Posted with permission, this well-researched article appears today in the San Francisco Bay Guardian. Based on extensive independent investigation, Rachel Brahnisky shows how real journalism is done.
April 6, 2005
The working wounded
How Schwarzenegger is saving Wall Street by decimating workers’ comp – a report from the front lines.
By Rachel Brahinsky
Crushed twice: Barbara Harlan has been out of work for most of the past five years – and has been fighting for her right to health care and pay for lost work hours the whole time. Photo by Lori Spears. IT WAS AN extremely fashionable thing in California politics last year to rant and rave about the workers’ compensation insurance system. Newly elected governor Arnold Schwarzenegger made it a top discussion item, and the newspapers followed suit. To many people, it might have seemed like a bizarre obsession. As a political issue, the arcane system of laws governing how to treat work-injured people is mind-numbing.
It’s true there were real problems with the system. Skyrocketing insurance rates were hurting businesses, and the insurance companies were still reeling from 9/11, a slow economy, and the unintended consequences of California’s 1995 deregulation of the industry. And there was naturally some waste and fraud associated with the massive state bureaucracy.
Schwarzenegger needed a simpler story. The actor turned pol insisted the problem was litigation-happy attorneys and the injured workers themselves – a group he painted as cheats and scammers. Only by strictly limiting cash payouts to workers and keeping the attorneys at bay could he right this upside-down program – a system so shaky that more than 20 insurance carriers had gone belly-up in recent years.
He bullied legislators into passing a reform package just five months after he took office, and he has since declared victory: “Workers’ comp reform has been a tremendous success,” spokesperson Vince Sollitto told me. Since then, most lawmakers have moved on, occupied with other political fights.
But the real story behind workers’ comp is still unfolding. Just days after the new law kicked in last April, life began to change dramatically for injured Californians. Once-routine medical visits were heavily scrutinized as potential crimes. Insurance companies started saying no to just about everything – according to doctors, workers, and attorneys I interviewed – almost as if they were testing the limits of the new law.
My interest was more than journalistic. I went through the system, after having developed a repetitive strain injury (RSI) in both arms from spending so much time in front of my computer. I hurt myself in 2001, when covering a particularly tough election season left me with numbness and pain. It was months before I could work full-time again, and I learned I needed acupuncture, good ergonomic equipment, and a daily dose of stretching to keep pace.
Among the million people who file workers’ comp claims each year in California, I was a pretty low-cost case. I didn’t need surgery or any particularly expensive medical gear. But under the new regime, even I was denied care recommended by my doctor. Those who fall victim to similar injuries in the future are likely to have it rougher, due to a remarkable, little-reported new rule: after the first few months, pain is no longer considered a sign of an injury. Doctors are now prevented from treating certain workers for their pain.
I was amazed to learn this, so I set out to understand what was happening to the system that was supposed to protect workers. Yes, there were litigation-happy attorneys, just like Arnold said, and there were doctors who seemed to overprescribe treatments, perhaps just to make a buck. I even found a small handful of workers trying to defraud the system by inflating their claims. But what I learned was that these were just symptoms of a larger, far more troubling problem – one that threatens the future of all working Californians.
Fighting for care
It was late afternoon, and the plaza near Oakland City Hall bustled with people walking briskly under a gray midwinter sky. Mike Gerson emerged from a pair of massive glass doors and sighed. A grimace appeared on the attorney’s weathered face. “You see?” he asked. He’d been showing me the ropes at the East Bay’s main workers’ compensation court, a place where miserable-looking workers sit in a waiting room for hours while attorneys cut deals in fast-paced, acronym-laden sessions down the hall.
It’s never been a real friendly place to visit: this is where injured people wind up when they’re fighting for medical care or when there’s a disagreement over how to settle their cases. Workers’ compensation laws can confuse professionals, let alone these neophytes.
That’s why attorneys have long had a toehold in the workers’ comp arena: confusing language leads to differing interpretations that often end up in court, along with all the cases in which insurance companies, employers, and wounded workers vie to protect their interests. These days even the attorneys are grim, as nearly a year under new regulations has spawned a whole new level of mistrust and fear.
Gerson’s take: it’s chaos, and the insurance companies are taking advantage of it.
“I’ve got clients from all over the country, cases that are 25 years old, who call me and say, ‘I can’t get my medical care,’ ” Gerson told me. “They’re just saying no – sometimes for no reason. It’s because they can.”
Gerson runs a major Democratic law firm (his partner is married to Sen. Barbara Boxer), so it’s not surprising that he has unkind things to say about the governor and his new law. Schwarzenegger has gone out of his way to vilify attorneys like Gerson, and the new law was designed in part to eliminate the attorney’s role. The logic is clear: you have a system that seems too expensive, so if you cut out the disagreements and limit the need for litigation, you’ll save money.
But the way the governor’s people set out to achieve this goal doesn’t just cut out money for the lawyers. Penalties that used to be levied against insurance companies for unfair delays and denials have been diminished dramatically. So it’s harder to get a lawyer to take certain cases, since the chance of making money is far slimmer. It doesn’t mean workers are suddenly getting what they need – it just means they have a harder time getting help.
As of April 2003, there were 3.69 million active cases in the state, and a million workers file new claims each year. About 200,000 of them are in the market for an attorney each year. (The state also keeps statistics on fraud, by the way, which show that only a tiny percentage of workers are even suspected of gaming the system – along with a handful of insurance companies, doctors, and attorneys.)
The law – passed last April by the legislature as Schwarzenegger threatened to bring even more stringent reforms to the ballot – cut costs in several other ways as well. It limited compensation for lost wages, gutted the state’s job-retraining program, gave insurance companies the right to strictly manage medical treatment, and – perhaps most significantly – slashed the amount of money an injured worker can get to pay for the medical costs that will come with a lifetime of disability. Rules being promoted by workers’ comp chief Andrea Hoch have made these changes even more severe.
The state hasn’t done a study to show how payments for permanent disability will change, but according to UC Davis researcher Paul Leigh, those benefits will be cut by as much as 70 percent. A carpal tunnel syndrome patient he cites would see her payment – meant to cover medical care for the rest of her life – drop from $116,000 to just $17,000. Why? Much of this disability is measured in pain, and after the initial treatment, pain no longer counts.
Even those who deal with the law on a day-to-day basis are baffled by the changes. An investigation by the Los Angeles Times published March 27 showed that as many as 100,000 cases are stalled, and delays are rising steadily as bureaucrats and attorneys wrestle over legal interpretations. I saw what they were talking about on my visits to local courts: nearly every person I spoke with – including judges and attorneys on both sides – said uncertainty dominates and delay is the norm. So costs come down while injuries go untreated.
Sam Sorich, president of the Association of California Insurance Companies, said the system is just going through growing pains and insisted the reforms will lessen the chaos of the past. “There are still a lot of unanswered questions, but things are on the right track. We’re getting close to a situation in California where insurance companies can come in and charge a good price and make a good profit. That’s how it should work,” Sorich said. “I have not seen any evidence that any insurance company is trying to deprive appropriate treatment to injured workers.”
But in the San Francisco court, the stress on injured people is palpable. A ruddy 32-year-old mechanic named Steve Gilbert sat in the waiting room on a recent Monday morning, wearing a blue cotton workman’s jacket. Gilbert has a herniated disk in his neck from a 2001 injury. He spent about six months recovering and since then has been able to work, although he still has occasional pain.
He settled his case with an agreement that the insurance company would cover future medical costs, and every once in a while he has a flare-up and needs to return to his chiropractor for a few visits. But recently his insurance company, possibly emboldened by the new law, suddenly tried to renege on its agreement.
“The pain comes and goes,” he told me. “I just go on with my life. But what good is having workers’ comp if they’re not gonna help me out? I want medical care when I need medical care.”
Such depressing stories are typical in court, as I learned over several weeks there. Linda Lajes told me she filed a claim after slipping while cleaning a meat grinder at the Fremont FoodMax. She and her daughter had been waiting in the airless room for hours to see if she’d be allowed more medical care.
Lajes hurt herself more than a year ago, just before the reforms. She told me that in addition to a chest-wall injury from the meat-room tumble, she has carpal tunnel syndrome in her wrists that she thinks comes from her years as a checkout cashier. Now, Lajes said, she’s in fairly constant pain. “Whenever I grip, push, or shove, my hand and elbow hurts,” she said. Her insurance company won’t pay for carpal tunnel surgery because of a dispute over what caused it. Her regular doctors will turn her away the moment she says the injury is work-related. So she may not ever have surgery that could help her heal.
Surrounding Lajes were rows of anxious people, some pawing through medical reports, others just waiting, with dead looks on their faces. The smell in the place was strong – many of these folks had been camped out here since 8:30 a.m., and it was now well past 2 in the afternoon.
These are the people Schwarzenegger blames for the workers’ comp problem. I found a few other suspects, particularly when I looked at who’s funding the governor’s political ambitions.
Reform or bailout?
Growing backlash: Injured workers rallied April 4 in San Francisco to protest proposed cuts in workers’ comp disability pay. Photo by Lori Spears.Schwarzenegger has become known as a prodigious and persistent fundraiser in his short tenure. His top-dollar dinners have generated almost as much press as his policy proposals. His various committees have taken in more than $1.2 million from insurance companies, including at least $560,000 from workers’ compensation firms, according to an analysis by the Santa Monica-based Foundation for Taxpayer and Consumer Rights (FTCR).
And so far the reforms have been kindest to insurance firms. Financial reports at the end of 2004 showed they were pulling in dramatically higher profits – just eight months after the law’s passage.
AIG, the largest private carrier in the state, reported $11.05 billion in profits for 2004 – up 19 percent from 2003. The California Applicants Attorneys Association, which represents lawyers for injured workers, reports that this is in spite of a dramatic 1,300 percent increase in payout by AIG for hurricanes, earthquakes, and tsunamis. Another one of the big guys, the Zenith National Insurance Co., also saw income rising. The CAAA’s review of Zenith’s books shows workers’ comp income shooting up 250 percent, from $29.3 million in 2003 to $104 million last year.
From this perspective, the “reforms” start to look more like a massive corporate-bailout scheme: keep rates unregulated and give the insurance companies the right to cut costs any way they can. Some smart investors may have seen the bonanza coming: billionaire Warren Buffett, one of Schwarzenegger’s top financial policy advisers, opened a new line of workers’ compensation insurance just a few months after the law was signed, through his company Berkshire Hathaway.
Meanwhile, the cost of insurance has dropped slightly for business owners – about an average of 16 percent – and prices may come down again later this month. But many businesses, particularly small companies or those with high-risk employees, are reporting little to no change, and some are even seeing rate hikes as insurance companies get creative with their billing plans.
High costs to businesses were what originally drew the public’s attention. The state insurance commissioner, who has only an advisory role, had suggested 10-to-20 percent hikes several years in a row, but some companies reported having to pay hikes of 30 to 50 percent a year for the past few years. Yet those increases seem mainly due to deregulation and the high cost of health care in general.
Just as deregulation of the electricity market sparked a self-destructive path for energy firms, things went sour for insurers right around the time they convinced legislators to open up the workers’ comp market. After the deregulation law kicked in, companies underbid each other in a frenzied customer grab. With health and legal costs rising, company reserves dwindled – even as worker injury rates declined. When the national economy tanked, the remaining financial cushion was deflated. Those that stayed solvent did so by charging ever higher rates.
“It’s a cycle that we see in the insurance industry just about every decade,” FTCR executive director Doug Heller explained. He said the insurance companies sunk themselves. “The economy goes south, stock prices are down, and bonds are devalued. When that happens, investment income declines. So they tighten their belts – or tighten the noose around policy holders.”
No surprise there. After all, this is the insurance industry we’re talking about, the same field targeted by New York attorney general Eliot Spitzer in a wide-ranging corruption probe. One of Spitzer’s top targets is AIG, which is accused of inflating profits in a deal cut with Buffett’s Berkshire Hathaway.
I was shocked the first time I heard a story about someone made homeless by a work-related injury: I had always, perhaps naively, believed the system had an obligation to workers who’d hurt themselves on the job. But as I interviewed more and more people for this story, I heard too many tales of homelessness, bankruptcy, and even suicide.
One man I spoke to has a Ph.D. from the Massachusetts Institute of Technology, yet a debilitating RSI in his arms has left him emotionally and physically worn and unable to earn money in his field. “I’ve been totally devastated by this,” he told me. “I was homeless for a while. I lost pretty much everything you can lose.”
That wasn’t what Gov. Hiram Johnson had in mind for us when he called on California to create a workers’ comp insurance system after he took office in 1911, though Johnson was looking out for business at least as much as for injured workers.
At the time, work-related accidents were high on the national agenda. The quickening pace of industrialization had pushed laborers into increasingly rushed and risky work environments, and it was taking a heavy toll. In a 1990 UC Berkeley doctoral dissertation, workers’ compensation analyst Glenn Shorr quotes an American Federation of Labor boss saying that more than half a million workers were killed or injured each year at that time, many from mining and railroad accidents. Another estimate put the total wounded at 2 million one year, out of around 26 million men in the workforce. Lawsuits against employers were climbing.
Then, in March 1911, in what became a galvanizing event for organized labor, 500 employees were locked inside the Triangle Shirtwaist Manufacturing Co. in New York while a fire raged, killing 145 and igniting the burgeoning labor movement to push through new protections.
Soon states began passing workers’ compensation laws. Essentially, it was a social compact. Workers gave up their right to sue in exchange for the promise of health care and some money to live on during recovery. Employers were relieved of the threat of costly lawsuits – as long as they paid their monthly premiums. Some states created government-run insurance plans; others, like California, left insurance largely up to the marketplace but also created a quasi-public insurer of “last resort” so that every worker could be covered.
These days the costs of work-related illness and injury are still a tremendous burden nationally. A 2000 study calculated that 70,000 job-related deaths and more than 13 million injuries in 1992 cost the nation about five times the price of treating AIDS, and almost as much as treating cancer.
Each year in California, about 1 in 18 workers files a claim. Many of these are for relatively minor sprains or muscle strain, but many are for workers run over by tractors or maimed in traffic accidents while on the job. Truck drivers, cops, and construction, maintenance, and farm laborers have it the worst. But the nature of workplace injuries has changed since Johnson’s day. While deadly mining and construction accidents still happen with alarming frequency, 70 percent of the injured workforce toils in the service industry. In 2003, nearly half of all injuries nationally were due to sprains, strains, and repetitive stress injuries.
It was the third day I’d glued myself to my computer writing a postelection wrap-up, and the thing was, my arms hurt. My fingers felt swollen and stiff, the muscles in my forearms burned, and my shoulders and wrists felt weak and achy. Logic told me not to push my body so hard, but as a reporter, I found it tough to consistently take breaks and stretch – even though I’d seen so many of my colleagues fall to RSIs like carpal tunnel syndrome and tendonitis. When I was first injured, I couldn’t grip the brakes on my bike, lift heavy pots and pans, or even chop vegetables.
I wasn’t alone. Of the half million people who missed work because of a job-related injury in 2003, about 5 percent were hit by carpal tunnel or tendonitis; a full third of the injured were felled by musculoskeletal problems, many of which are caused by repetitive motion. Still, those numbers don’t tell the whole story – the U.S. Bureau of Labor Statistics doesn’t count those who are injured and continue to work anyway, or those who never report their pain.
The thing about an injury that comes from your work is that it’s all-consuming in its devastation. If you love what you do, your wounds divide you from your passion. And it’s hard to feel good about yourself when you can’t live up to your potential. If you are working to put food on the table, as most of us are, the anxiety attendant on work-related pain is a constant. Imagine living in a city as expensive as San Francisco with a physical condition that has the potential to lay you up for weeks at a time. Imagine doing that while you support children.
In my case, I have no kids to feed, and if it came down to it, I have family who would take care of me. But I’ve also worked hard at healing myself with daily yoga, which, along with my doctor and acupuncture visits, keeps me healthy.
I’m lucky I started the yoga when I did, and that it turned out to do the trick, because my injury is one of those that have been targeted for virtual elimination under the new rules. I don’t mean to say Schwarzenegger wants to eradicate repetitive strain problems – I wish that were the case.
Instead, he’s allowing insurance companies to rely on a set of medical guidelines doctors say don’t acknowledge pain as a factor when determining how injured a person is. RSI sufferers will still get some temporary treatment under the new law, but the new time limit imposed on benefits ignores the reality of chronic pain. In his zeal to cut costs, the governor is relying on guidelines that insist on objectively measurable physical changes, and pain is sometimes impossible to witness from the outside.
Repetitive strain injuries emerged as an epidemic in the mid-’90s, propelled by the tech boom. Since then they have taken a steady toll. In 2002 repetitive motion was the fourth-highest cause of injury on the job, costing at least $2.8 billion nationally in health care and lost work hours, according to Liberty Mutual, an insurance company. The top injury cause was overexertion, a category that includes a lot of RSIs as well, costing $13.2 billion.
Without much help from workers’ compensation, the ranks of office employees working wounded is likely to swell – as is the number of them applying for state-funded disability payments, welfare, and Medicaid. So the insurance companies will save, but someone will have to take on the burden. Exacerbating the problem is a lack of federal recognition: under former president Bill Clinton, the federal Occupational Health and Safety Administration agreed to ergonomic standards to force employers to create safer work spaces, but President George W. Bush’s OSHA repealed them.
At the same time, the social safety net is under attack, both by the governor – who wants to cut welfare grants and trim pensions – and by Bush. The moves to change personal bankruptcy laws and privatize Social Security are especially ominous for injured workers.
Although pain won’t be fully acknowledged by workers’ comp insurers, people will still be struggling. One RSI sufferer told me he goes through periods where he can’t even sit and read because his neck aches. His whole life is arranged around the injury: groceries have to be carried in small bags, dishes often don’t get done, and he can no longer drive a car for more than an hour. His work has slowed to a painful pace: his body lags behind his mind, leaving him depressed. Meanwhile, he’s been refused disability benefits and has to continue working through agonizing pain. “I feel like I’m living in a cage,” he said.
Navigating the system
Digital divide: Since developing an RSI, Lee Worden has gone on to run a monthly RSI support group in San Francisco and is trying to organize support networks among injured people. Photo by Lori Spears.For an injured person, it has never been particularly easy to make it through the workers’ comp system. Even before the Schwarzenegger reforms took hold, it was standard to hear complaints about health care delays and rejections, with insurance companies hiring private investigators to track patients to see if they were lying. Now it’s just more extreme.
Barbara Harlan, a woman I met in the San Francisco court, had to wait so long for postsurgery physical therapy that thick scar tissue built up around her shoulder joint – enough that it had to be surgically torn off before she could finally begin therapy. She was battered when 40 heavy sheets of Plexiglass and hard lighting gel snapped against her legs with a force so powerful that the meniscus in both of her knees was split in two. She came away from the accident, which happened while she was working on a movie set, with back, neck, and shoulder injuries from clawing through more than a thousand pounds of plastic, and has had to stay away from her job as a stagehand for the better part of five years.
Several surgeries and court appearances later, Harlan has a stomach-grinding $40,000 debt on the credit cards she’s used to support herself while the insurance company delays her health care.
As with most work-injured people I spoke with, this was just one of many stories Harlan has about the challenges of the system. She’s had problems stemming from an insurance industry merger, dealt with bizarre questioning about her prior health history (one insurance representative implied that because she’d had back pain during childbirth, she might have a predisposition to pain), and faced off against the sluglike pace of the state agency that oversees workers’ comp disputes. “We’re almost two years behind in my treatment because of the court delays,” she told me.
The state Division of Workers’ Compensation doesn’t deny that delays are happening, but it insists staffers are working around the clock to move forward under a complex new set of rules.
In the meantime, injured people wait. Chiropractor William Ruch told me that every single workers’ comp patient of his is being denied care. If he wants to get paid, he has to file liens against the insurance companies. “They’ll set a date [to defend the request in court], with 25 others, and I’ll have to clear my schedule and go sit on line all day. Their goal is to disrupt. They just don’t want people treating injured workers.”
Ruch’s profession is under attack by Schwarzenegger, who says chiropractors and acupuncturists in particular are wont to overtreat. But that’s a tough call: the alternative is to use painkillers, which are more easily approved but often have lingering nasty side effects.
Plus, Ruch said, by refusing to treat pain, and by limiting care for chronic injuries, the Schwarzenegger law is actually making injuries worse. “Trauma initiates chronic degenerative changes. [But now] health care is limited to functional restorations. Not pain, or tingling…. There’s a denial that once a joint has been injured, it changes over time, so the idea is that over the years there’s less reason to treat. In fact, there’s more reason to treat.”
My doctor, osteopath Jerel Glassman, added, “They don’t want to pay for anything they call maintenance; they want to treat to cure. They’re basing this on an old 19th-century model of a guy who got his hand caught in a machine, and we have to pay for his prosthesis and we’re done with him…. If a person’s diabetic, you don’t say to them, ‘Well, you’ve had enough insulin.’ ”
The frustrating experience of fighting with insurance company medics has many, including Glassman, opting out of the industry. The new law kills your right to choose your doctor anyway, leaving patients to grapple mainly with doctors hired by employers and insurance companies whose primary interest is in cutting costs.
But as Glassman noted, while there are deep problems within the system, there’s a larger societal issue that needs addressing: “Ultimately, some of it comes down to not having universal health care that follows you from job to job.” That way you wouldn’t have to prove your pain was job-related – you would just be treated.
Perhaps there won’t be a real move toward nationalized health care in the next few years, but there does seem to be momentum building against Schwarzenegger and his entire political agenda that could transform into real action on workers’ compensation law.
In the first of three planned demonstrations this month, injured workers and their allies clustered together on the steps outside the workers’ comp division’s San Francisco offices April 4. They came out to protest workers’ comp chief Hoch’s proposed permanent disability rules – the ones that threaten to cut payments so dramatically. The demonstration was put together by Voters Injured at Work, which was started with seed money from attorneys and says it has attracted nearly 1,000 members in just three months.
Later that day former state senate president John Burton spoke at a hearing on Hoch’s rules, saying they deform the spirit of the law he signed off on last year. “In my judgment, they are of questionable legality,” said Burton, who helped broker the deal to pass the reforms.
If VIAW begins to build power, it will be a real shift from the current climate, where even politicians who oppose the Schwarzenegger reforms, including insurance commissioner John Garamendi, are keeping a low profile.
Sen. Richard Alarcon is pressing forward with a rate regulation bill (Garamendi won’t talk about rate regulation) that, while it has little chance of passing under Schwarzenegger, keeps the issue on the table. He’s also scheduled a hearing on the impact of the reforms for April 19. At the same time, several lawsuits have been filed (Schwarzenegger was messing with attorneys, after all) that challenge various elements of the law.
While it’s all sorted out, injured people will still need support, and the already overtaxed county hospitals and social welfare systems will have to bear some of the burden – even as they themselves are under assault. With the shredding of the safety net in full effect, what was once a financial muddle for a handful of insurance companies will become a crisis of far grander proportions: an injured public, without access to health care or a way to pay for a roof over their heads.
“It’s part of the Grover Norquist program – returning to the days of Dickens, essentially,” Lee Worden, a 35-year-old with a decade-old RSI, told me. (Norquist is a conservative policy strategist and a Schwarzenegger ally.) “You can’t look at this separately from the dismantling of the safety net. Pretty soon we’ll have a direct path from white-collar employment to workers’ comp to the streets. It’s not really shifting the burden to programs like G.A. [General Assistance]. It’s sinking all boats at once.”
Rally April 19 for injured workers in Sacramento: go to www.votersinjuredatwork.org soon for details. Commemorate Workers Memorial Day April 28, 11 a.m.-2 p.m., State Capitol steps, Sacramento. www.workersmemorialday.com. Research assistance by Abigail Kramer.
E-mail Rachel Brahinsky