Legislature(2005 - 2006)BELTZ 211
03/15/2005 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB130 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 130 | TELECONFERENCED | |
SB 130-WORKERS' COMPENSATION
CHAIR CON BUNDE announced SB 130 to be up for consideration.
The following is a verbatim transcript of testimony on SB 130.
GREG O'CLARAY, Commissioner, Department of Labor and Workforce
Development (DOLWD): I am the commissioner for the department of
Labor and Workforce Development. I believe that your staff
requested what that I appear today to answer questions and I am
happy to do that.
CHAIR BUNDE: I wanted to give you an opportunity, if there was
information that you needed to cover.
COMMISSIONER O'CLARAY: A couple of things Mr. Chairman, I'll see
if I can explain how the contracted consulting comes up with a
fee schedule for the medical fee reimbursement schedule and as
it is described to me and Mr. Lisankie can jump in and correct
me if I get too far off foot. There is a difference between
rating in the 90 percentile, which is what our consultant uses
to come up with that fee schedule, and 90 percent of a number.
You probably understand the difference; let me see if I can zero
in on it.
Lets say that we have a procedure, knee surgery for example,
[INDISC] doctor ten, who is the lowest. Taking the fee
structure in the 90 percentile means that we would zero in on
the 9th doctor, that is the 9th highest doctor, and use his
billing to set the rate for that particular procedure, its not
90 percent of a whole, its the 90 percentile. Now, don't ask me
how they come up with that particular rating system, but
Alaska's Workers' Comp medical reimbursement rate has always
been historically, one of the highest reimbursement amounts in
the nation. So, if you follow me, that is how we get that
particular rate. [INDISC] that testified for you Thursday in
response to the Chairman's question about his potential
solution. I believe that he offered a potential for a freeze in
medical reimbursement rates and while we are still evaluating
that in terms of the impact on trying to arrest the runaway
rates. [INDISC] the 2000 rate and we have been referring to it,
by the way, as the 1999 rate. Frankly, it was actually released
December 15, 1999, but it's the 2000 rate. We see some numbers
that have come to us now from the Hospital Association and they
were indicating that if we roll back the reimbursement rates to
their particular group, that is hospital facilities, then, it's
about a 37 percent cut in their existing charges. I don't think
that the circumstances require us to cut that deep.
1:39:27 PM
Frankly, some of the information that the ad hoc committee
requested in the process, that the department helped them glean,
we've had difficulty getting from one of the carriers, Alaska
Nation, who have the majority of workers' comp for the state.
The information that we are requesting, I think, advocates for
the doctors and hospitals were asking for it. We also need it.
But, there is some difficulty because it has social security
numbers attached to various information. I would offer that, if
we can submit some of that data to a so-called third party
neutral, we don't need the information on the names and social
security numbers of those patients. We just need the data to
help us evaluate where they really set medical reimbursement
rates.
Getting back again to your question, the state will be
interested in sitting down and working out the details with the
medical communities willingness to ratcheted back the cost of
workers' comp, everything is on the table.
1:44:52 PM
CHAIR BUNDY: While we certainly appreciate that, another concern
of the medical community is the guidelines and I am wondering if
you could share with the committee your vision of, to use a term
that is bandying about here, the cookie cutter doesn't work for
everyone, and obviously there would be cases where an unusual
event or something would require us to go outside the
guidelines, and how would doctors achieve a waiver.
COMMISSIONER O'CLARAY: I can just speak to that in general
terms, first of all the guidelines that we have spoken to in the
bill have been adopted by several states, and the term
guidelines really speaks volumes about those particular
standards of care. You must have standards of care. Frankly,
standards of care are more important than setting the
reimbursement rates, because, while not all doctors and
chiropractors and other practitioners use the same number of
visits. As an example, ratcheting back rates without a standard
of care guideline will not fix the problem because you have no
handle on the amount of business, for example, that you are
going to reimburse for.
COMMISSIONER O'CLARAY: I believe that the medical community can
pretty much pick the standard they want to use and there have
been statements made that nobody really knows if this standard
of care works. But, if it's been adopted by other states,
somebody knows that it works. Again, it is a voluntary
standard. It doesn't say that if a doctor has a medical reason
why he needs to treat differently, because your absolutely
right. When it comes to treatment of humans in the medical
community, you want to rely on that doctor's advice and in some
cases we are now challenging one doctor with second and third
opinions. I believe that you don't want to interfere with that
relationship, but we still want to have some guideline to detect
a practitioner going off the map, so to speak, on the number of
visits that would normally be a standard.
COMMISSIONER O'CLARAY: I think that we would want to have a way
of curtailing that particular proclivity. Let me see if I can
answer your question a little more directly. If the medical
community would be willing to have a peer review group speak to
the standards of care and agree to it, it would do the same
thing as adopting these standards that we put in the bill. But
like lawyers, they don't like to examine themselves. I know that
we've, for many years, the medical community has enjoyed this
elite status of not wanting to mess with what they charge in the
market place and believe me, we don't want to mess with it. We
are forced to because of the escalated rates.
COMMISSIONER O'CLARAY: If the doctors want to agree to peer
review, and I am talking about an in-house peer review, a group
of physicians that they trust in their community, I think that
would be something that we would be interested in doing, because
that is really all that we are talking about doing - is trying
to get a handle on the standard of care proper, or within the
realm or normalcy, if there is anything like that - so that we
don't end up running off the map in terms of medical costs for
treating injured workers.
CHAIR BUNDE: Thank you. One other question I - obviously
everything that we do down here has some political connotations.
On good days that is the smaller portion, on bad days it's the
bigger portion, but I have heard a couple of different views -
one that the ad hoc committee information was never received.
The Governor went forward without looking at the ad hoc's work -
the other, that the ad hoc work was looked at and rejected out
of hand, and third that the ad hoc committees work was, to some
extent, incorporated into the Governor's bill and you simply
added on to it, particularly the medical. Knowing the reality
of your position, could you help me understand your view of what
is actually the truth.
COMMISSIONER O'CLARAY: Mr. Chair, thank you for that question.
Let me go right to the heart of the matter here, A, this
government did not direct the drafting of the bill until after
we'd received the product of the ad hoc committee's long hours
of work. We would have, had we not done anything else, we would
have done the same exercise and we did with the ad hoc
suggestions. We drafted them in bill language. During that
process, we became aware that they had pushed aside, until next
year, or some future date, dealing with the medical
reimbursement situation or the standards of care.
COMMISSIONER O'CLARAY: Their particular approach, while
worthwhile and well intended, did not meet the challenge of
trying to arrest escalated rates. There are some good
provisions in there that we, in the drafting of our bill,
included. There was one such provision, however, that we
rejected in our bill. It had to do with giving the review
committee within workers' comp punitive ability to award damages
to an uninsured employer. We thought that that particular
vehicle should be reserved to the court system, not an appointed
quasi-judicial board.
COMMISSIONER O'CLARAY: In the drafting of the bill, and we did
not begin the drafting of the bill until after we had met with
the ad hoc co-chairs in Juneau in the Governor's conference room
to indicate to them that we were having to move forward to
include additional issues in taking the bill draft that they
gave us, and the issues that they gave us, and that we would be
open to their participation in that process. We actually started
drafting the bill the following Sunday morning. We worked Sunday
around the clock, Monday, President's Day, Tuesday, and then
Wednesday morning we had a bill that we were able to send to the
legislature. Now some may scoff at that, but I can tell as one
who stayed hour after hour with the drafting committee, our
people worked very hard on this bill. Now, did we miss some
things in the drafting? I don't believe so. Certainly, any piece
of legislation that you have before you is always a work in
process until it is voted on in final passage. There is plenty
of room for adjustments, but the Governor did not reject the ad
hoc committee.
CHAIR BUNDE: They are sending me emails saying let the ad hoc
committee complete their work. They actually did complete it.
COMMISSIONER O'CLARAY: The ad hoc committee members worked very
hard trying to come up with a solution. The fact that they
missed the target, I don't think that they realized, nor did we,
by the way, when we engaged their services, how the increase for
the following year was going to be in double digits. They are
not dealing with a medical. I think that is the biggest angst
that we had in terms of the administration and the announcement
that was published in the Anchorage Daily News about the closing
of a very popular downtown restaurant spurred our concern. We
absolutely could not sit still while companies were shutting
their doors because of the high cost of workers' comp. We had to
move.
CHAIR BUNDE: I will take some of the responsibility for
encouraging the speed of your actions by having said that if the
3rd floor didn't get to it, we would. I do have a person on
teleconference that has a time constraint and so with your
indulgence Commissioner, I will call on Mr. Favretto.
BOB FAVRETTO, business owner in Kenai, Soldotna, and Juneau:
Thank you Mr. Chairman, for the record, my name is Bob Favretto.
I'm a business owner in Kenai, Soldotna, and Juneau. I spoke a
couple of weeks ago representing seven different businesses in
our area when I gave you some numbers of employees and premiums
that indicate the escalation and the urgency behind the
legislation that the Governor has introduced. I just wanted to
take a minute. I get approached every day, I get phone calls,
emails. Right before I got here, I spoke to somebody who came up
to me to ask me what was happening with the legislation and I am
going to tell you a story of things that are happening within
the state in Anchorage and in Kenai.
There are small businesses now going to banks and lending
institutions having to borrow money to pay their workman's comp
premiums. That is very, very, very dangerous in the business
world, and I wanted to tell you that today. I thought that it
was important to tell you that today to help create the sense of
urgency that is there for myself and the other businesses in the
State of Alaska. I would strongly urge the committee to move
this bill out and get it on as soon as possible because it is
not something that we can just delay and wait and wait and wait
and wait. We have got to move on this thing and I would urge
you and the committee members to get this thing out and off to
Finance.
CHAIR BUNDE: Thank you for your testimony, and I would like to
assure you on behalf of the committee that I think that we all
feel the sense of urgency and the need to address this issue.
The results might be a little different from person to person
but I am sure that we all experience the need. For the record
let me point out that Senator Stevens has joined us some time
ago.
CHAIR BUNDE: So I would like then, to go to Kristin Knudsen
1:52:14 PM
KRISTIN KNUDSEN: Mr. Chairman, my name is Kristin Knudsen. I am
with the Office of the Attorney General and there was a specific
question that was put at the last meeting of this committee by
Senator Ellis asking for a further explanation of how section 36
of the bill, which contains the offset for coordination of
benefits provision would work. I have prepared a table that I
hope the committee has before it and, if you just let me step
right through the table really quickly, I can explain how this
would work, how the current system works and how this bill would
impact.
CHAIR BUNDE: Can you hang on just a minute Kristin? Okay, now we
have the table. For the committee's reference, it's section 36,
an illustration of combined PERS and workers' compensation
benefits and the operation of section 36. Please go ahead.
MS. KNUDSEN: This provision mirrors a similar provision that is
in the State of Colorado. The committee wanted to know where the
origin of this particular provision was. The current system,
the workers' compensation rate is achieved by taking the
person's wages at the time of injury, adding in the employer
pension contribution to achieve a gross weekly wage. It also
would add in overtime and premium pay if that were appropriate,
and in this illustration I have left that out. From that gross
weekly wage, a federal payroll tax, and a generated FICA number
is subtracted, coming to a spendable weekly wage. This is
actually kind of an idealized figure, an artificial figure,
because, of course, with PERS eligible employees, they may also
have, in addition, things like health benefits and other kinds
of benefits that would be contributing to their gross weekly
earnings.
In the middle two columns you see how a person's take home pay
is calculated. Out of your gross pay you have taken out your
contribution to pension benefits, to health care, to union dues,
that kind of thing. You also have taken out some payroll tax.
In this particular instance, the federal payroll tax is less
because it doesn't include FICA. It doesn't include social
security tax and approximate net wage to take or take home pay
is reflected in the 3rd to the last column. It's $466 and then,
the person's occupational disability benefit is $348.
When their workers' comp and their occupational disability
benefit are combined, you can see that the combined benefit is
significantly than their take home pay and since workers'
compensation and occupational disability benefits are tax-free,
that means that they are achieving a tax-free combined income
that exceeds what they could earn working. The way that this
bill would work is that there would be a coordinated benefit
that would match the spendable weekly wages under workers' comp.
In other words they would get their full occupational disability
benefit and then their workers' compensation payment would go up
to the combination of the workers' comp and occupational
disability up to the spendable weekly wage.
Now that spendable weekly wage, 100 percent of the spendable
weekly wage may, and in most cases would, exceed their actual
take home pay, because of the inclusion of employer contribution
to the pension plan. But, at least it gets closer to what the
100 percent of their take home pay would be. Now this particular
illustration is drawn from, maybe, the lower end of the wage
scales, but, I have also run these all the way up to higher
levels of wage scales and find that the combination of workers'
compensation benefits and occupational disability benefits
together combined exceed take home pay, almost all the way to
the very top of the wage scale. This is a section that would
apply to members of PERS and TERS to public employees for the
most part.
There is a section that does allow it to be applied to people
who receive, who are participants in another employer funded
pension plan, or welfare plan, in those cases however, the vast
majority of them, the welfare plan, or trust plan, provides for
an offset of workers' comp. It would only, in those cases,
apply if the trust doesn't take an offset for workers'
compensation benefits.
CHAIR BUNDE: Just to make sure that I understand - using your
illustration and referring to the chart in the first column, you
have a $564.25 spendable wage for your illustration, right?
MS. KNUDSEN: That is correct, that's the workers' compensation
calculation of spendable weekly wage.
CHAIR BUNDE: And you're pointing out that if you combine
workers' comp and disability benefits, it would exceed that by
over $200.
SENATOR ELLIS arrived at 1:59:29 PM.
MS. KNUDSEN: Yes
CHAIR BUNDE: What the bill is proposing is that you receive your
weekly disability benefits and then workers' comp adds to that
until you get to the spendable wage.
2:00:09 PM
MS. KNUDSEN: Actually yes, that would mean that you have a total
that matches 100% of your spendable weekly wage up to the
maximum allowable. Now, I will point out that you still have, in
effect, a maximum allowable workers' compensation rate, but
combined, even with the maximum allowable workers' compensation
rate. Often times, you will have something that exceeds their
spendable weekly wage.
CHAIR BUNDE Thank you. Do we have questions for Kristin. Is
there anything else that you want to add?
MS. KNUDSEN: I would also point out that the way this bill is
structured is that there is also applicable a minimum
compensation rate. If, as is now the case, if an employer is
thought to go below the minimum compensation rate, they would
have to go to the board to seek permission to do that. I think
otherwise, what I have provided in writing states how this would
work and if there is any further information that I can provide
to this committee, I would be very pleased to do so.
CHAIR BUNDE: Thank you and if you would stay with us in case
questions come up, we would appreciate it. We don't have
questions at this point. For the record I wanted to acknowledge
that Senator Ellis has joined us. I would like to move now to
Mr. Lisankie and Mr. Lisankie, welcome.
2:01:26 PM
PAUL LISANKIE, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development (DOLWD): Thank you
Mr. Chairman, for the record I am Paul S. Lisankie. I am the
director of the Division of Workers' Compensation within the
Department of Labor and Development.
CHAIR BUNDE: You did have an opening comment that you wanted to
make?
MR. LISANKIE: If I may, Mr. Chairman, there is just a couple of
things that I would like to say to punctuate the Commissioner's
testimony and to address your questions. The way that the 90th
percentile studies have come about is by board regulation. In
1988, the legislation that reshaped the Workers' Compensation
Act provided that the board, it provided statutory authority
under section 095F that all fees and other charges for medical
treatment and service shall be subject to regulation of the
board, but may not exceed usual customary and reasonable fees.
I am leaving out some verbiage. And then it says - as determined
by the board. So what the board did after 1988 was sit down and
cast a regulation of the usual and customary and reasonable
level at the 90th percentile of the bills that would be reviewed
by the provider of the services. That standard has continued
today.
2:02:56 PM
CHAIR BUNDE: How does that compare with some other western
states?
MR. LISANKIE: Mr. Chairman, from what I understand, and it may
be a little limited, it is not an exhaustive study, there are
very few states, either in the northwest or otherwise that
continue to use a usual and customary and reasonable rate based
on the conclusion that it doesn't really function as kind of a
control of the overall costs of the medical services provided
because, it just tracks bills that are being submitted. So
there are very few states that even use this approach.
The other thing that I wanted to add to the Commissioner's
testimony, Mr. Chairman, is as far, in regards of the treatment
guidelines, that dovetails into existing statutory authority
under section 095A which has existed for many years and requires
that an employer or insurer provide certain medical care,
attendance and treatment as is reasonable and necessary as the
standard has developed in light of the nature of the injury or
the process of recovery. And so there has always been, to some
greater or lesser degree, some scrutiny and potential dispute
about what is required medical treatment in light of a
particular claim. It is something that has always gotten some
greater or lesser amount of litigation associated with it.
These guidelines, or any other guidelines, if we take the
approach of this bill, sets out kind of an assumed standard that
is presumed to be reasonable and required by the process of
recovery and then gives a safety valve to go beyond the
guidelines for particular scientifically based medical reasons.
That is something that I have seen in every variant of a statute
that makes recourse to guidelines. The people who have edited
the guidelines in the literature that I have read and in some
brief discussions that we had with them.
When Dr. Glass, who was the editor of the guidelines, was up to
address the workers' compensation board this fall, he made it
clear that they believe that guidelines are what the name
implies and there needs to be an opportunity to depart from the
treatments in the guidelines based on, give and take, with the
practitioner.
CHAIR BUNDE: To move to another subject, we had asked about the
Reemployment Benefit Program and for the committee's information
we have a chart, I believe that everyone has a copy, and it's a
little breath taking to say the least. In 2003 there were 414
people for the program, 361 were required to participate.
2:05:40 PM
MR. LISANKIE: they requested to participate, it's voluntary. I
am sorry Mr. Chairman, it's requested.
CHAIR BUNDE: One-hundred and twelve settled. There were 91 still
in the plan. Some 43 have completed the plan for over $15
million. That is a lot of trips to Disneyland.
MR. LISANKIE: Mr. Chairman, it is a considerable amount of
money. I just want to make clear that last year when we had a
variant of this chart, it was discusses, but obviously the $15.7
million was not spent on just the 43 people who completed the
plan or the 91 people that were in the plan. A lot of those
dollars are represented by settlements by people who might be
eligible for that benefit who didn't take advantage of it or
every once and a while someone who might not be eligible for the
benefit, but still gets some settlement funds associated with
their argument, that maybe they would be found eligible. So
this is a global amount of every dollar that was recorded as
being paid out in the name of this program including
settlements.
As people point out, if someone settles, they don't necessarily
spend a dime on actually getting the program benefits, but I
think to turn a blind eye to those problems, which wouldn't
exist unless those potential program benefits were being
settled, would be to underestimate the true cost of the program.
So that is the way that it is presented.
2:07:52 PM
CHAIR BUNDE: In the previous year it was $15.7 million, in the
year before that it was $13 million, the year before that it $12
million. So, it has been escalating up until last year since
1997. One of the concerns that I am starting to hear from people
in this industry is that people are being pushed out of the
program. From your view, is their either economic savings to
encourage people to take a settlement versus staying in the
program?
MR. LISANKIE: Mr. Chairman, from my view, I believe that one of
the things that is working against people participating in plans
is the amount of time and delay that it takes to get through
this system. This is kind of counterintuitive when you look at
the statute. In 1988 its pretty clear that the people that
drafted that legislation believed that time was of the essence
in providing vocational rehabilitation benefits.
MR. LISANKIE: There are very, very short time lines for all of
the various waypoints and triggers under section 041 of the
statute. That is the section that deals with vocational
rehabilitation or 'exclusively reemployment benefits' is our
terminology for it. For a variety of reasons, the system has
increasingly, in my view, gotten away from those statutory
requirements in trigger times and guidelines. For example, we
in the division, did a little study not too long ago and we
queried our information to find out how long it was taking to
get a final determination of whether somebody was entitled to he
benefit or not. When someone finally asks for the benefit, it
triggers the process and then the system says, you know, in 14
days it is supposed to be referred and then there is an
evaluation process that is supposed to be completed by a
provider within three days and then its supposed to go back to
the reemployment administrator for a decision. So it's roughly
a 60-day process.
MR. LISANKIE: We queried our system for the year 2003 and we
found that there were, by our system, slightly over a thousand
requests to be evaluated for entitlement for that benefit. By
the time we ran the query, which was January 31st of this year.
So, two years from the beginning of 03' and a year from the end,
only 46.9 percent or approximately 504 of those thousand some
odd requests had been finally determined, which is kind of hard
to fathom given the way that the law is written. So that is one
of the reasons, we looked further and we found that the average
for those 504 that had been finally determined by January of
this year. The average time was 160 days. So, it was over five
months. So we became concerned that we needed to do something
in this bill that would push from the other direction that would
get it back in the direction of doing things quickly.
MR. LISANKIE: In attempting to respond to the letter from Mr.
Robert Sullivan, that your staff gave me to take a look at, I
think that if there is one thing that we fundamentally disagree
with. It would be that what do we do when we see a system that
the legislature says has to go fast, not going fast. Do we just
keep finding reasons why it is not easy to go fast and excuse
all of this and just let if float down, or do we try and stand
up for the determination of the legislature back in 1988 when we
heard experts that said that it was important to get vocational
rehabilitation quickly? We are trying in this bill to redefine
some of the things that are slowing the system down and
respectfully, with regards to Mr. Sullivan's concerns, I think
that's kind of the root difference between his concerns and the
bill as we have presented it to the committee.
2:12:43 PM
MR. LISANKIE: I am certainly willing to address the specific
sections and some of the concerns that he expressed, but I
really believe that the predominant difference is that we are
looking in this bill to get the system closer to what it was
designed to do to get decisions made more quickly when we agree
that with some of the observations that there are certain
triggers that just are not becoming apparent within the time
frames that the legislature envisions.
MR. LISANKIE: We are suggesting a different triggering mechanism
which would be less subject to the discussion and more in terms
of are you off work for 90 days or are you not off work for 90
days. The whole reason for that being that there is a 90-day
process that has been in section 041 since 1988. It continues to
be there to anticipate the people who request this benefit
within 90 days of injury. There are a variety of reasons that
keep people from either knowing about that right or asking
within 90 days. So, this bill says, 'All right, we will walk
away from that confusion and we will have a simple yes or no,
are you off work for 90 days or are you not?'
That is my overview of what we came up with with looking at the
costs and the responses that we get from out program.
2:14:17 PM
MR. LISANKIE: I would like to make one last remark before I go.
We have, even before I got to the division in January of last
year, there was correspondence from some people in the community
of the experts that do vocational rehabilitation within the
workers' compensation system and they were saying that your data
is confusing at best and we think, perhaps incorrect in other
ways. For example, I know that there is at least one provider
that went through the trouble of adding up all of the amounts
that she was paid for a certain type of activity and noting that
in our reports, she supposedly got $30,000 more than she
actually got.
All I have tried to say in response to that is that I think the
overall cost of outcomes of the reemployment benefits system are
reported with a reasonable degree of accuracy, reasonable enough
for people to make significant policy decisions, but, I would
prefer that they be better. I would prefer that our computer
system would be more responsive and one of the things that we
are trying to do in this budget cycle is to get authorization to
pursue that. I would prefer that I had better coordination with
the reemployment benefits administrator so that we don't
necessarily confuse people by him looking at either a different
period of time in the division reports or defining some of the
data in a different way, and doing it year in and year out. I am
responsible for the last 13 to 14 months and I am not going to
try and duck that responsibility, but this is something that has
been tracking back for many years.
MR. LISANKIE: When I say that I think that the outcomes and
costs are reasonably reported for policy reasons, I mean that in
the broad sense that we are talking about here. If one of the
providers says that they will provide $43,000 and the system is
saying that they will pay $75,000, I certainly believe them and
I would prefer that it be precise. One of the problems is that
we try and tell the insurance industry how to code their
payments and there are literally tens of thousands of entries
every year and then they report them to us once a year. So, I
cannot represent this committee or any committee that every bit
of data that is recorded under reemployment benefits is coded
properly, that nobody put it in the wrong column. What I can
say is that this is one of the few states that tries to break
down this information as closely as we do and I think that we
are head and shoulders above allot of places because we try, but
I don't want to impugn anyone if they say, 'Well, somebody is
misreporting what I paid.' I say that I believe them.
Now if the last six years comes up a total of $83.5 million, it
is possible that a $20,000 to $30,000 error is not significant.
2:17:28 PM
CHAIR BUNDE: A question in this arena that I have been hearing
from folks is that the eligibility requirements to get into the
program are so difficult that people are not being into the
vocational rehab program. Could you address that?
2:19:03 PM
MR. LISANKIE: Yes, Mr. Chairman, the eligibility criteria have
not changed substantially and it basically turns on whether
someone is predicted to have physical capacities, which as the
phrase implies is based on what you can physically do, which are
less then the physical demands of certain jobs. Those certain
jobs are defined in the statute in way, if I will, that I would
characterize as a kind of truncated view of your employment
history based, I guess, on the proposition that you can only
spend so much time trying to find out what people can and can't
do and then you need to move on.
To kind of explain that, it sets out a ten-year period before
your injury as the time of inquiry. So, depending on what you
have been doing and how long you have been working, a ten-year
time of inquiry may be more than enough to see all the
reasonable possibilities of jobs that you have held or it may
be, for some in my age fairly inadequate. But, that again, Mr.
Chairman, is based on the conclusions of the legislature and the
people that shaped that provision - that there had to be some
kind of reasonably short period of time that people could focus
on to determine whether the injured worker could go back to
those particular jobs. If they couldn't, they are eligible even
if there was a job that they held eleven years that they fully
intend, or could go back to.
By the same token, if they had held some kind of relatively low
paying job, and you hear about that as well, within that ten-
year period, then they are not eligible for this reemployment
benefit even though reasonable people might say, 'Well is really
good policy to have them do a lower paying job that they held
for a relatively brief period of time early in their employment
carrier.'
MR. LISANKIE: So all I can say, Mr. Chairman, is that the
criteria haven't really changed substantially since they were
put in place and allot of people qualify and a lot of people
don't and you can always talk about whether a particular person
should have or should not have. And depending on which side of
the bar of justice you are sitting on, in my experience, we have
a tendency to focus on the one that challenges our belief
system.
2:21:43 PM
One of the things that was raised by Mr. Sullivan that I briefly
alluded to in my opening remarks is, right now, what the bill
would propose to do in section 14, is change the criteria.
That's page 12, Mr. Chairman. There is also a sectional analysis
that was prepared if you prefer to just look at the summary. It
begins on page 12, Section 14. Mr. Sullivan raised a couple of
concerns about that that I would like to address. He expressed
concern that people be allowed to stipulate eligibility and that
is something that we discussed at the first meeting and I am a
little taken aback by that frankly. There really isn't anything
in workers' compensation or too many places existing in law
where parties can avoid a dispute or end a dispute by agreeing
to no longer disagree. It was frankly kind of a surprise to me
over the last few years when I came to recognize, even though I
have been doing workers' compensation for many years - that
there was a view that based on the way that the statute was
currently written that the parties, no matter how much they
agree that the injured worker is eligible for this benefit,
can't just stipulate to it and get on with construing the plan.
So I think that this is something that was, perhaps a surprise
to me, but in light of that fact, I think that the notion that
it is something that you just can't stipulate through is
something that is really important to get. So it was a further
surprise to me to see someone whose opinions on rehab, that I am
aware of - respected many of them - say that he thinks that it
is a bad idea. This would be one benefit that you wouldn't want
to have people agree to no longer disagree about.
2:23:56 PM
Mr. Sullivan also raised the question about the criteria, which
I was beginning to address. Because time is of the essence, the
trigger for whether you are entitled to ask for an evaluation is
the likely hood that you will be permanently unable to go back
to your time of injury employment. Over the period of time, it
has gotten more and more legalistic that you have to show up
with a doctor's statement that says that you can't go back to
your employment. I think that is just a way of keeping overall
numbers down. Mr. Sullivan and others are correct when they said
that it's not always easy to get someone, any doctor in
particular, to project what your physical capacities are going
to be for the rest of your life within 90 days of your injury.
So that is really slowing things down - that requirement.
What is also happening is that there is a safety valve, if you
don't ask within 90 days, you are allowed to go to the
reemployment benefits administrator and show that you had, I
think it is, unusual and extenuating circumstances to excuse
your failure to ask within 90 days. Because everyone in the
system understands that there are allot of reasons that you
might not be think about where you are going to be for the rest
of your life within 90 days of your injury, what happens is,
more and more people ask. They get one of these unusual and
extenuating determinations made and, I think, in the last
numbers I saw, there were 120 in 2003 and 117 of them were ruled
'Yes, you had unusual and extenuating circumstances.'
So, puckish people I know in the bar say that Workers' Comp. is
unique in that it is the only institution in which things that
are usual and routine are defined as unusual and extraordinary.
I understand their view and I think that it's better that we
don't undercut the law when we are not supposed to do that, but
I also understand the motivation, why the board over the years
has taken issue with the idea that if someone could not possibly
know within 90 days. And just because it is something that
occurs frequently, they shouldn't be allowed to ask.
So what we are trying to do with this 60-day, 90-day, trigger is
to take that problem spot out of the road for asking for this
benefit. So it will be a much simpler question, 'Are you off
for 60 consecutive days?' If the answer is yes, either the
injured worker or their insurer or their employer can ask for
evaluation for eligibility to begin. If, on the other hand,
neither of them ask and the person is off work for 90
consecutive days, then it will be just be a mandate to the
reemployments administrator to start the process of an
evaluation. So there won't be anymore waiting around to see if
anyone ever gets to the point of thinking about the future.
Is it possible that some people will end up getting an
evaluation back under this current law with the benefit of
hindsight during a long period of delay, who weren't entitled to
it? I would say, certainly that is a possibility, but I'd say
that would be a lot more people that are ultimately going to be
found to be wise to ask for the benefits that aren't asking for
it within 90 days. And then that triggers yet another system of
looking back to see if it should be excused, and then it goes on
and on. So I would respectfully disagree with Mr. Sullivan.
CHAIR BUNDE: I would like to ask a question about the vocational
rehab benefits about aviation techs and folks like that.
2:27:53 PM
CHAIR BUNDE: We have a rather rigorous tracking or follow-up
system for someone who has gone through the program to see if
they are, indeed, employed in the program. Do we have such a
mechanism in Voc Rehab?
MR. LISANKIE: Mr. Chairman, I would say we do not.
CHAIR BUNDE: As the lay-person here asking for your expert
advice. It seems counter intuitive. It seems that logically we'd
want to have that kind of follow-up system. If it works for
other educational arenas, it seems as if it ought to work for
this reeducation arena.
MR. LISANKIE: I agreed with that.
CHAIR BUNDE: Is there an area in this bill to achieve that end?
2:30:52 PM
MR. LISANKIE: There is nothing specific in the bill that would
achieve that specific goal. I believe that we can do it
internally by increasing our focus on having the reemployment
benefits administrator sharpen his or her focus, in this case,
his, on tracking.
CHAIR BUNDE: If it's something that should be done, I'm just
wondering if we ought to add that to this bill requesting that
this tracking occur so that if we've got a program that's
working really well, we know about it; if it's not producing
people who are employable in the area of rehabilitation in a
year, we ought to know that as well.
MR. LISANKIE: I agree, Mr. Chairman, and as a matter of
consternation to me for myself and others that have certain
disagreements about how well the program is working. The one
thing that none of us are prepared to do is give you a
definitive answer about, well if we know how many people
completed the plan, six months down the road, where are they
working, how many of them are working and how are they doing.
CHAIR BUNDE: I'm going to ask Jane to work with your office to
see where we might insert that.
Before we move on, is this a chart that you are involved with as
well?
MR. LISANKIE: Yes. That looks like the chart.
CHAIR BUNDE: The comparison of maximum allowable rates for
various medical procedures?
MR. LISANKIE: That is correct, Mr. Chairman. And that's the only
difference from the chart that I was looking for and unable to
locate the last time we were here. You had asked about
Washington State and now we have a third line at the top that
are the values that are in place in Washington in their state
fund. That is added as a line to this format at your request.
CHAIR BUNDE: Indicating even more substantial variance between
the various [coughing]. Thank you, is there anything you wanted
to add to that chart or?
MR. LISANKIE: No, Mr. Chairman.
CHAIR BUNDE: Do we have questions for Mr. Lisankie? I think I
have at this point answered my questions. Is there anything else
you would like to add? In that case, Senator Stevens has a
question.
2:31:31 PM
SENATOR BEN STEVENS: Thank you, Mr. Chairman, back to the chart,
Mr. Lisankie. I'm curious as to the difference between the
bright form between the maximum allowable for Alaska Care,
Medicare, Medicaid and then the Workers Comp rates on the top.
That gets us to the percent increase in the Alaska Workers care
charged. So, that's the rate of increase that's charged between
'00 and '05. Is that correct?
MR. LISANKIE: Through the chair, Senator Stevens, that's
correct.
SENATOR BEN STEVENS: So then, down at the bottom in the next
column, those are the rates that are allowed to be charged back
to those programs in '05 or '00?
MR. LISANKIE: Through the chair, Senator Stevens, that's
current. That's for '05.
SENATOR BEN STEVENS: That's '05 rates and all for the same
procedures. Those go to the billable reimbursable rates for '05?
MR. LISANKIE: That's for '05, sir.
2:32:30 PM
SENATOR ELLIS: In a previous hearing, we touched on section 36,
page 27, line 24 and you were going to have someone at some
future point walk us through coordination of benefits and there
was some unintentional misinformation at one point. Is that to
happen now or at some future time?
CHAIR BUNDE: It would be appropriate to go through it now if you
are prepared to speak to that.
MR. LISANKIE: Senator Bunde, that was the section that the
Assistant Attorney General Knudsen can address.
CHAIR BUNDE: Kristin, are you with us?
KRISTIN KNUDSEN, Assistant Attorney General: Mr. Chairman, I am.
CHAIR BUNDE: Would you for Senator Ellis' benefit briefly
recover that issue.
MS. KNUDSEN: Yes, sir - through the chair, Senator Ellis. I
provided a table with some text explaining the table to the
committee. Do you have that available? It's an illustration of
the effect of the combined PERS and Workers' Compensation
benefits under the operation of 36.
SENATOR ELLIS: Yes, I have it.
MS. KNUDSEN: What this table shows in the first two columns is
how the Workers' Compensation benefit is calculated. In this
case, I used somebody who had been as a basis, somebody who had
been injured in 2003. How the wages at the time of injury would
be reflected and what their actual - pretty close to their
actual take home pay - would be and in the last two columns,
their PERS occupational disability.
As you go through the second column, you see that there's a
weekly salary derived from their monthly salary. Included into
that or added to that would be the employer's pension
contribution. Coming up with a gross workers compensation weekly
wage of $620. The Workers' Compensation Act takes out a payroll
tax in FICA according to certain tables provided by the Workers'
Compensation Board. That gives you the spendable weekly wage -
$564 in this case, which is the basis for Workers' Compensation
payments. For a person who is receiving temporary total
disability benefits, that would be 80% or $451 in this case.
If you look at their wages at the time of injury, this would be
the fourth column from the left. You can see that when you get
your paycheck, you have a gross wage and from it is taken your
contributions to the pension. Also, some other benefits, but
we're not including them in this, because we want to have a sort
of an apples to apples kind of an arrangement here. And your
payroll tax now for public employees who are members of PERS. Of
course, they don't have social security taken out.
And then, you have collected here an approximate take home pay
of $466. As you can see, the $451 Workers' Comp payment is
fairly close to the take home pay. When you have combined an
employee receiving Occupational Disability benefits and Workers'
Compensation, both, their combined benefit in this case was $799
a week, which far exceeds the person's take home pay.
This bill would essentially allow the occupational disability to
remain unchanged. Instead, the Workers' Compensation benefit
would be adjusted to the point that the combined payments did
not exceed the Workers' Compensation spendable weekly wage. In
this case, $564. Now, that's still greater than their actual
take home pay because of the inclusion of pension contribution,
but it's much closer to at least the spendable weekly wage
reflected in the Workers' Compensation Act.
The way this section is intended to operate is to address people
who are receiving Public Employee Retirement System benefits or
TRS benefits and also, if there is - and I would say it would be
a very uncommon circumstance - someone who is a member of an
employer contributed work trust fund where they have a welfare
trust that provides a disability benefit that does not already
offset Workers' Compensation benefits. The vast majority of such
funds provide an offset for Workers' Compensation. In this case,
however, PERS does not. It would not apply to any privately
purchased disability benefit insurance. It would not apply to
long-term disability or short-term disability elected by an
employee under the Supplemental Benefits System.
2:38:24 PM
SENATOR ELLIS: So reducing this payment to coordinate with the
benefits in reducing this payment, the effect of the bill would
be to reduce payments to the workers. That's intended to effect
the insurance rates and help out small business? Is it a dollar
for dollar translation or how do we expect this is going to help
the employer?
MS. KNUDSEN: Well, it will certainly save your PERS employers
who are all self-insured or for the most part, self-insured -
some money. It also provides a certain parity. In the private
world, the vast majority of disability benefits that are
provided by either some kind of group insurance or through
privately purchased disability plans do provide an offset for
Workers' Comp., the idea being that the person who is disabled
should not receive more than their actual take home pay. In this
case, it allows the public employee who is subject to PERS to
have theirs adjusted to 100% of their spendable weekly wage, but
not to exceed 100% of their spendable weekly wage. In other
words, that they should not take home a benefit that exceeds
their spendable weekly wage.
2:40:02 PM
SENATOR ELLIS: Through the chair, I understand the effect on
PERS employees, but for other employees, you said parity. Parity
in what sense? Between whom?
MS. KNUDSEN: Private employees and public employees.
SENATOR ELLIS: So the effect would be to reduce public employees
to the lesser benefit that most private employees receive under
this arrangement?
2:40:56 PM
MS. KNUDSEN: Most private employees, if they have a disability
insurance, the disability insurance would be reduced. In other
words, the third column in this case would be reduced. Not the
Workers' Compensation benefit. For example the state's case -
the state occupational disability benefit would remain
unchanged. And the Workers' Compensation payment would be
reduced to match 100% of their spendable. In essence, this is
returning to a system that existed back in the early '70s, if I
recall correctly, when occupational disability benefits allowed
a set off of Workers' Compensation.
CHAIR BUNDE: Excuse me, Kristin, I have a number of people that
do want to have an opportunity to testify, so I might ask
Senator Ellis to contact you directly to continue with his line
of questioning.
MS. KNUDSEN: Thank you very much, Mr. Chairman, I'll do that.
CHAIR BUNDE: Thank you very much for your help, again, and I'd
like to deal with the folks that are on teleconference and then
we'll come back here to the folks in Juneau. I have a Dr.
McNamara who is off net.
2:42:02 PM
DR. MIKE MCNAMARA: This is Dr. Mike McNamara. Can you hear me
alright?
CHAIR BUNDE: The volume is pretty low. Can you speak up?
DR. MCNAMARA: Let me try this. Is that better?
CHAIR BUNDE: Much better. Identify yourself for the record and
go ahead with your testimony, please.
DR. MCNAMARA: This is Dr. McNamara. I am a physician, an
orthopedic hand surgeon, one of two in Alaska that is dedicated
primarily to hand and upper extremity surgery. I'd like to just
briefly offer some input from a physician's standpoint on your
Workman's Comp bill, 130. We came up here in the Air Force as a
hand surgeon, left for a short while and returned because really
for the lifestyle it afforded our children. We love living here
and have a thriving hand and upper extremity practice. I have a
high volume of Workman's Comp. - about 20 percent of my
practice, which equates to about 500 patients a year. I checked
with the other hand surgeon in town, Leslie Dean. She sees about
the same - maybe 18 percent of her practice or 700 patients a
year.
My concern is this. That if the House or Senate reduces or rolls
back the Workman's Comp rates, that ultimately the availability
of care for Workman's Comp patients will be reduced and the
Workman's Comp patients will have a lower priority for care in
the physicians' office. If you would allow me to use Medicare as
an example, albeit different, I think all of us as physicians
look at some of Medicare as charity. We like to care for people
who have done for us in the past and some that haven't. But
regardless, many of us still see Medicare patients, but what
we're seeing is that there's an increasing number of physicians
and surgeons who choose not to see Medicare, because of the high
degree of paperwork and the reduced reimbursements. I worry that
Workman's Comp patients risk this same and if the Workman's Comp
reimbursements fall to any kind of fee schedule that's near
Medicare.
So, what I'd like to do is just to mention a few things that
worry me - that you should know, Chairman and Senators, that
affect how we care of Workman's Comp. One, Workman's Comp
requires a significantly more amount of paperwork than the
typical patient that's seen or even a Medicare patient. They
require more visits to deal with work issues, graduated release
back to work and to determine the type of work they can do,
because, often, it's different. They require significantly more
depositions with attorneys and third-party litigation issues,
just because some are Workman's Comp. Some are controverted and
have to go back and be looked at or billed differently. There
are those that require additional visits to determine medical
stability or partial permanent impairment. And these are all
above and beyond what we do as our specialty. These are things
we have to do because we're caring for Workman's Comp patients.
Lastly, Workman's Comp requires review of independent medical
evaluations, which are often requested by the Workman's Comp
board or by insurance companies. When we get these back, we have
to spend a significant amount of time reading through these and
then answering to them, which often requires revisiting the
patient and redetermining what a patient can and can't do. So,
all in all, this is just a significant amount of time for the
physician; for the office, it translates to loss of time to see
additional patients, especially a specialist. If Workman's Comp
cuts its fee schedule considerably, I'm very concerned in my
practice that they will no longer choose to accept Workman's
Comp. Ultimately the Workman's Comp patient and the Workman's
Comp board will pay the consequences, because there won't be
someone to see these folks, much like is what happening with
Medicare.
CHAIR BUNDE: Thank you doctor. I think you express the concerns
that some of us on the committee have discussed earlier. Senator
Ellis has a question for you.
2:46:53 PM
SENATOR ELLIS: Dr. McNamara, thanks for being with us today. I'm
trying to understand - you know the bill speaks to guidelines
and I know the medical community is very concerned about that
part of this bill. I'm trying to understand what the difference
is or interplay are between the guidelines or standards of care
that physicians talk to me about or best practice in a certain
field of medicine. Can you speak to that or I may direct this to
other doctors who are with us.
DR. MCNAMARA: I'm not sure I understand your question fully.
Could you please repeat that?
SENATOR ELLIS: Well, I've been around health care issues in the
Legislature for a number of years and we often talk about
standards of care, that this is a standard practice or a best
practice in a certain field for a certain medical condition, and
this bill speaks to guidelines and the doctors are concerned
about that. I'm just trying to sort out the terminology and
understand where we're going.
You don't have to speak to it; I can ask Mr. Jordan about that
when he's available to us in the future.
DR. MCNAMARA: I think you should pass that one to Mr. Jordan.
CHAIR BUNDE: Thank you doctor. Moving on to Hank Schaub.
Identify yourself for the record and go on with your testimony,
please.
2:48:08 PM
HANK SCHAUB: My name is Hank Schaub. I'm in Anchorage. I own a
small moving company - been in business for 26 years and the
comments that I would offer for consideration are as follows:
Concerns on my part - One, I'm very thankful that the Governor
did step up and start the process because I think that's what it
needed - something to jump start it and get people talking. In
our business, we provide patients to Dr. McNamara,
unfortunately; but, the thing that concerns me is the escalation
of cost. An example - in our company in four years, our manpower
has remained the same, but our workers' comp cost has gone from
$12,000 to last year, which was $59,803 - for nine people -
three of which were admin.
My concerns are the 25 percent risk pool charge that we get; and
when we talk to the agents, the comments are very straight-
forward. You're in the moving industry - a high incidence of
back injuries, et cetera; you're not going to get out of the
pool. So, we pay and our competitors who are self-insured. My
concern is that perhaps there be some consideration given to the
small guy who has been around and fills the void. If it
continues to rise, as it's already been explained to us, our
rates will go up 14.5 percent on the next time around, which is
May 1 - I think is when ours renews. What that means is I'll be
paying $70,000 a year for nine employees, which have a rate of
$1.05 per $100. And when I calculate my classification rate as
established by the NCCI, and I add my 25 percent, because I'm in
the risk pool and then I add the 32 percent, which is the - we
had an accident - one individual - my cost per $100 of pay is
$32.02. For every $100 that I pay an employee, I pay that to the
Workers' Comp. I'm looking at my hole card after 26 years and
saying is it worth it to continue [indisc.] over a quarter of a
million dollars worth of payroll money that we generate as a
small company or should I just take and throw in the towel.
CHAIR BUNDE: Thank you for your testimony and obviously that is
one of the reasons we're here - so that if people like you no
longer employee people, the workers' comp issue becomes moot,
because people just don't have jobs.
MR. SCHAUB: I have one other comment, if I may.
CHAIR BUNDE: Go ahead, please.
2:51:26 PM
MR. SCHAUB: That is on the Guarantee Association - pay in two
percent per year retroactive and now it's jumping up to four
percent to offset, I believe it was the Freemont Company, $60
million scar that they left on the community. The question is is
it our responsibility because somebody at the state level failed
to follow up and monitor these insurance companies to determine
that they are solvent or they're not solvent? And I'm sure
somewheres in the Department of Labor infrastructure, there is
somebody who is getting paid to do just that. And if they were,
why are we paying for somebody else's mistake? In my case, it
was $2,584 in the last two years.
2:52:30 PM
CHAIR BUNDE: I don't believe there was malfeasance on the state
employee. It was some $20 million to fill that gap and even as
well paid as state employees are, I don't think they could have
taken that out of their pocket.
MR. SCHAUB: That's not the thrust of my....
CHAIR BUNDE: I would just go along and finish that this
committee - the state doesn't have money. The state simply takes
money from its citizens and redistributes it to pay for various
services and this committee, in its wisdom, chose to fill that
gap out of the earnings of the Permanent Fund so that it
wouldn't have fallen as a burden on small business men like you.
Unfortunately, that wisdom was not shared by other people in the
Legislature and they chose not to support that and to simply pay
for it by raising rates for businesses. It's in one of the areas
where reasonable people can disagree, but I suspect from your
position, it's pay me now or pay me later. We can use the
earnings of the Permanent Fund that belong to all of us or, of
course, we could take it out of your....
MR. SCHAUB: I'm not suggesting that the funds be taken out of
the Permanent Dividend Fund. If my company becomes insolvent,
I'm insolvent. If their company becomes insolvent, it's a
convenience for the multiple number of businesses in this
community to offset their losses. Now, granted there's a
requirement to take care of these people and I understand that,
but we paid our dues with our premiums and there is a vehicle
via the NCCI rules - called the percentage that we pay over and
above our normal premiums if we have injuries. So, they get the
benefit of both ways. They had it when they were in business.
Now, they're out of business and we're still paying for their
bills.
CHAIR BUNDE: Just one correction. It's not the Permanent
Dividend Fund; it's the Permanent Fund Dividend and too many
people look at it as their permanent due. In any case, we tried
to solve that problem for you, but there were others in the
legislative majority who disagreed with us. I need to go on now
to Marjorie Linder.
2:55:03 PM
MARJORIE LINDER: Hello, this is Marjorie Linder and I'm the lady
who's been reporting on the statistics, for instance how
exaggerated my own eligibility evaluations have been. I'm not
the only person here that is figured in. We have providers who
have been said to have been paid $26,000 for an eligibility
evaluation. Another in the $30,000 range for an eligibility
evaluation. Those particular figures are observed on their face.
What's happening here is that we're having a lot of fuzzy math
and I feel really bad for Mr. Schaub and Mr. Favretto to be
paying these kinds of high prices, possibly based on bogus
numbers or, at least, numbers that don't inform as to what is
really going on. We don't know how to tweak these numbers
because they don't tell us anything. They're misreported and
that sort of thing. It's a very difficult thing to try to solve
something that you really haven't properly analyzed. So, that
was Exhibit 1 - I don't know if all of you have before you. My
proposed testimony for the Senate Labor and House Committee -
and different exhibits. But, I have these exhibits attached and
that's why I would like you to follow along with me, because
there are charts attached to those.
CHAIR BUNDE: For committee members, in the packet that Jane has
prepared for you there is a section labeled Marjorie Linder's
handouts.
MS. LINDER: I hope you have exhibit 1, exhibit 2 attached
because I've been kind of prolific. I've tried to send some down
by email.
CHAIR BUNDE: Yes, we have your information.
MS. LINDER: Great, thanks so much. Okay, exhibits 2 and 3 are a
chart that showed samples of different reporting practices for
sample carriers for the years 2002 and 2003 and there is an
incentive, as you've seen in the present law, for carriers to
report settlement inducements as a rehabilitation cost. They do
this to avoid paying a 6 percent assessment into the second
injury fund. So, note in 2002 that the percentage of 041K that
Freemont and Eagle Pacific said that they paid into from their
claims costs. They said they paid 11.63 percent and 15.94
percent when the overall percentage rate was 5.07 percent. So,
sometimes these figures lie and perhaps liars figure.
The total rehab - most of the rehab expenses - the majority are
under this 041K category and, as I say, this helps them avoid
the pay in and assessment into the second injury fund. If you
notice here, too, there are different ways that the report
things. Wausau, for instance, reported paying no stipend to
claimants and they, in fact, had to plan writing costs, but
interestingly enough, they said that they paid rehab counselors
5.1 percent of the their claims dollar to monitor rehab plans
never written. So, this is just an example of how crazy these
particular statistics and how unreliable and how uninformative
they are for all of you.
2:59:10 PM
Exhibit 4 talks about the rehab expenses for the insured and
self insured for 2002 and 2003. The important thing to notice
is, unlike what you've seen today, my figures show that rehab
expenses have actually gone down from 2002 to 2003. That's a
little different from the numbers that were reported to you that
seemed to be rounded out. So, I, in fact, have a $42,000
decrease in the vocational rehabilitation expenses. We know,
too, that those that the referrals have gone down. In 2004, the
rehab administrator told me that we had about 100 less
referrals. So, this is going down right and left.
You will note that the biggest cost field is 041K funds and that
accounts for $10 million in both 2002 and 2003. Now, swollen
into this, again I say, are settlement inducements and these are
not pay to people who could possibly be eligible for the benefit
or those who are eligible for the benefit. Sometimes, these are
just inducements to sweeten the pot for people who would never
qualify for the benefit, never have visited our system and so,
they're this is an extra legal kind of a category that has been
called rehab, but please don't confuse it as a legitimate
rehabilitation expense - because it isn't.
Exhibits 6, 7 and 8 here are all on one page and exhibit 6 is
actually Commissioner O'Claray's explanation to Kevin Myers
contained in a letter that he wrote trying to explain the what
settlement costs were assigned to people who were eligible for
the benefit and those that weren't. Really, it's very hard to
understand these things. I've not been given a very plausible
explanation and the rehabilitation benefits administrator
doesn't seem to understand exactly what and where these things
came from.
But, it looks 155 people who were not eligible actually received
benefits - and 041K and other benefits that were reported and,
yet they weren't even eligible. Some of them actually had plan
costs, rehabilitation service evaluations, monitoring for these
plans and yet they weren't even eligible for the benefits. It
just doesn't make any sense. In other words, please do not
believe anything that is thrown into the rehabilitation category
and reported as vocational rehabilitation, because a lot of this
is absolutely fictional to avoid payment into the second injury
fund.
3:03:30 PM
Exhibit 7 is the rehabilitation benefits administrators report
versus the carriers report. He can account for only one third of
the benefits that are listed in the annual report under the
program he administers. So, the program as written in the law,
if the statistics were isolated to the legitimate program,
rehabilitation would be seen as costing a lot less.
Exhibit 9 shows the distribution of PPI ratings in 2003. Now, I
know one of the sections of the law is calling for this jobs
dislocation benefit. It's supposed to benefit workers with under
15 percent impairment. They can get their impairment rating and
a $5,000 award. If you notice, that would mean here, I believe,
that workers with PPI and rehabilitation costs reported 653
people might be able to qualify for that $5,000.
But, only 89 percent actually were above 15 percent to 30
percent. That would be the $8,500 and then, if you were take
above 30 percent, they are supposed to get a whopping $13,500
and only eight people would probably qualify for that benefit.
We are talking about 2042 claimants who have had PPI ratings in
2003. So what I am saying is this is not a real benefit and
yet, when you really look at it, what this is, is a back door
settlement for people to give up rehabilitation services for
ever, even in the face of injuries. If they get injured again
and they come, and that injury puts them out of their work, and
they come back through the eligibility process, because they
have accepted this set of benefits in anther claim, they will be
found not eligible for the vocational rehabilitation benefits.
This is really, a pretty mean spirited and horrible thing,
couched and presented to you as a benefit when it really is, yet
another way to make it almost impossible for injured workers to
qualify the benefits. Thank you very much.
CHAIR BUNDE I would like to go on to John Micks please.
3:05:50 PM
JOHN MICKS: Mr. Chairman, my name is John Micks, I'm a
vocational councilor here in Alaska, last year I worked in as a
vocational expert in 163 social security hearings. I have a
unique vantage point to observe what happens to injured workers
who either settle their claims or waive their vocational
benefits in the workers' compensation system. Workers often opt
for the governmental system as workers' compensation insurance
covers their relinquished responsibility to assist these
claimants to become reemployed.
I am not in favor of SB 130 or HB 180 for several different
reasons. One, I would like to direct you first to section 14 of
SB 130. It repeals AS.23.30.041(c). It calls for the stipulation
of employee's eligibility for the reemployment benefits at any
time. This stipulation will not benefit the worker like it is
portrayed. The stipulation will deny the inured worker the
opportunity to be informed about the retraining benefits. Often
we, as councilors hear the comment, 'This is the first time I
was told about how this workers' compensation benefit works.'
Without this information, more injured workers may opt for the
job dislocation benefits and waiver listed in 16 of this bill.
The problems of those remedies will be discussed shortly.
Although the stipulation is purported to speed up the process,
it stands to alter the selection by the claimant of the plan
writer. The insurance companies already try to direct claimants
to rehabilitation specialists who have been working against
them. To avoid this conflict of interest, the rehabilitation
specialist who work's for a company to which the insurance
company has referred work on the case must excuse him or herself
from consideration to be the plan writer on the same case.
Two, section 15 of SB 130 deals with ways to make a claimant
ineligible for the benefit AS.23.30.041(f)(2) offers another way
to discourage the reemployment benefit. It reads that an
employee is not eligible for reemployment benefits if the
employee previously declined the development of the reemployment
plan under G of this section, received a job dislocation benefit
under G2 of this section and returned to work in the same or
similar occupation in terms of physical demands required of the
employee at the time the previous injury.
I see nothing in this bill that addresses what happens in the
case of a new injury, which is not a unusual occurrence. Surly
it is not the intention of this SB 130 to permanently
disenfranchise injured workers from reemployment benefits in the
instance of a new injury. The language 'same or similar
occupation in terms of physical demands' is so broad, that it is
meaningless. It is a lawyer's meal ticket. It is like arguing
what is, is.
Three, section 15 alludes to (g)(2), which is the described
under section 16. AS.23.30.041(g)(2) and (3) describes what they
call a job dislocation benefit and the waiver, which says the
injured worker can always forfeit the retraining benefit.
The job dislocation benefit appears to be a tool for inducing
injured to trade in their reemployment benefits forever for an
additional $5,000 to $13,500. The waiver allows the injured
worker to forgo the benefits simply to obtain their impairment
award in a lump sum and go away. Those claimants who have
stipulated the reemployment benefit in section 14 would not have
the information they need to make the decision to accept
training, waive retraining, or elect job dislocation benefits.
Under the present act, I have seen a trend by the insurance
companies to convince injured workers to waive the benefit even
before they know that they are entitled to it or what percentage
points they are getting in impairment. The majority of injured
workers have an impairment rating of 5 percent or under. They
have no idea that our rating system is not like the veterans
administration.
Both the waiver and the job dislocation benefit exploit middle
aged workers who are afraid of retraining or are near
retirement, those who are illiterate or learning disabled, non
English speaking, brain-injured claimants, young workers who
have the life view that they are invincible and those who are in
need of immediate cash.
The waiver will be done in the dark, not before an agent of the
workers' compensation board. Often, in cases in which there is
a stipulation of benefits, the worker will never know, from a
rehab councilor, the value of what his retraining benefits could
be. In essence, this is a back-door settlement of reemployment
benefits forever with no real input for an attorney. The
Division of Workers' compensation and, in some cases, a
rehabilitation specialist. There is no oversight, when you have
the insurance companies, alone, explaining to workers what they
get but not what they are giving up. The stipulations will
encourage this practice.
3:11:13 PM
There are job dislocation benefit also ignores the difference
between impairment and disability. There are people knocked by
their jobs by a 2 percent rating and those who can still work
with a 30 percent impairment rating. The job dislocation could
actually encourage the benefit that it seeks to put off. When
the injured slope worker earning $54 per hour finds that he will
only receive an additional $5,000 plus his impairment benefit,
he will elect the retraining benefit. Workers' compensation
claimants were once working people, they have lifestyles to
maintain, mortgages to pay, and children to raise. They want to
work, yet preserve as much of their income as they can. The
reemployment program under the workers' compensation system
offers them that avenue. We need to help people learn to earn a
living again, not discourage them with a benefit that just
addresses immediate need, ignoring the long term consequences of
not working.
A person's work is undoubtedly one of the most decisive,
formative, influences on his character and personality. The
question of what the work does to the worker is hardly ever
asked. Not to mention question of whether the real task might
not be to adapt to work that needs the worker rather than demand
that the worker adapt himself to the needs of work, which means
of course, primarily, the needs of the machine. Human beings
need personal activity in accordance with the injunction, which
ever gifts each one of you have received, use it with service to
one another, like good steward dispensing the grace of God in
its varied forms.
From this we derive three purposes of human work as follows:
first to provide necessary and useful goods and services,
second, to enable everyone of us and thereby, perfect our gifts
like good stewards. Third - do so in service to and cooperation
of others so as to liberate ourselves from our inborn
egocentricity. This threefold function makes work so essential
to human life that it is impossible to conceive of human life
without work.
CHAIR BUNDE: Have you concluded Mr. Micks?
MR. MICKS: YES
CHAIR BUNDE: Thank you very much. I'd like now to go on to
Lance Bush.
3:13:29 PM
LANCE BUSH, injured Alaskan worker: My name is Lance Bush, I am
an injured Alaskan worker. I worked at Fred Meyer, Northern
Lights on October 19. A couple of things that I would like to
mention. I agree with the man that just talked before me, this
is the first time that I have heard about rehabilitation or
anything like that. I never heard anything about it from
workers' comp from the Fred Meyer's insurance adjuster. I am
really scared. I would like to know when are we going to hold
corporate Alaska, corporate America, accountable for illegal
practices, bullying, intimidation, and out-right lying.
I am concerned that if we continue to relinquish our voice as a
community to corporate Alaska or to corporate America, we will
all become their slaves. What are we going to do about these
serious problems? Let's not squabble over how we can protect
corporate Alaska or corporate American, and remember who the
backbone of America really is. That would be me and a bunch of
other injured Alaskans that have been mistreated. We are not
getting the answers that we seek, I get told that as a result of
my injury, a garage door, industrial size, came down and grazed
my shoulders and broke my ankle and foot in six different
places. This is a life-altering injury, a serious injury, and I
would like to know what they are going to do about it, because I
haven't gotten any answers, and from what it sounds like,
Governor Murkowski does not have me or any other Alaskan in
mind. All he is worried about is protecting corporate America
and Corporate Alaska. We need to quit doing that.
We have allowed corporate Alaska, corporate America to dictate
our lives far to long in order protect these organization from
alleged, frivolous lawsuits. We have given them the power to use
those laws as loopholes against permanent, life long injuries
from Alaska workers. I am concerned as an Alaskan with a life
altering injury that the legislature would like to increase the
protection for corporate Alaska, corporate America.
I see what is happening is that Alaskans with minor injuries
that require minimal medical attention do, in fact, get adequate
care. Those are the cases that corporate Alaska, corporate
America, portray as being in compliance with workers' comp
liability. But, the seriously injured Alaskans are swept under
corporate Alaska, corporate American's rug, left to be ignored,
because the liability is too costly and they do not want to take
accountability. And then we become a commodity and one that can
be dismissed for the better of the company. I feel that my and
my family, and I am speaking on behalf of myself, my wife, and
my eight children - now I know that my and my family's American
dream was altered when we began to live the workman's comp
nightmare and that is exactly what it has become. That is all I
have to say.
CHAIR BUNDE thank you - moving on to Fairbanks - J.D. Reagan.
3:17:38 PM
JOHN REAGAN, Ester AK, Volunteer Fire Department: I am a
volunteer fire fighter with the Ester Volunteer Fire Department
and I work at a laborer's union Local 942 here in Fairbanks.
There was another member of my union here, but he had a serious
workers' comp injury in the past and he walked out kind of
furious after the Disneyland comment. For myself, I would like
thank the members of the legislature who have been in contact
with the local fire department to try and ensure proper coverage
for firefighters and EMTs, both volunteer and paid. I think we
owe it to the people who give their time and who risk their
lives as firefighters and EMTs. We owe them the best possible
care when they are injured in the line of duty and that is
workers' comp.
The second thing that I would like to point out is that there is
a real problem with this bill as I understand it because, as I
understand it, it will freeze medical reimbursement rates, which
physicians can charge for specific injuries as Medicare does and
set those fees at the 1999 level. I think this is a very bad
idea because, just as in Medicare, the best doctors will simply
stop taking workers' comp patients as many doctors have stopped
taking Medicare patients.
We recently had an injury in our fire department when a fire
fighter blew out a knee coming off a fire truck with a hundred
pounds of hundred-foot hose on his shoulder, just as they were
supposed to, but the knee went out. So, the fire department
doctor, under whose authority our EMTs work, recommended one of
the best knee surgeons here in Fairbanks. The operation went
really well and everything went fine. That knee is way back to
being fixed up again just fine. The problem is that if your
bill goes through doctors like that, who have all the work that
they need, because they are the best in the business. They will
simply stop taking workers' comp patients, just as many doctor's
have stopped taking Medicare patients.
This not a smart idea because it will actually raise the cost of
your program instead of lowering it. That is because the only
doctors that you are going to get to treat workers' comp
patients are going to be the dorky doctors who really need the
business. The good doctors are not going to the workers' comp
patients anymore.
That is a real bad idea because this not Medicare, where you
only provide health care. This is workman's comp when you are
paying for these injured people as long as they are out of work.
The whole point is to get these people back to work as soon as
possible, because, you mess up that knee operation, and they are
out of work for another six months or a year, and you are out of
a lot of money. So, the state would be a lot better off to
spend a little bit more money and get the best surgeon and get
the best care and that is the way that it should be. And the
freeze on the medical reimbursement rate is actually going to
work against you on that.
Tom Brice from Juneau, our union lobbyist, and the other folks
at Local 942 here in Fairbanks, they are all scratching their
heads and saying that this approach that you are taking. The
freeze on medical reimbursement rates, it just doesn't make
sense because it won't lower the cost of the program. Their
complaint is that you had a bi-partisan ad hoc committee of
people from the industry that made very good suggestions, but
they seem to think that you have taken a different approach
without input from the industry and an approach that doesn't
make sense. That will not lower the overall cost of the program
for the very reason that I have discussed. What you really what
to do is get these people back to work as soon as possible and
it is in your interest to give them the best medical care and if
you freeze those rates, it is going to be just like Medicare.
The best doctors are simply going to say fine, we are not taking
workers' comp patients anymore. Tom Brice was up here in
Fairbanks for our laborers' local 942 meeting last Friday to
talk about this bill and we are trying to get information to my
local volunteer fire departments and other volunteer fire
departments because we are really concerned with this problem.
And the reason is that if we are injured, we want the best care.
We don't want something like Medicare where the best doctors are
just not going to take workers' comp patients because that just
means that you are going to pay out a lot more money who are
going to be out of work longer. That is just my comment and I
hope that can this thing fixed well. Thank you very much.
CHAIR BUNDE: Thank you, I appreciate your testimony. As medical
costs are some 64 percent of the problem right now, obviously
they have to be part of the solution, though, it is still a work
in progress and I can't tell you what the final solution will
look like until we achieve it. Coming back here to Juneau, Rob
Betit.
3:22:34 PM
ROD BETIT, Alaska State Hospital and Nursing Home Association
(ASHNHA): Mr. Chairman, members of the committee, I am Rob Betit
with the ASHNA. I think that we had a very short table that was
passed out and I just wanted to make a couple of comments about
that. The discussion that we've had about the positions rates
and the 90th percentile really does not pertain to hospitals. We
are facing a different methodology. What that table reflects
basically - all of the things that you can be admitted to a
hospital for are rolled into one of two choices - medical and
surgical. And then you can see from the 2005 there is a combined
rate for those medical, surgical things of $7,586 a day and then
for the intensive care unit and the critical care unit it is
$13,907 dollars a day.
If you calculate going back to the 2000 rate, it would mean an
adjustment of about 35 percent and that is on top of a about a
20 percent discount that is already built into the rates
historically each year as they are adjusted. There is about a 20
percent offset already given to the workers' comp program. So
that would bring the calculations I have to about 50 percent
discount. None of the hospitals could sustain that kind of
discount long-term. It would be particularly difficult for rural
hospitals. Looking at Kodiak, just as an example, there net
income for the year was about a quarter of a million dollars and
this would have an over $100,000 impact just for that hospital
alone, based on their past experience working with worker comp
claimants.
I think what we want to say is that that's not a solution that
we think is workable as lawyers and CEOs have been working on
this with the ad hoc committee - because they are equally
interested in finding some permanent long-term fix to the
problem and they are looking for another forum in which to have
that discussion. But, I just want the committee to know that
this particular component of the roll back of rates is just too
harsh for our revenues to absorb.
CHAIR BUNDE: Is there a compromise number that you would
entertain?
3:24:38 PM
MR. BETIT: I think that there is something else that they would
entertain. I couldn't really tell you what that is because we
would have to bring together some of our CEOs to arrive at that,
but they very much want to be at the table and realize that
there is going to have to be some concessions by all parties and
they want to be part of that discussion.
CHAIR BUNDE: A very important point. We all have to be part of
the solution or we won't have a solution. The committee would
look forward to their input. Thank you very much, John George.
3:25:12 PM
JOHN GEORGE, Property Casualty Insurance Association of America:
Thank you Mr. Chairman, my name is John George. I am here today
representing the Property Casualty Insurance Association of
America. The Property Casualty Trade Association represents over
700 companies writing insurance in Alaska, not primarily
workers' comp writers, although we do have a few members that
write workers' comp. But, we would like to congratulate the
administration and the legislature for tackling this obviously
difficult problem. I wish you the wisdom of Solomon to find a
solution to it but, availability and affordability of insurance
are always concerns of ours and this bill speaks to some of
those.
I always liken insurance to a large pipe. You put money in one
end and money comes out the other end, but there is obviously a
friction loss in that pipe and that is the administrative cost
in that system. The longer the pipe the more friction there is.
I think that this bill does a lot of things that may shorten
that pipe and reduce some of the friction loss, and every little
bit that you can save is a benefit. So there is a lot of little
things that the bill does that hopefully will shorten the time
to get a claim settled, will make it easier to make the claimant
get a resolution early. And it is in everyone's benefit to get a
claim resolved properly, but quicker. The longer it goes on,
the more frustration there is. One would assume that nobody
wants to be off work longer than they have to to get back to
life - get treated, get going, get their rehabilitation started
if they are going to rehabilitates, but get on with it. Shorten
the pipe as much as they can, reduce the friction and even if it
only reduces the cost a little bit, the psychological benefit to
every one is probably important there, as well.
Whether you can cut 15 to 20 percent out of this, who knows? As
I said, I wish you the wisdom to do that, but we do appreciate
the fact that the administration and the legislature are
tackling this and hopefully you will find at least some
solutions. But, we would encourage you to do the things that
this bill says, to streamline the system a little bit and reduce
that friction loss. Thank you.
3:27:44 PM
CHAIR BUNDE: Thank you, you know it seems to be enough pressure
from both ends of this equation, businesses are concerned that
they will disappear and without businesses we don't have any
jobs, we don't need workers and of course the injured workers
are very frustrated and we wish that nobody were ever injured.
But it does happen and we all have to be, as I said earlier,
part of the solution. With that, we thank all who have
participated, as I said, this is a work in progress, we will
continue to address the issue. Those who would like to have
input - we would like their input. We invite their input.
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