Thursday, June 9, 2016

What is Right with Comp?

The great debate recently is where Worker's Compensation has gone wrong. I sat through two full days of discussion with a variety of "subject-matter experts" in Dallas recently. It seems that there are many ways in which Workers' Compensation has gone right. The consensus seems to be that in a large majority of injuries, the systems work precisely as designed; medical care is provided, wage replacement is paid, the injured worker returns to work, and the claim closes.

Various statistics were stated throughout the discussion. Many believe that the systems work effectively and efficiently in a vast majority of instances. There are perspectives that contend our systems spend a great deal of resources and time dealing with a small minority of cases. The catch-phrase was "95% of our resources on 5% of our workers." There was no contention that workers' compensation is perfect in any jurisdiction or in any particular way. As one put it, "the system has warts." But what system doesn't? Name me a federal program that

To get those warts, perhaps workers' compensation has made some wrong turns. Analysis might help us find those points. There has been a great deal published about the Summit in Dallas, and there will be more in days to come, discussing some of those perspectives. 

One must understand that workers' compensation is a legal system in each state. Thus, how it is constructed is a result of a committee (a really large committee, in most states divided into a House and a Senate), and the committee work has to meet the final approval of an executive (Governor). So, nothing in these laws, or any laws, is necessarily exactly what any one person might choose. It is a product in each jurisdiction of many ideas, multiple compromises on various individual topics, and various perspectives, values and beliefs. You know what they say about opinions, and the workers' compensation laws are ultimately about various people's opinions. 

For many years, workers' compensation has been the subject of changes and amendments; celebrated by some and decried by others, again due to their opinions and perspectives. It is also important to remember that workers' compensation statutes each also create bureaucracies, whether we call them Boards, Commission, Divisions, or Departments, there is some state agency or agencies that administer(s) what is workers' compensation in each jurisdiction. These supplement or interpret the law through administrative regulation. The regulations come to be through a process involving public input, debate, and compromise. Again, perhaps they reflect a little of the will of many, and never all of the will of anyone - compromise.

So how does workers' compensation get its warts? I am not certain that a particular "point" can be identified. We hear much in the modern vernacular of "micro aggression." It strikes me that natural human tendencies lead to the systems being modified before our eyes, slowly over time. There are micro aggressions against the systems? Certainly, there are sometimes large changes, labeled "reforms," but a great deal of change is made in small periodic alterations. The "reforms" might be likened to a storm or an earthquake, while the smaller changes might be accretion (where something accumulates slowly) or erosion (where something is slowly taken elsewhere). 

As human beings, we all possess a multitude of attributes including intellect, compassion, and commonsense (some more than others - some arguably none at all, back to opinions again). Unfortunately, we are all also torn by the seven deadly sins or human failings if you prefer. These are discussed in various contexts, but essentially are thought to be: anger, envy, gluttony, greed, lust, pride and sloth. It is possible that some of these enter the workers' compensation systems, and there have influence, intended or otherwise. 

Thinking about the Newtonian aspect of any regulatory process, we can likely attribute much of what occurs in worker's compensation to two of Newton's laws. First, "every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it." And second (the third law), "for every action there is an equal and opposite reaction." Thus, we might posit that the changes in the law, whether through calm erosion (taking away) or accretion (accumulation), or through a more cataclysmic change, are describable in terms of Newton's laws. 

I had an interesting conversation at a conference in April, and our focus was upon whether worker's compensation is evolving or de-evolving or not. Thus some see it improving over time and others see it deteriorating. Like much in life, this may depend upon perspective. But this diagram occurred to me as perhaps helping with an understanding of how various jurisdictional systems have evolved into their current state (I am no artist, have access to no artists or graphic design department, my apologies). It does not explain the "what" of change, but perhaps helps with a discussion of the "how?"

It seems that perhaps each of the seven deadly sins might work its respective effect on the process. But first let's understand the process.

It seems one could start at any point in this diagram, and it makes as much sense (I will get emails from those who think it makes no sense in any event, I love honest critics!). But for illustrative purposes let's start with "misbehavior." Misbehavior can be perpetrated by anyone in the system. Regardless of who misbehaves, someone else (individual or group) will struggle against the misbehavior. There is a natural reaction by regulatory entities to regulate a solution to any perceived problem (once enough voices join the chorus). Important in this context, the word "regulate" could as easily mean legislation by an elected body, as it could mean rules promulgated by an appointed official such as a Commission, Commissioner, Board, Division, etc.

This alteration of regulatory or statutory scheme, then cascades into the marketplace and various entities like insurance carriers, employers, or service providers implement "internal" policy in order to document and comply with the new law or regulation. Too often, such policies lead to friction, and friction tends to decrease speed. From decreased speed or increased friction flows frustration at the consumer level, and the payer level, and the service level, and from this frustration perhaps flows poor behavior, and the cycle starts a new.

It doesn't matter which specific participant we are discussing. An injured worker might receive benefits that are not appropriate. Having failed to alert someone to a return-to-work perhaps, an over-payment is made. In an individual case, that worker might argue it is not her/his fault, the payer should have noticed, and in balancing equities the worker is perhaps allowed to keep the "overpayment." When discovered, this over-payment, and the perceived inequity of no refund, creates payer frustration leading to calls for regulation. The regulation or legislation is put in place to prevent the circumstance in which this over-payment occurred, or to require repayment in the future. Fairness (arguably, from one perspective at least) is re-established, but complexity (repayment process) is added to the system.

The misbehavior could just as easily occur with a claims adjuster refusing to provide appropriate and necessary medical care. This leads to a poor or perhaps tragic outcome. The story gets repeated, and then publicized, leading to complaints to legislators or regulators, volumes of litigated cases, or other outcry. Then regulatory or statutory constraints are put in place to remove or restrict payer discretion in some particular type of situation. The purpose may be to better regulate this particular, and alleviate the potential for similar poor behavior, but the cycle begins again. 

An employer can fail to appropriately document employment information. An audit by the potential payer (carrier) or state regulators reveals that this employer failure (intentional or not) resulted in an under-payment of premium for worker's compensation coverage. This seems unfair to the payer, and voices are raised. The legislative/regulatory process is engaged to tighten reporting requirements, and/or the penalties for such behavior. Or, perhaps there are more auditors employed, more oversight, and all that entails. And, thus the cycle begins anew.

The cycle, regardless of the instigating event(s) potentially inspires the pride, greed, envy, and sloth of others. Enter the next generation of subject-matter experts. They ride to the sound of the guns, arriving on the scene to facilitate compliance with the new regulation or legislation. They are needed because the people, for whom the system was created, employees and employers, cannot master all that has become involved. And so there is a cadre of experts standing by to provide legal representation, medical bill review, case management, Medicare set-aside perfection, status verification, form review, etc., etc., and so on and so on. The systems seem to involve a great many such experts. Writing that, I remembered Calvert DeForest who did a Late Night bit in which he played Larry Melman, Expert, in which he held forth with great humor; may he rest in peace. 

It is also possible, some would argue probable, that each action around the cycle may have both intended and unintended consequences. Thus, an intended reaction to a new internal policy, regulation, or frustration may cause a reaction intended to remedy that, but may create a second or third effect that leads to some new and unintended frustration or misbehavior and yet again starts a whole new cycle. 

From what I have heard, I believe that the vast majority of employers and employees and service providers are pursing the ultimate goal of workers' compensation, the effective delivery of quality medical care, recovery, and return to work. According to many experts, the data bears this out, with the system "working" in a huge volume of cases, every day, all around us. 

However, there are perhaps some employees, employers, carriers, and more who do not aspire to the goals of workers' compensation. There are therefore frustrations and misbehavior, and the system evolves there from, adding checks, balances, regulations and rules. And all of this regulation comes through committee processes, with checks and balances, and compromise. The compromise is a natural part of our national political process, and few really understand it. For many, the process itself is too "complex," too "corrupt," too "confusing." And, it appears possible that much of this regulation and reaction comes as an expense or aggravation to many, the majority for who the system works, as a result of the misbehavior of a few?

Some lament that these systems seem to be in a state of near constant change. Keeping up with changes can admittedly be a challenge. But geologists might tell us that if enough pressure accumulates without the relief of these little changes, as tectonic plates of our system move against one another, the corrections might come less frequently and as a result be more cataclysmic (earthquake). They argue that these plates need to periodically slip, sometimes smoothly, but sometimes with a jerk or stutter. 

In geology, those stutters are felt when they happen abruptly and relieve significant stored energy. They call that an earthquake and perhaps we call the workers' compensation equivalent "reform." Perhaps change is the inevitable constant in workers' compensation. Maybe regulators and legislators cannot help themselves and their urge to "fix" it. Perhaps the choice is whether it comes through small incremental adjustments or through cataclysmic, or systemic, "reform" every decade or so?

Finally, let's return to Newton. Admitting that change is a reality, and recognizing that it may come to us in large or small bites, can we better understand it through Newton? Might we say "every (workers' compensation system) in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it." In other words, if a system is in stasis, might it stay in stasis if left alone by regulators and legislators? Might they resist the urge to make changes and tinker? Might they accept that there will be a minority of situations and motivations that should be accepted as normal, rather than trying to close every potential loophole with a new "fix," rule or law?

In other words, if we admit there is no such thing as perfection, might we learn to live with the unintended consequences of today's system, live with the outliers or infrequent bad outcomes, rather than acting incessantly on "improving" that system and changing it, exchanging today's consequences and outliers for the new ones of tomorrow (our unintended consequences) that would likely be brought by change?

And Newton also taught us (the third law), "for every action there is an equal and opposite reaction." Thus, whatever is done to the system, whatever regulatory or legislative "action" is taken," there will be reaction. This is perhaps equally true when change comes through some inexplicable, incomprehensible, confused, or inartful court interpretation (seeking to do equity)? Not just reaction, but "equal and opposite reaction." Might courts, legislatures and regulators realize that each action taken will inevitably lead to some other action?

Some describe workers' compensation as a balloon. They say that the balloon may change shape, but you cannot change the nature of it overall. They say that if you squeeze one part successfully, it will just expand some other direction or way. Some lament that the expansion is always in the interest of some constituency group. Others claim instead that it is always some classification of vendors who benefit. History has documented some excellent examples of either, depending again upon your perspective. 

The emphasis may shift; the balloon may change shape as they contend; unless the balloon pops. And that is something that would arguably be to the detriment of a great many workers and employers. What would that look like? Federalization? (Name a single Federal program or agency that has performed as designed, on budget, and with efficiency - the Veterans' Administration, IRS, EPA?). And it would almost certainly be to the detriment of the many service providers that exist, with their (sometimes) narrow and hyper-specialized expertise. 

Would we be better off without workers' compensation in any form? Would we be better off with a federal bureaucracy to replace the states' programs, boards, and bureaucracies? Would we be better served with courts that stuck to the law and avoided equity? Would we be better off if regulators refrained from new rules for every perceived abuse or shorfall? It is a great deal to think about.

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