We recommended that a task force be created to improve the validity, reliability, and efficiency of the PPD ratings process and the disability schedule used in that process. The task force should include a working group of persons with experience, technical skills, and the analytic perspective needed to consider and implement changes in the treatment of PPD claims in California. The task force should work in conjunction with and under the direction of a policy group that represents important interest groups in the workers' compensation community and that can help facilitate changes recommended by the task force.
We urged the task force to consider several policies suggested by our research findings. We briefly describe each of these below.
Implement an elective fast-track system for compensating minor PPD claims. The most consistent set of results in our research argues for adopting different procedures to deal more efficiently and fairly with minor PPD claims. Claims with disability ratings under 20 or 25 dominate the PPD claims volume, the indemnity and medical paid, and processing costs. Despite the relatively low stakes involved in each of these cases, they take years to resolve, clogging the courts and the caseloads for insurers, self-insured employers, and third-party administrators. Parties spend a great deal of money fighting over small differences in benefits, and the consequent congestion delays resolution of other, more serious claims, disadvantaging all injured workers. Furthermore, the resulting, usually modest differences in benefits are only weakly related to the real wage losses that workers sustain.
The proposed fast-track system could create a simple, objectively based administrative system to provide fixed and certain payments to claimants who meet certain specified criteria. Applicants could elect either the present system or the simplified administrative fast-track system and benefit levels would be similar under either system. Such a system should speed claims resolution for the vast majority of PPD claims.
The fast-track option would be available only to claimants with claims rated below 20 or 25, and only to those who have injuries that are acknowledged to be work-related. Employers could force a summary process to determine whether the injury was related to the worker's employment. The summary process would be handled quickly to ensure that applicants are not denied the principal advantage of the fast-track system--early resolution of their claims.
The fast track would be based on a schedule listing specific injuries that are documented by specific objective medical findings. Each scheduled injury would be associated with a non-negotiable flat payment; an applicant's eligibility for payment within any category would be determined by an evaluation from a treating doctor.
If an employer disputed the treating doctor's evaluation, the claim would be handled as it is now, by a panel of three physicians who are Qualified Medical Examiners. If an applicant did not accept the panel's evaluation, he/she could withdraw from the fast track and proceed along the normal workers' compensation track. Payment of the fast-track amount would serve as a final resolution of the indemnity rights for a particular claim.
The task force should be responsible for determining both the categories of injuries in the fast-track schedule and the payment amounts. Payment schedules should be developed using current payment patterns as well as information generated by the wage loss study about actual wage losses associated with particular injury types.
Claimants should be able to use applicant attorneys for counseling and advice regarding whether to choose the fast track. The amount of compensation for such services should be set so that attorneys are financially indifferent to an applicant's choice of track. This principle implies a lower rate of compensation for advising applicants under the fast-track system, since attorneys will be able to represent many more fast-track claims than those requiring ordinary litigation.
To implement the fast-track system, the task force will need to address a number of technical and strategic issues--for example, identifying injury categories that can be characterized by objective medical findings and that historically have received relatively homogeneous PPD payments. The task force will also need to consider how the availability of a fast, easy, and certain payment program will affect the number of workers who apply for PPD benefits.
Revise the PPD schedule based on a wage loss approach. We recommend the development of an empirically derived disability schedule based on an expansion of our wage loss study. This would require supplementing current limited information about medical conditions and occupations. Since the objective of an empirically derived workers' compensation schedule is to identify and appropriately weight each factor that might be related to an injured worker's wage loss, data should be collected for all elements of the present PPD schedule that the task force believes might be related to a worker's wage loss.
The American Medical Association Guides provides a potentially valuable source for identifying medical findings, tests, and other medical judgments that might appropriately be considered as elements of the revised schedule. Using the Guides to identify elements to include in the wage loss study does not suggest that the Guides should be adopted in their entirety. Finally, the task force should work with experienced raters, adjusters, and applicants' lawyers to identify other medical matters routinely used to evaluate and rate claims under the PPD schedule.
Revisions of the disability schedule should be sensitive to how such changes might affect the return of injured workers to meaningful employment as well as their retention on the job. As we suggest below, California should develop policies aimed at increasing return and retention of injured workers.
If California develops policies that are effective in returning and retaining injured workers, the relationships between particular injuries and wage losses are likely to change over time. Consequently, the task force, the Division of Workers' Compensation, or another appropriate entity should periodically update the wage loss study, test the validity of the then current schedule, and revise it as necessary.
Develop and distribute a database on closed PPD claims. The task force could facilitate more informed decisions by claimants and more consistent settlements by obtaining and providing claims-level data that track how claims are being resolved in the PPD system. These data would provide feedback to lawyers, applicants, employers, and insurance adjusters about historical patterns in claims resolution and could guide decisionmaking and help set reasonable expectations about resolving new claims. The availability of these sorts of data will help ensure a more informed and consistent set of practices and resolutions under the workers' compensation system, operating under either the current or a revised wage-loss-based schedule.
Review strategies for increasing return to work. The task force can draw upon both the wage loss study as well as a possible follow-up study of applicants and employers to better understand why injured workers have a low rate of return to work and why they experience episodic periods of employment and unemployment after their return. The task force should consider strategies for increasing return to work and employment stability after injury. As part of this consideration, the task force should monitor the effects of statutory attempts in other states to encourage return to work.
Improve the consistency and predictability of the rating process. Many people we interviewed expressed concern about the consistency and predictability of disability ratings. Such concerns seem inevitable given any process that attempts to impose simple, standardized ratings upon the complex variety of injuries and work requirements involved with workplace injuries. Our research suggests that problems of rating consistency and predictability exist in the current California disability rating schedule and are more severe for low-rated claims. This by itself can undermine the validity of the rating process.
However, the Division of Workers' Compensation and the DEU can improve the consistency and predictability of the rating process--and others' confidence in that process--by instituting routine procedures for testing the consistency of DEU raters. Such reliability checks would provide a measure of the overall reliability and consistency of the DEU rating process, identify troublesome areas of the disability schedule or types of claims that have comparatively low rating consistency, identify raters whose practices differ from those of most other raters, and provide the basis of materials used to train raters.
In addition to the proposals discussed above, we also recommended that the Division of Workers' Compensation undertake several initiatives, including the following: