Challenges Facing Workers’ Compensation: What Medical Tourism Needs to Do

R I C H A R D K R A S N E R , M A , M H A

C EO & P R I N C I PA L CO N S U LTA N T, F U T U R ECO M P CO N S U LT I N G

B LO G G E R - I N - C H I E F, T R A N S F O R M I N G WO R K E R S ’ C O M P B LO G

©2015 FutureComp Consulting

Introduction Workers’ Comp at a crossroads

Internal and external challenges

“Seismic Shifts”1

“The Year of Awareness”2

“Storm clouds in near future”3

Financially, work comp is looking better4, but not profitable5

Not all workers hurt on the job report problems

Internal Challenges Opt-out expansion Rising costs Impact of ACA Constitutionality of Exclusive Remedy

External Challenges Media reports on inadequacies of workers’

comp How injured workers are treated by system

supposed to protect them Other challenges on the horizon

Notes: 1) Seismic Shifts: An Essential Guide for Practitioners and CEO’s in Workers’ Comp2) Year of Awareness3) & 4) First up at NCCI – Work comp is looking better…5) Workers’ comp’s “profitability” and Workers’ comp profitability, Part 2

Challenges

Opt-out expansionARAWC Association for Responsible Alternatives to Workers’ Compensation (“A-rock”)

ARAWC views option as a positive, competitive complement to work comp, not a replacement

Funded by nearly two dozen major corporations (Walmart, Lowe’s, Safeway, & Nordstrom)

Multistate lobbying to allow private employers to opt-out of state workers’ comp systems

Conservative, Southern states such as Florida, Georgia & Alabama on group’s shortlist

Has written legislation for Tennessee; legislation has been deferred to next year

South Carolina legislation introduced in May 2015Sources: Walmart, Lowe’s, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers’ Comp

More States to Offer Work Comp ‘Opt-Out’?Tennessee Workers Comp Opt-Out Legislation Revised, Ready for Next SessionARAWC: South Carolina Legislators Introduce WC Option Bill

Opt-out expansion, cont’d. ARAWC’s Goals – For Employees:

Delivery of better medical outcomes and higher process satisfaction for injured workers

Improved workplace safety and training supporting injury prevention

Expanded access to quality medical providers providing exceptional care

Opportunity for expanded benefits through custom-designed plans

More expedient medical treatment and more referral to specialized medical treatment to enhance recovery

ARAWC’s Goals – For Employers:

Improved incentive for existing workers’ compensation providers to improve services and prices

Incentives for medical providers to act in the best interest of the employee and improve levels of service

Expanding employee access to medical providers who do not accept workers’ comp

An injury benefit plan that can more efficiently deliver care to and achieve better medical outcomes for injured workers

Source: More States to Offer Work Comp ‘Opt-Out’?

Opt-out expansion, cont’d. Criticism of Opt-out legislation

Opt-out has been criticized as limiting injured workers’ rights to medical benefits

Workers are taken for granted

Better medical care and return-to-work rates are alleged without evidence

Texas system cited without qualification as a success

Resistance to legislation to enforce ethical and equitable behavior on part of employers and improve compliance with laws on the books

Absence of transparency; 100,000, or 90% of employers in Texas fail to file required reports

Worker intimidation; if an injured worker seeks advice from personal physician, they could lose their benefits

Sources: Walmart, Lowe’s, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers’ CompWhat Opt-out Advocates Need to Do

Rising Costs Medical Costs for Lost-time Claims Approaching $30,000

2014p – Preliminary figure based on data valued as of 12/31/14Source: https://www.ncci.com/Documents/AIS-2015-SOL-Presentation.pdf

Rising Costs, cont’d.

Source: https://www.ncci.com/Documents/AIS-2015-SOL-Presentation.pdf

Comparison of Actual and Preliminary Costs

Rising Costs: Hospital Costs Outpatient costs still rising States with %-of-charge fee schedules or no fee schedules had highest payments to hospitals

for outpatient surgical episodes for knee and shoulder surgeries States with no fee schedules had 60 – 141% higher payments per episode compared with

states with fixed-amount schedules Tremendous variation in rates of change in hospital payments per surgical episode across

states SC saw reduction of 31% in avg. hospital payment from 2006 – 2013; AL grew by 81% States with %-of-charge-based fee schedules or no fee schedules had more rapid growth

than states with other regulations Most percent-of-charge-based states experienced growth that was 157-286% faster than

median of states with fixed-amount fee schedules

Source: Hospital Outpatient Costs Still Rising Says New Study

Rising Costs, cont’d. Consolidation

Payments to hospitals on behalf of privately insured are an estimated 3% higher as a result of consolidation

Hospitals have increased their prices by nearly 50% after a merger; after two San Francisco hospitals merged, their prices increased 28-44%

Increase in Physician Fees

7% increase on physician fees for total knee replacements due to concentration of orthopedic groups

From 2001-2010, average professional fee for total knee arthroplasty was $2,537

In markets that moved from bottom quartile of concentration to top quartile, physician fees paid by private payers increased by $168 per procedure

Sources: The Urge to Merge: Why Health Care Costs Are Still RisingIncrease in Physician Fees for Total Knee Replacements Due to Concentration in Orthopedic Markets

ACA Impact Doctor Shortage by 2025 US will be short 46,000 – 90,000 doctors by 2025, according to Association of American

Medical Colleges (AAMC) AAMC estimates shortage of primary care physicians will be 12,500 – 31,100; 28,200 –

63,700 non-primary care physicians, most notably among surgical specialists Total physician demand projected to grow by up to 17%, with population aging and growth

accounting for majority

ACO’s May Shift Claims into Workers’ Comp

Workers’ Comp Research Institute (WCRI) found that millions of claims dollars may be shifted into workers’ comp due to Accountable Care Organizations (ACO’s)

Sources: Doctor shortage to hit 90,000 by 2025, report saysAccountable Care Organizations May Shift Claims into Workers’ Comp

ACA Impact, cont’d. Hospital Closures Due to Failure to Expand Medicaid

Hospitals in Kansas, Kentucky and Louisiana, as well as other states that rejected Medicaid expansion are struggling

283 mostly-rural hospitals are in financial trouble, and since 2010, 48 have closed

Failure to Expand Medicaid Could Lead to Cost-Shifting to Workers’ Comp

Problems will arise unless states expand Medicaid

Problems due to two things:

Cost pressure placed on facilities and health systems will lead to increased pressure to cost shift 6.4 million adults who remain uninsured will be less healthy, have more incentive to get care under

work comp and heal more slowlySources: Hospital Closures Due to Failure to Expand Medicaid

Failure to Expand Medicaid Could Lead to Cost-Shifting to Workers’ CompMedicaid and Workers’ Comp

Constitutionality of Exclusive Remedy What is Exclusive Remedy?

Protects employers from common lawsuits by employees to recover for work-related injuries

Limits a worker's remedies for work-related injuries to a workers' compensation claim against the employer

“Trade-off” compromise whereby both employers and employees give up certain advantages in return for others; so-called “Grand Bargain”

Employers trade liability, regardless of fault, for protection from large tort awards, and employees surrender a cause of action in return for swift but limited financial benefits

Source: http://definitions.uslegal.com/e/exclusive-remedy-rule/

Constitutionality of Exclusive Remedy, cont’d. Constitutionality

Various reforms over the years have devalued the workers’ comp program that it can no longer meet its constitutional declared objectives

Plaintiffs in FL case Julio Cortes v Velda Farms allege comp system became “unconstitutional as an exclusive remedy in stages,” as lawmakers made changes that slowly eroded benefits and protections

Plaintiffs asserted that anytime Legislature takes away a right, it must provide a “reasonable alternative”

Miami-Dade County Circuit Court Judge Jorge Cueto ruled in Padgett vs State of Florida, that the exclusive remedy provision is unconstitutional

Source: Constitutionality of Workers' Comp Challenged: What that could mean for Medical Travel

Constitutionality of Exclusive Remedy, cont’d.

Constitutionality, cont’d.

Basis of ruling was that over the years, Florida’s workers’ comp act benefits had been eroded as to no longer serve as an adequate remedy

District Court judge in Oklahoma ruled that its state’s workers’ comp law does not provide exclusive remedy for “foreseeable” injuries

Judge ruled that employee could sue his employer because his injury was “foreseeable” and therefore employee did not suffer a compensable injury under OK workers’ comp law

Florida 3rd District Court of Appeal ruled in June, plaintiffs in Padgett had no legal standing, constitutionality upheld; but plaintiffs will continue to change constitution

Sources: Update on Constitutionality of Work Comp in FloridaExclusive Remedy in Workers’ Comp under AssaultBreaking News on ACA and Exclusive Remedy

Media Reports Exposes deficiencies in Workers’ Comp system ProPublica/NPR The Demolition of Workers’ Comp

“Reforms” pushed by big business and insurance carriers have dismantled state WC systems Cutbacks have been drastic in some places, they guarantee workers will plummet into

poverty; workers often battle insurance companies for surgeries, prescriptions, and basic help doctors recommend

The Fallout of Workers’ Comp “Reforms”: 5 Tales of Harm Five case studies reveal real-life impact of rollbacks spreading across the country

How Much Is Your Arm Worth? Depends On Where You Work Found there was different compensation for identical injuries; example: Arm injury AL $49K,

GA $118KSources: The Demolition of Workers Compensation

The Fallout of Workers’ Comp “Reform”: 5 Tales of HarmHow Much Is Your Arm Worth? Depends On Where You Work

Media Reports, cont’d. OSHA Report

Adding Inequality to Injury: The Cost of Failing to Protect Workers on the Job More than 3 million workers seriously injured every year; thousands more are killed on the job Financial and social impacts of injuries and illnesses are huge, with workers and their families,

and taxpayer-supported programs paying most of the costs Workplace injuries create a trap which leaves them less able to save for future or make

investments in skills and education Injuries contribute to issue of income inequality

Mother Jones article Criticizes push for opt-out legislation

Industry response Slanted “reporting” public disservice; biased view of work comp system; facts not substantiated

Sources: ADDING INEQUALITY TO INJURY: THE COSTS OF FAILING TO PROTECT WORKERS ON THE JOBWalmart, Lowe’s, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers’ CompProPublica’s slanted “reporting” is a public disservice

Treatment of Injured Workers Injured workers denied basic medical care and services, as well as adequate compensation,

leading to impoverishment ProPublica/NPR and OSHA reports – lost limbs, delays in treatment, etc. Article “They Shoot Horses Don’t They?” discusses why injured workers are subjected to

various indignities after suffering a work-related injury Big businesses largely believe workers are disposable Workers who are injured on the job are cast aside Large corporations’ attitude towards worker and treatment of the workforce can be

summed up by one word: exploitation Work of ARAWC cited as a new “reform” trend taking workers’ rights back to time

when they had no recourse for injuries, and as a result became impoverished or died

Source: They Shoot Horses Don't They?

Seismic Shifts Seismic Shifts: An Essential Guide for Practitioners and CEO’s in Workers’ Comp

Report by Peter Rousmaniere earlier this year found “next big wave…is already here” for workers’ comp industry; offers contrasting view of industry direction over next decade

Workers’ comp industry is shrinking

1993 – today, number of serious work injuries dropped by over 35%

Today – 2022, work injuries will likely drop by 35% again; study of impact of automation suggests that over next decade or longer, injuries might be cut in half

Cites Texas as example of the shrinking of the industry

2013, Texas private sector workforce incurred 30% fewer lost time injuries than in 2004

As the typical claim is increasing in complexity, total number of claims decreasing

Source: Seismic Shifts: An Essential Guide for Practitioners and CEO’s in Workers’ Comp

Seismic Shifts, cont’d. Factor behind shrinking of workers’ comp claims

Shift from manufacturing to service

Entering into 20th century, service sector roughly equal to goods-producing sector in share of national output

Change began in 1920’s; by 1960’s, the service sector eclipsed industry in creating economic value

Employment in services climbed from 55% to 85% of total employment

Manufacturing employment (70% male) dropped precipitously, and revival of manufacturing uses a fraction of workers employed in the past

Manufacturing employment much safer today; risk of “time lost” injury same as service sector

1994: for every 10 manufacturing injuries involving one day’s lost time, there were 8 service sector injuries

2012: for every 2 manufacturing lost-time injuries, there were 10 service sector injuriesSource: Seismic Shifts: An Essential Guide for Practitioners and CEO’s in Workers’ Comp

Seismic Shifts, cont’d. Top Four Reason for Declining Injuries and Claims

Workers may be reporting and claiming less out of intimidation or unhappiness with the benefit package which has shrunk in past decades

Employment sector shifts, notably in sharp reduction of high-risk manufacturing jobs; continuation, if not acceleration of injury declines, without collapse of employment in a major high-risk sector

Employers are devoting more attention to work safety; lost-time claims have fallen faster than injuries

Employers are pushing down lost-time claims by stay-at-work arrangements, or expediting return-to-work before convalescence goes on long enough for worker to qualify for lost-time benefits; employers have assumed more exposure to claims costs through self-insurance and high deductibles

Source: Seismic Shifts: An Essential Guide for Practitioners and CEO’s in Workers’ Comp

Seismic Shifts, cont’d. Claims Costs May Also Decline

Cost of claims likely to moderate in growth, and even decline in near future

Most up-to-date data on medical costs in workers’ comp indicates that past years’ annual increases per claim in the 5 – 10% range have decreased 3%

Correlation exists between general healthcare costs and medical cost trends in workers’ comp

Increases in cost of healthcare have moderated through all lines of industry: Medicare, health insurance, and workers’ comp; Cost of claims likely to follow suit

High deductibles in health plans may induce individuals to seek medical care in workers’ comp

For the foreseeable future, case can be made that core medical cost index in national healthcare will remain low; in workers’ comp, that can translate into a flat rate of zero, or in selected areas, a negative rate

Source: Seismic Shifts: An Essential Guide for Practitioners and CEO’s in Workers’ Comp

Seismic Shifts, cont’d. Other Shifts

Technology – injury-saving telematics

More transparent, analytical and collaborative claims data, i.e., “more lit up”

Diversification

Integrated Disability Management

Total Absence Management

Health and Productivity Management

Source: Seismic Shifts: An Essential Guide for Practitioners and CEO’s in Workers’ Comp

What Medical Tourism Needs to Do

What Medical Tourism Needs to Do

Be Prepared

Whatever happens in the workers’ comp industry, the medical tourism industry needs to be prepared to expand into and handle medical care for injured workers

Educate yourselves on the issues related to occupational illness and injury, as well as the deficiencies in the current US systems that would open itself to medical tourism

Market other services such as orthopedic surgery, rehabilitation services, physical therapy, medical prosthetics, etc.

Attend Risk Management and Workers’ Comp Conferences in the US to learn more about the industry and its needs for the future, whatever direction it takes

Transparency

Provide accurate pricing, cost of services, outcome data, and success stories to industry leaders

Convince skeptical thought leaders and industry personnel that medical care outside of the US is equal to or better than what is available domestically (i.e., change the perception)

Partner with me to work with brokers, employers and insurance companies

Conclusion

Conclusion Workers’ Comp experiencing internal and external challenges that threaten its future

Negative reports in the media have shined a light on workers’ comp’s failures and inadequacies

Injured workers are being denied basic medical care, are being discarded and abused and forced into poverty

Seismic shifts such as a shrinking industry, declining claims costs, new injury-saving technology, and diversification into “integrated disability management”, “total absence management”, or “health and productivity management” may require expansion of medical services offered by medical tourism industry

Medical Tourism industry must take lead and go after the market; the market will not come to you

Questions?Contact Info:

Richard Krasner, MA, MHA

+1 561-738-0458

+1 561-603-1685, cell

Email: richard_krasner@hotmail.com

Skype: richard.krasner

LinkedIn: https://www.linkedin.com/in/richardkrasner

Blog: richardkrasner.wordpress.com