Worker's Compensation Advisory Council

Council on Worker’s Compensation
Crowne Plaza
Madison, Wisconsin
May 09, 2011


Members present:   Mr. Beiriger, Mr. Brand, Mr. Buchen, Mr. Collingwood, Ms. Connor, Mr. Kent, Mr. Metcalf,  Mr. Olson, Ms. Pehler, Mr. Schwanda and Ms. Thomas

Excused:    Ms. Bloomingdale,  Ms. Nugent, Mr. Redman

Staff present:   Mr. O’Malley, Ms. Knutson, Mr. Krueger and Mr. Aiello

  1. Call to Order/Introductions: Mr. Metcalf convened the Worker’s Compensation Advisory Council (WCAC) meeting at approximately 10:30 a.m. in accordance with Wisconsin’s open meetings law.  WCAC members, staff and members of the audience introduced themselves.  Mr. Metcalf is the new administrator of the Worker’s Compensation Division (WCD).
  2. Minutes: Mr. Kent moved to approve the minutes of the April 11, 2011 meeting with the correction that the absences of Ms. Bloomingdale, Mr. Redman, Mr. Schwanda, and Ms. Connor be marked as excused; second by Mr. Buchen.  The minutes were unanimously approved as corrected.
  3. Correspondence:  None.

  4.  Report - Proposal Updates:  Mr. O’Malley explained the following Department proposals (numbers correspond to the Department proposal numbers):

    #5 Originally the department proposed to amend Wis. Stat. §102.44(1)(c) to require that all claims for reimbursement for supplemental benefit payments be made within six months.  In response to Management’s concerns, the proposal has been modified to provide that reimbursement requests must be made within 12 months, allowing one year for reimbursement requests.  

    #7 This proposal was modified based on Labor’s concerns, to delete language that allows the Work Injury Supplemental Benefit Fund (WISBF) to hire a third party administrator; WISBF could retain the Department of Administration to handle claims.              

    # 12 This proposal references claims monitoring for follow-up medical reports.  In the previous draft, eye injuries that involved two or more doctor visits required a final medical report; the proposal was modified to include eye injuries involving three or more doctor visits.  

    # 15  The timeframe to provide the annual report of payments made in permanent total disability claims, including those involving supplemental benefit payments, was increased from a six month period to a 12 month period.  The WCAC members were provided with a copy of the form involved with this proposal.

    # 18 and 19  These proposals pertain to reasonableness of fee and necessity of treatment disputes.  The proposal was modified to clarify that certified mailing could be required when the dispute involved repeated allegations that documents were not received by a party.  At the prior meeting, Management expressed a concern regarding how aggressive the department would be in enforcing this provision.  The modified proposal provides there must be two allegations of non-receipt before the department could require certified mailing.  Ms. Knutson clarified that these issues involve a small group of providers and carriers. 

    Mr. O’Malley explained that the pharmacy fees dispute process involves use of the Red Book for pricing.  First Databank and Mediserve have discontinued publishing the Red Book.  The Red Book hardcopy was discontinued; the price was approximately $200.  Only the online service is available, at a cost of up to $2,000 per year per user.  No other benchmark for pharmacy fees is readily available at this time; the department will keep monitoring the standard for pharmaceutical pricing.  The pharmaceutical fee schedule under Wis. Stat. §102.475 refers to the definition of “practitioner” contained in §450.01(17).  The definition is as follows: “’Practitioner’ means a person licensed in this state to prescribe and administer drugs or licensed in another state and recognized by this state as a person authorized to prescribe and administer drugs.”  
  6. Discussion all proposals:  Mr. Kent distributed updated Labor proposals that include certain public proposals.  Motion by Mr. Buchen, second by Mr. Kent that the WCAC go into closed caucus to consider the Department proposals.  The motion was unanimously approved.

    Upon return from caucus, Labor and Management provided their responses to the Department proposals as follows

    # 5 Labor and Management agreed.

    # 7 Labor questioned whether under this proposal DOA could subcontract defense of claims to an outside attorney or firm.  Mr. O’Malley explained that the language of the proposal mirrors Wis. Stat. §102.81(2) pertaining to the Uninsured Employers Fund.  Mr. Beiriger questioned whether DOA would be able to handle the WISBF claims.  Ms. Knutson explained that in a meeting with DOA Bureau of State Risk Management (BSRM) staff, the BSRM could handle the claims if the funding was available; however, they would need to obtain position and spending authority.  Mr. O’Malley indicated currently the WCD is providing funding to DOJ to handle the WISBF claims from the WCD’s budget.  If this proposal is approved, at some point in the future, BSRM will need to ask for the spending and position authority if the WCD intends to request that DOA handle the claims.  Under Wis. Stat. §102.64, DOJ has authority for payments into and out of the fund.  The WCD will work on a revised draft to address Labor’s concerns.  This proposal was tabled.

    #12 Labor and Management agreed.

    # 15 Labor and Management agreed.

    # 18 and 19 Labor agreed; Management objects because the reasonableness of fee dispute issues must be looked at holistically and not modified in a piecemeal fashion.  Mr. Beiriger suggested that the WCD discuss issues related to health cost disputes with representatives of carriers and providers and report back recommendations to the WCAC.  Mr. Metcalf indicated that the WCD could hold informal discussions with stakeholders on the health cost dispute process.

    Motion by Mr. Beiriger, second by Mr. Kent to approve Department proposal numbers 5, 12 and 15.  Motion carried unanimously.

    Management responded to additional Department proposals as follows:
    #2 Yes;
    # 8 Yes;
    # 13 Yes;
    # 14 No;
    #16 No;
    #17 No - the department should develop a form;
    # 20 Tabled - waiting for an updated proposal;
    #21 No issues with updating the guidelines, but Management has a preference for a Wisconsin system.  

    In addition, regarding the pharmacy fee schedule, if the Red Book is still available, the cost of the publication is not an issue.  

    Motion by Mr. Beiringer, second by Ms. Thomas to approve Department proposal numbers 2, 8, and 13.  Motion carried unanimously.   

    Management did not add any Public proposals to the list of Management proposals. 

    Management explained their proposals as follows:

    # 1  Worker’s compensation is a wage replacement system.  If there is actual wage loss, the disfigurement would be compensated; if the employee is disfigured due to an injury, but had no wage loss, the employee would not receive compensation for the disfigurement.  If in the future the employee had a wage loss, the employee would receive benefits subject to the 12 year statute of limitations.  Mr. O’Malley explained that under Wis. Stat. §102.56, an injured employee is entitled to benefits for disfigurement when the employee can prove “potential” wage loss.  Under subsection (2) if the employee returned to work for the same employer, at the same or higher wage, the employee will not be eligible for compensation unless the employee proves that he/she “probably” has or will suffer a wage loss.  This is a higher legal standard to qualify for benefits than has been in effect since 1988.  

    # 2  Management is taking a different approach to reducing medical costs than a fee schedule.  Mr. Beiriger explained that the intent is for employers to start understanding the benefit of sending an employee to a provider that understands the nature of the work.  After 90 days the employee can change to a doctor of their choice.  The initial care provider is moving the claim along to get it resolved.  Employers should be motivated to provide a list of good providers to have pricing leverage and quality outcomes.  Employees should be convinced the doctors on the list provide good care; making good choices on the front end of claims is a tool to employers to decrease medical costs.  Mr. Kent commented that the proposal is introducing a modified panel system; panels in the past were highly skewed.  He questioned if there were any studies or experience from other states.  Ms. Pehler responded that 29 states have employer-directed care at least initially on a claim.  

    #3  Management is proposing a fee schedule for implants, medical hardware and prosthetics.  Ms. Knutson commented that the certified databases do not contain formula amounts for those medical charges.  Normally hospitals charge a percentage mark-up over invoice, and usually indicate that their contract with the manufacturer precludes disclosure of the invoice amount.  The carriers do not provide any reasonable basis supported by data to reduce the charges.  In one case, the carrier appealed to circuit court and the court remanded with instructions to obtain the invoice.  Once the invoice was received, it was evident that the hospital mark-up was 200% over invoice.  The carrier did not dispute the matter further.  Mr. Brand responded that the provider by law could be required to produce the invoice.  Other states regulate charges for these items and provide maximum mark-up allowances for implants, hardware and prosthetics.  Ms. Knutson commented there is no certified database amount for L-codes, which are used for prosthetic device billings.  Labor is interested in a system to control unnecessary medical costs.  

    #4 Mr. Beiriger explained that currently the certified data bases calculate fees at 1.4 standard deviations from the mean, resulting in payments at the 92nd percentile.  Management proposes to reduce the reimbursement to 1.0 standard deviation above the mean resulting in payments at the 84th percentile.  This proposal relates to Management proposal #2 regarding directing medical care.  The projected net effect is that medical costs will fall below the 84th percentile.  Mr. Brand commented that a majority of states have medical fee schedules based on Medicare reimbursement rates.  Usual and customary reimbursement rates are usually at the 80th percentile or lower.  Mr. Metcalf indicated that the WCD could look at the impact on reducing the standard deviation on various CPT codes.  Mr. Kent questioned that in instances where maximum reimbursement rates apply; does it negatively affect medical outcomes?  Is the participation rate of doctors impacted?  In Wisconsin, the satisfaction rate now is 85%.  Mr. Buchen responded that no other state uses certified databases to set a maximum reimbursement rate.  Management is not proposing a Medicare-based system due to the resistance in past years from providers.  In addition, the mean charge moves because the database amounts are based on billed charges rather than paid charges.  

    #6 Mr. Kent expressed concern in requiring an occupational medicine physician to make a determination on PTD if there is not a specialist available within 100 miles of the injured worker.  A doctor that is more familiar with a patient is in a better position to assess PTD.  Management is concerned about physicians labeling injured workers as permanently disabled.  Occupational medicine physicians are more familiar with physical requirements of jobs than family practitioners.  Ms. Knutson clarified that most physicians do not render opinions on PTD, they just provide work restrictions and vocational experts provide the opinion on PTD.  Ms. Thomas commented that it is hard for workers with disabilities to get a job, especially at past wages.  In many cases orthopedic surgeons and neurosurgeons are rendering their opinions on work restrictions.  Ms. Knutson commented there are factors set forth in administrative rule that vocational experts consider in opining loss of earning capacity and PTD.  The credentials of the expert can be taken into consideration as well.  Mr. O’Malley commented that under Wis. Stat. §102.17(7)(a), the vocational expert report is considered with all other evidence, so that the administrative law judge can consider the “range of evidence” in finding loss of earning of capacity or PTD.  

    #7  Management indicated there is a question as to when a case is really ready for hearing.  

    # 8  Labor questions the ramifications if the doctor refuses to provide the report as required.   Ms. Pehler commented that it is not the responsibility of the doctor to send copies of medical notes to both parties; it sometimes gets burdensome for the provider.  Management wants complete copies of records before going to hearing.

    #9  Management is looking to insulate the carrier from liability when there is no claim initiated by employer.  Ms. Pehler elaborated that an employee sees a doctor to get treatment and says it is due to a work injury and the bill is returned by the carrier indicating “no claim found” because the employee failed to report the injury to the employer.  The provider then files a fee dispute and an order by default is issued by the WCD.  Ms. Knutson explained that the WCD writes to the carrier and gives them additional time to investigate the claim.  The department cannot determine if the employee did not report the claim to the employer or if the employer is failing to report the claim to the carrier; but once the carrier is on notice of the claim, they have a duty to investigate.  Often the carrier does not respond to the department and that is when a default order is issued.  This circumstance is one issue among many that needs to be addressed with the health cost dispute process.

    Labor explained their proposals as follows:

    #1 Management requested that the department provide information on the current ratio of permanent partial disability (PPD) benefit rates to temporary total disability (TTD) benefit rates.  Normally, the WCAC negotiates yearly increases in the PPD benefit rate.  Mr. Kent explained that in the past, primary compensation comprised 60-65% of the total worker’s compensation claim dollar.  Now, medical expenses comprise 65% of the worker’s compensation dollar, resulting in an imbalance between indemnity and medical benefit payments.  The Worker’s Compensation Research Institute (WCRI) in its February 3, 2011 presentation indicated that its data showed that indemnity payments were 30% lower in Wisconsin.  The proposal ties the PPD benefit rate to a calculation of the state’s average weekly earnings to result in a maximum PPD rate of 50% of the maximum TTD rate.  The current 2011 PPD maximum rate is $302, but 50% of the maximum TTD rate would be $410.  Labor is trying to restore the worker’s compensation claim dollar as a better wage replacement for permanently injured workers.  The past increases in the maximum PPD benefit rate have not kept up with a reasonable wage replacement.  The proposed increase in PPD benefits is not insignificant; the rationale is to bring equity to the system.  Mr. O’Malley explained that in 2002 the maximum TTD rate was raised to 110% of the state’s average weekly earnings for a four year period, with this provision becoming permanent effective April 1, 2006.  Mr. Buchen questions whether the duration of PPD benefits in Wisconsin is lower than other states.  Mr. Kent requested that the department assist in providing information on the rate and duration of PPD benefits in other states.  Mr. Buchen commented that the shift in the worker’s compensation dollar is a result of rising medical costs and lessening disability.   

    #2   Management in response to this proposal, indicated that it has its own proposal #10 that would increase permanent total disability (PTD) benefits to current levels and provide indexing for individuals who are “statutory” PTD.    Management indicated they were open to a discussion to include additional injuries in the statutory PTD definition.  Management stressed the goal should be trying to return all other employees to work; making clear that worker’s compensation is a temporary benefit.  Labor is in agreement with Management proposal # 10 if the term “statutory” is removed.  Mr. Beiriger elaborated that PTD has been studied for many years; Management does not want to exclude persons with brain injuries, those that are paralyzed, etc.  Labor responded that for most PTD cases, an administrative law judge determines PTD following a hearing.  Most injured workers want to go back to work.  Only 37% of disabled workers find jobs.  Management is concerned about the additional cost to settle a claim when PTD is alleged.  Mr. O’Malley clarified that a party can only request reopening one year from the date of a compromise order.  Management is seeking a bright-line test for eligibility for PTD.  They are concerned about employees labeled as PTD, but they are working and earning income.  Offsetting income earned after PTD may be a possibility.  Ms. Pehler relayed that claims are made for odd-lot PTD based on a poor labor market.  Due to the large exposure in PTD claims, most of them settle.  Mr. Beiriger indicated that Management also has proposal # 6 requiring an opinion from an occupational medicine doctor.  Mr. O’Malley relayed that currently there is an 85% settlement rate for litigated cases.  Other than the statutory definition of PTD, the department determines PTD as set forth in case law.  Mr. Kent responded that once an employee is adjudged PTD, there is a need for sufficient benefits to provide for the family.  There are other costs the employee endures including loss of medical benefits for family members, retirement benefits, etc.  There are approximately 700 injured workers currently receiving PTD benefits.  The six-year lag takes into account the Social Security offset.  Many of these claimants do not live past the age of 62; they have a lower life expectancy.  

    # 3 Under current law, injured workers are eligible for retraining through the Division of Vocational Rehabilitation (DVR) but they are unable to be served due to order of selection.   Those individuals are entitled to the services of a private vocational counselor and the carrier pays all costs of the retraining program.  If the DVR serves the injured worker, public funds are used to pay tuition, fees and books with a yearly maximum of $4,500 to pay the costs of retraining.  In Labor’s view, the carrier should pay all retraining costs, even if DVR develops the plan (the same as for private counselor-developed plans).  Yearly maximum tuition assistance is subject to DVR rules and is dependent on government funding.  Mr. Metcalf relayed that the WCD is having discussions with DVR on the two systems; very few worker’s compensation employees are ever served through DVR.  Mr. O’Malley indicated it is not certain whether the WCD has an accurate count of the number of employees served by DVR and private counselors.  In a meeting with DVR a few weeks ago DVR indicated 1,900 clients had reported a previous worker’s compensation claim, but there is no clear indication that the person’s disability was work-related.  Mr. Aiello commented that most individuals fall into category 3 based on definitions in federal law and they are not served by DVR.  Some carriers may be reporting payment of retraining benefits as temporary total disability.  Currently carriers can offset wages for injured workers in retraining who are working part-time.  The proposal is to eliminate that offset against disability benefits with no limit on income.  Mr. Beiriger commented that this proposal relates somewhat to Management’s proposal # 10.   

    # 4 and #5 Mr. Beiriger explained that proposal #5 is more difficult to address; just because someone is employed making more money, that does not necessarily mean they are saving for retirement.  Health insurance provided by the employer is more common, but it may be difficult to value.   Labor is looking to study these issues.  Mr. Kent indicated that some states grant an enhancement to indemnity for health insurance.  Health insurance is a fixed source benefit.  A pension functions as a deferred wage. Labor’s intention with this proposal is very limited, i.e., additional indemnity would not be provided if the employee’s spouse has a health plan.  In the survey conducted by WCD a few years ago, 78% of the PTD recipients indicated they had lost retirement income.  As a matter of equity, indemnity should include health insurance and pension as a deferred wage.  The WCD will provide information it has available from other states regarding inclusion of health insurance and pension in the average weekly wage. 

    # 6 This proposal requires that reports of medical and vocational experts who examine injured workers at the request of the employer/insurance carrier be provided to the employee within 7 days of receipt of the carrier/self-insured employer with a penalty for delay.  Management has concerns that only the final report of an expert be required. Earlier versions of a report may not answer all of the questions posed to the expert.  It is difficult for parties to be ready for hearing when reports are only exchanged 15 days prior to a hearing; both parties need to be able to fairly present their case at hearing.  Management is not interested in attaching a penalty to be paid to the worker.          

    # 7 This proposal requires that carriers/self-insured employers provide the employee with any medical records obtained with the use of a written authorization.  Management is interested in full disclosure prior to hearing.  

    #12  This proposal prohibits the use of the term “independent medical evaluation” (IME) in reference to the evaluation performed by a physician appointed by the carrier/self-insured employer.  Mr. O’Malley clarified that under Wis. Stat. §102.17, a “true IME” is appointed by the department.  The department could look at creating a definition for the examination performed by the carrier/self-insured employer.    

    At the next meeting, the WCAC will continue with explanation of Management and Labor proposals. 

  7. Adjournment:  Mr. Beiriger moved to adjourn; second by Ms. Thomas.  Motion carried unanimously and the meeting adjourned at approximately 5 p.m.

    Next Meeting:  June 13, 2011
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