Has the “Great Bargain” Worked? Well … It’s Complicated

Episode Notes

Transcript

[Music]

Workers’ comp Matters, the podcast dedicated to the laws, the landmark cases, and the people that make up the diverse world of workers’ compensation.  Here are your hosts Jud and Allen Pierce.  

Alan Pierce: Welcome on another edition of Workers’ comp Matters here on the Legal Talk Network.  I am your host, Alan Pierce I’m with my co-host and son-in-law partner Judson Pierce and we’re happy to bring you another show on the Legal Talk Network.  It’s complicated, C-O-M-P-licated, is the bargain still grand.  That is the topic of our conversation today with our special guest from the great State of Tennessee, Abbie Hudgens.  

Judson Pierce: Thank you, Alan.  We are pleased to have Abbie as our guest today.  Just briefly, we’ll give the audience a little bit of your background.  Abbie was named president of the prestigious National Association, the members of the International Association of Industrial Accident, Boards and Commissions also known as IAIABC and she has also worked with Tennessee as the head of the workers’ comp division there and has been very active in the City of Knoxville later Davidson County as a risk and benefits manager and has had her own private consulting services through her private practice at Hudgens Group, Abbie, welcome and thanks for coming on today.

Abbie Hudgens: Thank you so much for inviting me.  I’m looking forward to talking with you.  

Alan Pierce: Yeah, Abbie as you know, this is an interesting milestone year, 2022, we’ve discussed it in prior programs here on Workers Comp Matters and that being the 50th anniversary of the Report of The National Commission on State Workers’ Compensation Laws back then known as State Workmen’s Compensation Laws and as you know, 50 years ago the federal government took a strong look at the adequacy or inadequacy of workmen’s compensation programs across the 50 states and looking that through the lens of the so-called “Grand Bargain” that you identified in a recent blog post that was picked up on work comp central and perhaps other sites.  So we kind of wanted to revisit that topic with you, is the bargain, the quid pro quo of the employee giving up their rights under civil tort law in exchange for an adequate or not unreasonable system of renumeration without regard to fault still a viable albeit complicated system.  So how do you see it in the broad view right now both outside of Tennessee and perhaps equally importantly, inside the State of Tennessee?

Abbie Hudgens: Well, when I wrote the blog post, I was really thinking about it as the whole system and for me, rather than an evaluation about whether the bargain is still grand is really more to support the idea of the concept is a good concept, it is complicated, it is difficult to get there, if there are so many different opinions about what is involved in the Grand Bargain, if you look at history, you can see that where we are now is vastly different from where it started out in the early 1900’s and it had an upward pattern about what was included in the workers’ comp until about the 90s and then there was sort of a retrenchment and some of the states changed their plans.  

But for me the issue is what is that right balance, what is fair and I don’t think we’ve ever established that.  I spent a lot of time not an expert on it by any means but I’ve spent a lot of time with a report of the commission, we had a substantial reform in 2013 which got a lot of criticism for being part of the race to the bottom.  But for us, it was more a desire to get it, right and everyone may disagree with it but the thing is we’ve never really had — there’s never been a national election on what benefit adequacy, congress has never put it into law, what it is, all we have is the report of the commission and that is a great place to start, they raised a lot of good questions.  I think that there was a response to the report of the commission in the years after that, you see a marked increase, that’s where the 66^2/3% came in with benefits.  

(00:05:06)

But the progress stopped and I think part of the problem is that I wrote another blog that was says, there were no stone tablets and I think that’s part of the problem is, there has never been a universal decision on exactly what constitutes a Grand Bargain.  

Alan Pierce: Yeah. And you actually make a good point as everybody struggles, and nobody can really define what is an adequate benefit, it’s a very subjective term.  And in fact, I had occasion to re-read the seminal case holding workers’ compensation benefits constitutional issued by the US Supreme Court I believe in 1917, that’s a New York Central Railroad case in which even the justices of the Supreme Court in deciding that this so-called Grand Bargain was indeed constitutional could not grapple with how to determine or how to enunciate, what a reasonable benefit would be, in fact, they utilize the double negative, the justices didn’t say the benefits had to be reasonable, they said the benefits cannot be unreasonable.  And I found that an odd choice of words because I don’t think anybody can determine what a reasonable benefit is but perhaps, when something strikes you as just totally not reasonable, maybe that’s when the alarm bells will ring.  So, the last 90 years and certainly the last 50 years has been a struggle of determining what is considered a reasonable benefit and at what cost. 

Judson Pierce:  So one thing you looked at Abbie was the idea of permanent partial disability, what does that mean? And what does that mean in the State of Tennessee?

Abbie Hudgens: Well let me start off with two concepts and when I look at the different states, there’s not a consistent way of looking at it.  When we look at disability, in theory we think about an impairment and then the effect that impairment has on someone’s work life.  But in some states like Tennessee, if you have an impairment, you get a benefit, a permanent partial benefit even if it can’t be demonstrated that it affects your future earnings, you may have returned to work and so, not all states have that and so that’s an interesting concept but then where there’s more difference of opinion, it is on what happens when you can’t return to work.  And in the State of Tennessee, those benefits are based on the impairment rating.  We follow what was in the commission, which is we use the AMA Guides for the evaluation of permanent impairment but I don’t think even those guides were meant to be the total answer because you have the impairment and then you have the effect that it might have on someone.  In the State of Tennessee, we have a formula.  So if they’re beyond not being able to return to work, if someone has less than a high school education, it should be a larger benefit, if someone is over a certain age, there should be an increase.  If they are in a geographical area where the unemployment is high, there should also be an additional increase and that was done to try to take care of what we think are one of the big problems in permanent partial disability which is the long time it takes for an employee to actually get their benefit because sometimes these cases get locked up in court for a long time when it is so flexible that both sides can argue for a long time about what actually is the resulting problem for the employee.  But other states base it on lost wages.  And then again, you have other issues that make it complicated.  How do you provide for a benefit that’s not a moral hazard for the injured worker?  So, he doesn’t go back to work, so he can demonstrate lost wages.  No matter what the scheme is, there are always ways where one could say, this isn’t a good scheme.  The other area where there are variances that would cause real discrepancies between what’s available in one state compared to available in another is the maximum benefit.  One area is when they have that maximum benefit, there are some states where I think that’s really much lower than it should be.  In Tennessee, we key it to the average weekly wage for the state which is what many states do now.  The commission suggested that eventually we could get to 200% and I don’t think any states has gotten there, I think there’s one that’s gotten at a 150%.  

(00:10:08)

But when we get to what’s complicated, what is the right place?  What is the right maximum and embedded in that question is an even a more important question which is how fair is it to have a maximum?  If a person for example, someone who’s in Texas, perhaps and they are an engineer involved in drilling for petroleum and there is a horrible accident and they made a hundred thousand dollars a year.  Their benefit is going to be arbitrarily low compared to someone who has a lower income.  So to me, there’s the basic question of is that fair, is that reasonable that someone is discriminated against because they’ve worked hard and have a higher wage.  So those are some of the issues for me around permanent partial disability benefits.  

Alan Pierce: We are going to take a quick break and I won’t going to try to answer some of these questions at least, frame them a little better for further discussion.  So after a word from our sponsor, we’ll be right back with Abbie Hudgens.

[Music]

Female: As a lawyer, ever wish you could be in two places at once?  You could take a call when you’re in court, capture lead during a meeting, that’s where Posh comes in, we are live virtual receptionist who answer and transfer your calls so you never miss an opportunity.  And the Posh app, lets you control when your receptionist steps in, so if you can’t answer, Posh can and if you’ve got it Posh is just a tap away.  With Posh, you can save as much as 40% off your current service provider’s rates.  Start your free trial today at posh.com.  

Alan Pierce: We are back with Abbie Hudgens.  We sort of left off talking about the broad concept of adequate benefits and how different states do them.  I want to swing back to the national commission report and maybe set the stage this way for our listeners.  There are basically four types of disability or wage replacement benefits.  There is temporary total, which means for a specific period of time, somebody is totally unable to work and they get 2/3s or whatever the formula is of their average wage.  Then there was temporary partial disability in which there is an ability to earn a wage but less than what the injured worker was earning before and workers’ comp fills the gap for a defined time.  Then there is permanent total disability, where if somebody is so severely injured, they basically can collect total disability for either the rest of their life or the rest of their work life but there is very little in our statutes for permanent partial disability and the states that have permanent partial disability.  

The word permanent doesn’t mean for the length of a person’s life or work life, it’s usually defined in terms of additional weeks and the national commission grappled with that, and I don’t like to quote very much on this show but I don’t think I could say it any better than the commission did when it came to looking at permanent partial disability.  The commission said that “permanent partial benefits are so critical to the future of workers’ comp that the subject warrants its highest priority, unfortunately, the critical need for corrective action is matched by the loot elusiveness of the proper remedy and therefore they punted”.  They basically said we’re not going to address this right now but we welcome the opportunity in the future for the system to better define permanent and total and I think from your experience in Tennessee — 

Judson Pierce:  Permanent partial. 

Alan Pierce: Permanent partial, I’m sorry.  From your experience in Tennessee, and I would say for the experience of most states nobody has really fully grasped how to deal with permanent partial disability.  And one way is, of course, by using the AMA Guides of impairment as a proxy for disability.  So, I know Judson you had a question about impairment versus disability.  

Judson Pierce: I’m wondering if there is indeed a difference between what the AMA Guides seek to do, what we’re using them for to do and whether or not we should be looking to some other source to define what a disability is.  If AMA Guides are merely speaking towards impairment, isn’t there a difference between impairment and disability?  What are your thoughts on that Abbie?

Abbie Hudgens: Well I may be wrong here.  I’m involved in a group of editorial panel working on the AMA Guides, the things that follow the sixth edition.  If I’m remembering correctly, the AMA Guides never intended for those impairment rates to be the be-all and end-all of a permanent partial disability determinations.  

(00:15:00)

As I said before, I think there’s one piece, which is the impairment, but then there is that additional piece, which is the impact of that impairment on that person’s future ability to earn a wage.  That to me, is where the difficulty lies because I’ve not seen anything that I have looked at and gone, you know, that’s exactly the right way to do it.  I think all the states, look at it, I think an important part of this conversation about the work of the commission and the state of workers’ comp in the United States is that we have to always keep in mind that there is no voice at the top of the mountain that is giving us the answer to these things and we are a country where there’s a multiplicity of interest on every issue and any policy always is the result of the interaction of that multiplicity of interest.  So we can never forget that that exists or pretend that it’s not there.  People often say we have 50 states that means we have 50 different labs, but in the area of partial disability benefits I see no consensus about one way being better than another.  Personally, I think that it does need to be some combination and think starting with the guides is a good idea.  Although in the United States, we have people using the third edition, the fourth edition, the fifth edition, the sixth edition and now this annually updated, sixth edition.  

So which edition is the right edition?  There was a court case in Kansas when they try to use the sixth edition and they were moving from the fifth edition and at first, it was declared unconstitutional only because it resulted in lower benefits not because it was right or wrong but because it was lower they said it was unconstitutional and that case was eventually overcome but it’s just a great example of how this issue of what is the right way to establish permanent partial disability benefits is so elusive.

Alan Pierce: Yeah, and for our listeners, the case that Abbie is referring to is the Howard Johnson versus U.S. Foodservice case, which came down around 2018 at the appeals court, which did in fact, declare that section unconstitutional and then the Supreme Court a year later modified it a bit and just said the AMA guides would not be the exclusive evidence for a judge or a fact-finder, they could use other medical evidence.  But to your point, yes, the blurring of the distinction between impairment and disability was at the heart of that decision and that case did seek to clarify to a great extent, how the AMA Guides are supposed to be used.  I think at this point we’re going to take another quick break and then we’ll follow up with a couple of final questions with our guest Abbie Hudgens, we’ll be right back.  

Male: As a workers’ comp attorney, you need a law practice management solution that works as hard as you do, from document creation, to email tracking, to custom billing options, Merus Case is tailor-made to automate your daily tasks so you can focus on what matters most, your clients.  To learn more about how Merus Case can increase your firm’s efficiency, visit meruscase.com, that’s M-E-R-U-S C-A-S-E dotcom.  

Alan Pierce: Alright, welcome back, everyone.  We are on with our special guest today Abbie Hudgens.  I wanted to ask you Abbie, if you see a difference in your state, with respect to the award of permanent and total disability benefits, and the lack thereof what award of permanent partial, we find here in Massachusetts at least that judges often award permanent and total when they know the injured worker has exhausted his or her temporary benefits but there’s really no other avenue to help offset the losses that that injured worker is going to be facing in the future.  So permanent and total is the only two left in the tool chest for the judge to award and perhaps if there was another tool in that tool chest such as an elongated partial award or a permanent partial, that actually might mitigate some of the cost drivers in this scenario.  What have you found these of that scenario?  

Abbie Hudgens: My observation in Tennessee is there’s not an over reliance on permanent total.  Our statute is pretty clear on what constitutes perm total, the judges in Tennessee spend a lot of time making sure that their opinions are strictly in accordance with the law.  So, we do see the majority of the orders that come down are for permanent partial disability benefits.  

(00:20:00)

Now that is determined by formula and we sort of talked about it earlier which involves the impairment rating, the maximum weekly wage or the average weekly wage of the employee whichever’s different times 400 weeks.  And so that may not come to the right place at the end of the day, we do have a statute, 50-6-242, which does allow a judge to evaluate all the facts of the case and upon evaluation of all of those that there would be a fundamental inequity to just go strictly by that formula.  They have the right to increase that amount to 275 weeks.  I don’t see that used that often and probably it’s because the representatives of the plaintiffs aren’t bringing that up.  That’s not a thing the judges can come up with themselves but they’re allowed to do it if it’s brought up in trial.  So there is a difference, are permanent total benefit is one of the ones that is comes pretty close to what the national commission recommended.  Although we do tap hours at the age they’re eligible for Social Security.  We increase that in 2013 to say the actual age that became ineligible, because prior to that, it had 65 and course we know the eligibility time for has changed.  So there is a big difference but you can’t get there, our judges would not take the discretion to actually award that if it did not fit the definition of perm total that’s in the statute.  

Alan Pierce: Do you find that there is increased utilization at your hearing level or vocational experts to focus on the particular skills or lack thereof of individual claimants to see if they meet the test of either permanent partial of permanent and total? 

Abbie Hudgens: I’ve not seen any increase.  There was probably more use of that before the 2013 reform when there was a lot more discretion made available to the judge.  Since we have more of a formula after 2013, it doesn’t come into play as much although there are times when there are — those hearings, where I see it though, is an increased use of vocational counselors in the recovery process.  In Tennessee, we are trying to focus more and we want to focus the employers on recovery from the moment that someone’s injured and I know sometimes that concept gets a bad name because it sounds like we’re trying to cut their disability short or their impairment period short just to save money but we strongly feel that the ultimate purpose of workers’ comp is to minimize the effects of that injury and to get that employee back to a full life and employment as soon as possible.  

There are lots of studies that show that not having a job and not working is really detrimental to someone’s health, they might even have a higher mortality rate.  So we have many employers in Tennessee who work very hard to get their employees through recovery as quickly as possible which means things like at their first appointment, their doctor tries to foreshadow, you know, in two weeks, you should be able to and another two weeks, you should be able to, rather than saying, you know, you’re going to be disabled for the rest of your life because we should all know that that is not a sentence that’s necessarily true in every case.  So I’m seeing more and more use of vocational experts trying to help people along.  

Now in Tennessee, we also have a program where if someone’s not able to return to work because they’re not able to do their job.  We have the potential of — I wouldn’t call it a benefit, it’s not necessarily a scholarship but it is a program that can pay for tuition and books and other expenses of a continued education for someone of $5,000 up to four years.  And so, that just reflects what our focus is which is trying to get people to recovery as soon as possible one.

Alan Pierce: One final question, because Jud and I are both injured worker lawyers and I think our predilection in that direction comes through in our programming.  But I think we both realized that for the system to be viable, we not only have to focus on the adequacy of benefits but as Professor Burton refers, we also have to focus on the affordability of those benefits because there has to be a balance between what an employer can afford to pay in premiums versus what an injured worker can expect to be paid as a result of their injury.  

(00:25:00)

So my final question to you is what is the business climate now in terms of premiums cost associated with workers’ comp on your employer community?  Are you getting closer to a balance?  Did you have a crisis that prompted your 2013 reforms and if so have the changes that were put in place a few years ago achieved the result of keeping the system as affordable as it can be? 

Abbie Hudgens: The changes we made in 2013 have made the system more affordable.  It has also made the system less time consuming, more consistent.  It has developed a lot of support in the employer community and even some plaintiff’s attorney who were really opposed to it at the beginning have said that the changes that were made to the processing of claims to the adjudication of claims, they give it very high marks, even someone who I used to be on the opposite side of when I was back in Knoxville, wrote a very lovely letter that we included in our annual report on the effects of the reform to talk about the institution of a court of workers’ compensation claims, the mediation, all the things that we’ve done to make the system work better have made it both better for employees and employers.  

So I think to your question some of that certainly has been the case.  You raised a good point about we must always keep to me that fragile balance in mind.  The year after our legislation passed, there was a very strong effort for Tennessee to allow employers to walk opt out of workers’ comp and that was very troubling to me and I really tried to lend a voice to help people understand why that would not be a good idea.  Interestingly enough, as employers have gotten to understand the changes that we’ve had in Tennessee, I’ve not heard anything about a desire for opt out and at least three years.  So I think that speaks to how well in Tennessee we’ve managed to negotiate that delicate balance between the interest.

[Music]

Judson Pierce: Well, I’d like to just to thank you again for coming on our show, this is very enlightening presentation and your frequent blog posts at workers’ comp central are really interesting to read.  So Abbie Hudgens thanks again for coming on Workers Comp Matters.  

Abbie Hudgens: Thank you so much for inviting me.

Judson Pierce: And for all of us, Alan, Legal Talk Network, and myself Jud Pierce, come back again for another edition of Workers Comp Matters and make it a day that matters, take care. 

[Music]