PowerPoint Presentation

Challenges Facing Workers Compensation: What Medical Tourism Needs to Do

Richard Krasner, MA, MHACEO & Principal Consultant, FutureComp ConsultingBlogger-in-Chief, Transforming Workers Comp Blog

2015 FutureComp Consulting

IntroductionWorkers Comp at a crossroadsInternal and external challengesSeismic Shifts1The Year of Awareness2Storm clouds in near future3Financially, work comp is looking better4, but not profitable5Not all workers hurt on the job report problems Internal ChallengesOpt-out expansionRising costsImpact of ACAConstitutionality of Exclusive RemedyExternal ChallengesMedia reports on inadequacies of workers compHow injured workers are treated by system supposed to protect themOther challenges on the horizonNotes: 1) Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers Comp2) Year of Awareness3) & 4) First up at NCCI Work comp is looking better5) Workers comps profitability and Workers comp profitability, Part 2

Challenges

Opt-out expansionARAWCAssociation for Responsible Alternatives to Workers Compensation (A-rock)ARAWC views option as a positive, competitive complement to work comp, not a replacementFunded by nearly two dozen major corporations (Walmart, Lowes, Safeway, & Nordstrom)Multistate lobbying to allow private employers to opt-out of state workers comp systemsConservative, Southern states such as Florida, Georgia & Alabama on groups shortlistHas written legislation for Tennessee; legislation has been deferred to next yearSouth Carolina legislation introduced in May 2015Sources: Walmart, Lowes, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers CompMore 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, contd.ARAWCs Goals For Employees:Delivery of better medical outcomes and higher process satisfaction for injured workersImproved workplace safety and training supporting injury preventionExpanded access to quality medical providers providing exceptional careOpportunity for expanded benefits through custom-designed plans More expedient medical treatment and more referral to specialized medical treatment to enhance recovery

ARAWCs Goals For Employers:Improved incentive for existing workers compensation providers to improve services and pricesIncentives for medical providers to act in the best interest of the employee and improve levels of serviceExpanding employee access to medical providers who do not accept workers compAn injury benefit plan that can more efficiently deliver care to and achieve better medical outcomes for injured workersSource: More States to Offer Work Comp Opt-Out?

Opt-out expansion, contd.Criticism of Opt-out legislationOpt-out has been criticized as limiting injured workers rights to medical benefitsWorkers are taken for grantedBetter medical care and return-to-work rates are alleged without evidenceTexas system cited without qualification as a successResistance to legislation to enforce ethical and equitable behavior on part of employers and improve compliance with laws on the booksAbsence of transparency; 100,000, or 90% of employers in Texas fail to file required reportsWorker intimidation; if an injured worker seeks advice from personal physician, they could lose their benefits

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

Rising CostsMedical 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, contd.Source: https://www.ncci.com/Documents/AIS-2015-SOL-Presentation.pdf Comparison of Actual and Preliminary Costs

Rising Costs: Hospital CostsOutpatient costs still risingStates with %-of-charge fee schedules or no fee schedules had highest payments to hospitals for outpatient surgical episodes for knee and shoulder surgeriesStates with no fee schedules had 60 141% higher payments per episode compared with states with fixed-amount schedulesTremendous variation in rates of change in hospital payments per surgical episode across statesSC 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 regulationsMost percent-of-charge-based states experienced growth that was 157-286% faster than median of states with fixed-amount fee schedulesSource: Hospital Outpatient Costs Still Rising Says New Study

Rising Costs, contd.ConsolidationPayments to hospitals on behalf of privately insured are an estimated 3% higher as a result of consolidationHospitals have increased their prices by nearly 50% after a merger; after two San Francisco hospitals merged, their prices increased 28-44%Increase in Physician Fees7% increase on physician fees for total knee replacements due to concentration of orthopedic groupsFrom 2001-2010, average professional fee for total knee arthroplasty was $2,537In 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 ImpactDoctor Shortage by 2025US 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 specialistsTotal physician demand projected to grow by up to 17%, with population aging and growth accounting for majorityACOs May Shift Claims into Workers CompWorkers Comp Research Institute (WCRI) found that millions of claims dollars may be shifted into workers comp due to Accountable Care Organizations (ACOs)

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

ACA Impact, contd.Hospital Closures Due to Failure to Expand MedicaidHospitals in Kansas, Kentucky and Louisiana, as well as other states that rejected Medicaid expansion are struggling283 mostly-rural hospitals are in financial trouble, and since 2010, 48 have closedFailure to Expand Medicaid Could Lead to Cost-Shifting to Workers CompProblems will arise unless states expand MedicaidProblems due to two things:Cost pressure placed on facilities and health systems will lead to increased pressure to cost shift6.4 million adults who remain uninsured will be less healthy, have more incentive to get care under work comp and heal more slowly

Sources: Hospital Closures Due to Failure to Expand MedicaidFailure to Expand Medicaid Could Lead to Cost-Shifting to Workers CompMedicaid and Workers Comp

Constitutionality of Exclusive RemedyWhat is Exclusive Remedy?Protects employers from common lawsuits by employees to recover for work-related injuriesLimits a worker's remedies for work-related injuries to a workers' compensation claim against the employerTrade-off compromise whereby both employers and employees give up certain advantages in return for others; so-called Grand BargainEmployers 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 benefitsSource: http://definitions.uslegal.com/e/exclusive-remedy-rule/

Constitutionality of Exclusive Remedy, contd.ConstitutionalityVarious reforms over the years have devalued the workers comp program that it can no longer meet its constitutional declared objectivesPlaintiffs 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 protectionsPlaintiffs asserted that anytime Legislature takes away a right, it must provide a reasonable alternativeMiami-Dade County Circuit Court Judge Jorge Cueto ruled in Padgett vs State of Florida, that the exclusive remedy provision is unconstitutionalSource: Constitutionality of Workers' Comp Challenged: What that could mean for Medical Travel

Constitutionality of Exclusive Remedy, contd.Constitutionality, contd.Basis of ruling was that over the years, Floridas workers comp act benefits had been eroded as to no longer serve as an adequate remedyDistrict Court judge in Oklahoma ruled that its states workers comp law does not provide exclusive remedy for foreseeable injuriesJudge 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 lawFlorida 3rd District Court of Appeal ruled in June, plaintiffs in Padgett had no legal standing, constitutionality upheld; but plaintiffs will continue to change constitutionSources: Update on Constitutionality of Work Comp in FloridaExclusive Remedy in Workers Comp under AssaultBreaking News on ACA and Exclusive Remedy

Media ReportsExposes deficiencies in Workers Comp systemProPublica/NPRThe Demolition of Workers CompReforms pushed by big business and insurance carriers have dismantled state WC systemsCutbacks 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 recommendThe Fallout of Workers Comp Reforms: 5 Tales of HarmFive case studies reveal real-life impact of rollbacks spreading across the countryHow Much Is Your Arm Worth? Depends On Where You WorkFound there was different compensation for identical injuries; example: Arm injury AL $49K, GA $118KSources: The Demolition of Workers CompensationThe Fallout of Workers Comp Reform: 5 Tales of HarmHow Much Is Your Arm Worth? Depends On Where You Work

Media Reports, contd.OSHA ReportAdding Inequality to Injury: The Cost of Failing to Protect Workers on the JobMore than 3 million workers seriously injured every year; thousands more are killed on the jobFinancial and social impacts of injuries and illnesses are huge, with workers and their families, and taxpayer-supported programs paying most of the costsWorkplace injuries create a trap which leaves them less able to save for future or make investments in skills and educationInjuries contribute to issue of income inequalityMother Jones articleCriticizes push for opt-out legislationIndustry responseSlanted reporting public disservice; biased view of work comp system; facts not substantiatedSources: ADDING INEQUALITY TO INJURY: THE COSTS OF FAILING TO PROTECT WORKERS ON THE JOBWalmart, Lowes, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers CompProPublicas slanted reporting is a public disservice

Treatment of Injured WorkersInjured workers denied basic medical care and services, as well as adequate compensation, leading to impoverishmentProPublica/NPR and OSHA reports lost limbs, delays in treatment, etc.Article They Shoot Horses Dont They? discusses why injured workers are subjected to various indignities after suffering a work-related injuryBig businesses largely believe workers are disposableWorkers who are injured on the job are cast asideLarge corporations attitude towards worker and treatment of the workforce can be summed up by one word: exploitationWork 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 ShiftsSeismic Shifts: An Essential Guide for Practitioners and CEOs in Workers Comp Report by Peter Rousmaniere earlier this year found next big waveis already here for workers comp industry; offers contrasting view of industry direction over next decadeWorkers comp industry is shrinking1993 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 halfCites Texas as example of the shrinking of the industry2013, Texas private sector workforce incurred 30% fewer lost time injuries than in 2004As the typical claim is increasing in complexity, total number of claims decreasingSource: Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers Comp

Seismic Shifts, contd.Factor behind shrinking of workers comp claims Shift from manufacturing to serviceEntering into 20th century, service sector roughly equal to goods-producing sector in share of national outputChange began in 1920s; by 1960s, the service sector eclipsed industry in creating economic valueEmployment in services climbed from 55% to 85% of total employmentManufacturing employment (70% male) dropped precipitously, and revival of manufacturing uses a fraction of workers employed in the pastManufacturing employment much safer today; risk of time lost injury same as service sector1994: for every 10 manufacturing injuries involving one days lost time, there were 8 service sector injuries2012: for every 2 manufacturing lost-time injuries, there were 10 service sector injuriesSource: Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers Comp

Seismic Shifts, contd.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 decadesEmployment 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 sectorEmployers are devoting more attention to work safety; lost-time claims have fallen faster than injuriesEmployers 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 CEOs in Workers Comp

Seismic Shifts, contd.Claims Costs May Also DeclineCost of claims likely to moderate in growth, and even decline in near futureMost 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 compIncreases in cost of healthcare have moderated through all lines of industry: Medicare, health insurance, and workers comp; Cost of claims likely to follow suitHigh deductibles in health plans may induce individuals to seek medical care in workers compFor 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 CEOs in Workers Comp

Seismic Shifts, contd.Other ShiftsTechnology injury-saving telematicsMore transparent, analytical and collaborative claims data, i.e., more lit upDiversificationIntegrated Disability ManagementTotal Absence ManagementHealth and Productivity Management

Source: Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers Comp

What Medical Tourism Needs to Do

What Medical Tourism Needs to DoBe 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 workersEducate 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 takesTransparencyProvide accurate pricing, cost of services, outcome data, and success stories to industry leadersConvince 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

ConclusionWorkers Comp experiencing internal and external challenges that threaten its futureNegative reports in the media have shined a light on workers comps failures and inadequaciesInjured workers are being denied basic medical care, are being discarded and abused and forced into povertySeismic 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 industryMedical 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, cellEmail: richard_krasner@hotmail.comSkype: richard.krasnerLinkedIn: https://www.linkedin.com/in/richardkrasnerBlog: richardkrasner.wordpress.com