preview/true/Default.aspx
© 2001-2023 Jon L Gelman. All rights reserved.
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This article originally appeared in the American Association of Trial Lawyers - Workers' Compensation & Workplace Injury Section newsletter, Vol. 2, No., 2, Spring 2004.