Workers' compensation faces challenges from rising medical and indemnity costs, expansion of opt-out legislation, impact of the Affordable Care Act, and questions around the constitutionality of exclusive remedy. Media reports have also highlighted deficiencies in how injured workers are treated. Internal challenges include rising costs, impact of healthcare reform, and debates around opt-out programs and exclusive remedy protections. External pressures involve scrutiny of inadequate support for injured workers and the impact of consolidation in healthcare.

1. Challenges Facing Workers’ Compensation:
What Medical Tourism Needs to Do
RICHARD KRASNER, MA, MHA
CEO & PRINCIPAL CONSULTANT, FUTURECOMP CONSULTING
BLOGGER-IN-CHIEF, TRANSFORMING WORKERS’ COMP BLOG
©2015 FutureComp Consulting

2. 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’ Comp
2) Year of Awareness
3) & 4) First up at NCCI – Work comp is looking better…
5) Workers’ comp’s “profitability” and Workers’ comp profitability, Part 2

3. Challenges

4. Opt-out expansion
ARAWC
 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 2015
Sources: 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 Session
ARAWC: South Carolina Legislators Introduce WC Option Bill

5. 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’?

6. 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’ Comp
What Opt-out Advocates Need to Do

7. Rising Costs
Medical Costs for Lost-time Claims Approaching $30,000
2014p – Preliminary figure based on data valued as of 12/31/14
Source: https://www.ncci.com/Documents/AIS-2015-SOL-Presentation.pdf

8. Rising Costs, cont’d.
Source: https://www.ncci.com/Documents/AIS-2015-SOL-Presentation.pdf
Comparison of Actual and Preliminary Costs

9. 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

10. 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 Rising
Increase in Physician Fees for Total Knee Replacements Due to Concentration in Orthopedic Markets

11. 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 says
Accountable Care Organizations May Shift Claims into Workers’ Comp

12. 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 slowly
Sources: Hospital Closures Due to Failure to Expand Medicaid
Failure to Expand Medicaid Could Lead to Cost-Shifting to Workers’ Comp
Medicaid and Workers’ Comp

13. 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/

14. 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

15. 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 Florida
Exclusive Remedy in Workers’ Comp under Assault
Breaking News on ACA and Exclusive Remedy

16. 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 $118K
Sources: The Demolition of Workers Compensation
The Fallout of Workers’ Comp “Reform”: 5 Tales of Harm
How Much Is Your Arm Worth? Depends On Where You Work

17. 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 JOB
Walmart, Lowe’s, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers’ Comp
ProPublica’s slanted “reporting” is a public disservice

18. 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?

19. 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

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

21. 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

22. 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

23. 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

24. What Medical Tourism
Needs to Do

25. 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

26. Conclusion

27. 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

28. 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